Hello!
Here are nine facts about the new vehicle sales and excise tax deduction. Read below for details.
Taxpayers who buy new motor vehicles this year may be entitled to a special tax deduction for the sales or excise taxes on those purchases when they file their 2009 federal tax returns next year. This tax break is part of the American Recovery and Reinvestment Act of 2009.
Taxpayers in states that do not have state sales taxes may be entitled to deduct other fees or taxes imposed by the state or local government.
Here are nine important facts the IRS wants you to know about the deduction.
1. State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
2. Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
3. To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. Motor homes are not subject to the weight limit.
4. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
5. Taxpayers who purchase new motor vehicles in states that do not have state sales taxes may be entitled to deduct other fees or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify must be based on the vehicles’ sales price or as a per unit fee. These states include Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
6. Taxpayers who purchase qualified motor vehicles may claim the deduction when they file their 2009 tax return in 2010.
7. The deduction may not be taken on 2008 tax returns.
8. This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
9. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at IRS.gov.
Links:
Sales Tax Deduction for Vehicle Purchases
YouTube Video: Vehicle Tax Deduction
Audio File for Podcast - ARRA Vehicle Tax Deduction: English | Spanish
The American Recovery and Reinvestment Act of 2009: Information Center
Tuesday, December 1, 2009
Wednesday, November 25, 2009
There are a number of steps you might take by year-end to cut your 2009 tax bill, such as deferring income, accelerating deductions and capital gain planning.
Caution: If you expect to be subject to the alternative minimum tax (AMT), you may want to accelerate income and delay deductions. The AMT is expected to impact many more taxpayers in 2009 due to the decrease in the exemption amounts. Please contact us for more information.
Deferring Income
If you are planning on selling an investment on which you have a gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year (subject to estimated tax requirements).
If you are due a bonus at year-end, you may be able to defer receipt of these funds until January. This can defer the payment of taxes (other than the portion withheld) for another year. Deferral of tax generally won't work where the bonus is contractually due in 2009.
If your company grants stock options, it may be wise to wait until next year to exercise the option or sell stock acquired by exercise of an option. Exercise of the option is often but not always a taxable event; sale of the stock is almost always a taxable event.
If you're self employed, and can afford the delay in cash inflow, defer sending invoices or bills to clients or customers until the end of December.
Caution: Keep an eye on the estimated tax requirements.
Accelerating Deductions
Pay a state estimated tax installment in December instead of at the January due date. However, the payment should be based on a reasonable estimate of your state tax.
Pay your entire property tax bill, including installments due in year 2010, by year-end (not applicable to mortgage escrow accounts).
Try to bunch "threshold" expenses, such as medical expenses and miscellaneous itemized deductions. (Threshold expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income.) By bunching these expenses into one year, rather than spreading them out over two years, you have a better chance of exceeding the thresholds, thereby maximizing your deduction. For example, you might pay medical bills and dues and subscriptions in whichever year they would do you the most tax good.
Caution: In most cases, credit cards charges are considered paid in the year of the charge regardless of when you pay on the card. This, however, does not apply to store revolving credit cards. If you charge expenses on a Wal-Mart store credit card, the deduction can not be claimed until the bill is paid.
In the case of tax benefits that are phased out if you have more than a certain level of adjusted gross income (AGI), a strategy of deferring income and accelerating deductions may also allow you to claim larger deductions, credits, and other tax breaks for 2009. The latter benefits include Roth IRA contributions, conversions of regular IRAs to Roth IRAs, child credits, higher education tax credits and deductions for student loan interest.
Tip: Deferring income into 2010 is an especially good idea for taxpayers who anticipate being in a lower tax bracket next year, generally because of much-reduced income or much-increased deductible expenses.
Tip: It may pay to accelerate income into 2009 if your marginal tax rate is much lower this year than it will be next year.
Tip: If you have a sum of income coming in that is not covered by withholding taxes, increasing your withholding before year-end can avoid or reduce any estimated tax penalty that might otherwise be due.
On the other hand, the penalty could be avoided by covering the extra tax in your final estimated tax payment and computing the penalty using the annualized income method. Call us for additional support regarding estimated taxes.
Caution: Alternative Minimum Tax no longer just impacts the wealthy! Do not overlook the effect of any year-end planning moves on the alternative minimum tax (AMT) for 2009.
Due to recent tax policy, the AMT will impact many more taxpayers than ever before due to the reduction in the exemption amounts. The problem is that the tax is not indexed to inflation, and, as a result, growing numbers of middle-income taxpayers have been finding themselves subject to this higher tax.
Items that may affect the AMT include the deductions for state property taxes and state income taxes, miscellaneous itemized deductions, and personal exemptions. Please call us for more information.
Note: AMT Exemption Amounts For 2009
$46,700 for single and head of household fliers;
$70,950 for married people filing jointly and for qualifying widows or widowers, and
$35,475 for married people filing separately.
Caution: If you expect to be subject to the alternative minimum tax (AMT), you may want to accelerate income and delay deductions. The AMT is expected to impact many more taxpayers in 2009 due to the decrease in the exemption amounts. Please contact us for more information.
Deferring Income
If you are planning on selling an investment on which you have a gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year (subject to estimated tax requirements).
If you are due a bonus at year-end, you may be able to defer receipt of these funds until January. This can defer the payment of taxes (other than the portion withheld) for another year. Deferral of tax generally won't work where the bonus is contractually due in 2009.
If your company grants stock options, it may be wise to wait until next year to exercise the option or sell stock acquired by exercise of an option. Exercise of the option is often but not always a taxable event; sale of the stock is almost always a taxable event.
If you're self employed, and can afford the delay in cash inflow, defer sending invoices or bills to clients or customers until the end of December.
Caution: Keep an eye on the estimated tax requirements.
Accelerating Deductions
Pay a state estimated tax installment in December instead of at the January due date. However, the payment should be based on a reasonable estimate of your state tax.
Pay your entire property tax bill, including installments due in year 2010, by year-end (not applicable to mortgage escrow accounts).
Try to bunch "threshold" expenses, such as medical expenses and miscellaneous itemized deductions. (Threshold expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income.) By bunching these expenses into one year, rather than spreading them out over two years, you have a better chance of exceeding the thresholds, thereby maximizing your deduction. For example, you might pay medical bills and dues and subscriptions in whichever year they would do you the most tax good.
Caution: In most cases, credit cards charges are considered paid in the year of the charge regardless of when you pay on the card. This, however, does not apply to store revolving credit cards. If you charge expenses on a Wal-Mart store credit card, the deduction can not be claimed until the bill is paid.
In the case of tax benefits that are phased out if you have more than a certain level of adjusted gross income (AGI), a strategy of deferring income and accelerating deductions may also allow you to claim larger deductions, credits, and other tax breaks for 2009. The latter benefits include Roth IRA contributions, conversions of regular IRAs to Roth IRAs, child credits, higher education tax credits and deductions for student loan interest.
Tip: Deferring income into 2010 is an especially good idea for taxpayers who anticipate being in a lower tax bracket next year, generally because of much-reduced income or much-increased deductible expenses.
Tip: It may pay to accelerate income into 2009 if your marginal tax rate is much lower this year than it will be next year.
Tip: If you have a sum of income coming in that is not covered by withholding taxes, increasing your withholding before year-end can avoid or reduce any estimated tax penalty that might otherwise be due.
On the other hand, the penalty could be avoided by covering the extra tax in your final estimated tax payment and computing the penalty using the annualized income method. Call us for additional support regarding estimated taxes.
Caution: Alternative Minimum Tax no longer just impacts the wealthy! Do not overlook the effect of any year-end planning moves on the alternative minimum tax (AMT) for 2009.
Due to recent tax policy, the AMT will impact many more taxpayers than ever before due to the reduction in the exemption amounts. The problem is that the tax is not indexed to inflation, and, as a result, growing numbers of middle-income taxpayers have been finding themselves subject to this higher tax.
Items that may affect the AMT include the deductions for state property taxes and state income taxes, miscellaneous itemized deductions, and personal exemptions. Please call us for more information.
Note: AMT Exemption Amounts For 2009
$46,700 for single and head of household fliers;
$70,950 for married people filing jointly and for qualifying widows or widowers, and
$35,475 for married people filing separately.
Monday, September 28, 2009
Employee vs. Independent Contractor
Below is an article that offers good tips for the small business owner.
Employee vs. Independent Contractor – Ten Tips for Business Owners
If you are a small business owner, whether you hire people as independent contractors or as employees will impact how much taxes you pay and the amount of taxes you withhold from their paychecks. Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.
Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees.
1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.
2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
8. Workers can avoid higher tax bills and lost benefits if they know their proper status.
9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.
10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Links:
Contractor vs. Employee
Publication 1779
Publication 15-A
As always, please don't hesitate to call us if we can assist you in any way.
Employee vs. Independent Contractor – Ten Tips for Business Owners
If you are a small business owner, whether you hire people as independent contractors or as employees will impact how much taxes you pay and the amount of taxes you withhold from their paychecks. Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.
Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees.
1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.
2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
8. Workers can avoid higher tax bills and lost benefits if they know their proper status.
9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.
10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Links:
Contractor vs. Employee
Publication 1779
Publication 15-A
As always, please don't hesitate to call us if we can assist you in any way.
(636) 916-1010 or mike@favazzacpa.com
Wednesday, September 16, 2009
10 Tips for Business Owners
Hello!
Here are some great tips for small business owners.
If you are a small business owner, whether you hire people as independent contractors or as employees will impact how much taxes you pay and the amount of taxes you withhold from their paychecks.
Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.
Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees.
1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.
2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
8. Workers can avoid higher tax bills and lost benefits if they know their proper status.
9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.
10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Links:
Contractor vs. Employee
Publication 1779
Publication 15-A
As always, please don't hesitate to call us if we can assist you in any way.
Here are some great tips for small business owners.
If you are a small business owner, whether you hire people as independent contractors or as employees will impact how much taxes you pay and the amount of taxes you withhold from their paychecks.
Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.
Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees.
1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.
2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
8. Workers can avoid higher tax bills and lost benefits if they know their proper status.
9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.
10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Links:
Contractor vs. Employee
Publication 1779
Publication 15-A
As always, please don't hesitate to call us if we can assist you in any way.
Thursday, September 10, 2009
Newsletter
Check out our latest newletter and while you are there subscribe!
http://www.favazzacpa.com/newsletter.shtml
http://www.favazzacpa.com/newsletter.shtml
Wednesday, September 9, 2009
Now Is Time For Energy Tax Breaks
Labor Day has come and gone, and summer is unofficially over. Retailers are starting to dust off Christmas decorations, and colder weather will be here all too soon.
Energy costs are at historic highs, and the weak economy makes the problem even worse. Fortunately, the IRS is offering some relief in the form of tax credits. But you can't claim the credit for 2009 if you don't act soon, so this may be a great time to improve your home or business property.
For 2009 and 2010, you can claim a 30% credit, up to $1,500 total, for the cost of buying "qualified" energy efficiency improvements you install in your primary residence. These include:
qualifying exterior windows and skylights (meeting specific "U-factor" and "Solar Heat Gain Coefficient" ratings) qualifying exterior doors qualifying insulation certain metal and asphalt roofs (meeting specific ENERGY STAR requirements) qualifying heating and cooling systems
non-solar water heaters, and biomass stoves.
If you're slightly more ambitious, you can claim one credit equal to 30 percent of the qualified investment in a solar panel, and another equivalent credit for investing in a solar water heating system. (Sorry, there's no credit for systems you use to heat your swimming pool or hot tub!) That credit was limited to $2,000 for 2008, but is not capped for 2009 and beyond. You can also use this credit to offset the Alternative Minimum Tax.
Finally, if you own your own business, you can deduct up to $1.80 per square foot for investments you make in "energy efficient commercial building property," placed in service through December 31, 2016, and designed to save at least 50% of the building's heating, cooling, and water heating costs, and interior lighting costs. (Deductions for energy efficient lighting systems are limited to 60 cents per square foot.)
They say it's the thought that counts. Well, the thought here is simple. Energy is expensive, and fossil fuels are getting scarce. Uncle Sam wants us to conserve, so he's offering tax breaks for energy efficiency.
But the rules here can be tricky. What qualifies? When does it have to be installed to qualify? So don't hesitate to call us with questions before you renovate or improve.
Energy costs are at historic highs, and the weak economy makes the problem even worse. Fortunately, the IRS is offering some relief in the form of tax credits. But you can't claim the credit for 2009 if you don't act soon, so this may be a great time to improve your home or business property.
For 2009 and 2010, you can claim a 30% credit, up to $1,500 total, for the cost of buying "qualified" energy efficiency improvements you install in your primary residence. These include:
qualifying exterior windows and skylights (meeting specific "U-factor" and "Solar Heat Gain Coefficient" ratings) qualifying exterior doors qualifying insulation certain metal and asphalt roofs (meeting specific ENERGY STAR requirements) qualifying heating and cooling systems
non-solar water heaters, and biomass stoves.
If you're slightly more ambitious, you can claim one credit equal to 30 percent of the qualified investment in a solar panel, and another equivalent credit for investing in a solar water heating system. (Sorry, there's no credit for systems you use to heat your swimming pool or hot tub!) That credit was limited to $2,000 for 2008, but is not capped for 2009 and beyond. You can also use this credit to offset the Alternative Minimum Tax.
Finally, if you own your own business, you can deduct up to $1.80 per square foot for investments you make in "energy efficient commercial building property," placed in service through December 31, 2016, and designed to save at least 50% of the building's heating, cooling, and water heating costs, and interior lighting costs. (Deductions for energy efficient lighting systems are limited to 60 cents per square foot.)
They say it's the thought that counts. Well, the thought here is simple. Energy is expensive, and fossil fuels are getting scarce. Uncle Sam wants us to conserve, so he's offering tax breaks for energy efficiency.
But the rules here can be tricky. What qualifies? When does it have to be installed to qualify? So don't hesitate to call us with questions before you renovate or improve.
Tuesday, September 8, 2009
8 Important Questions For Hobbiests
Do you have a hobby? Does your hobby result in a profit? Read the tips below to see if your activity is a hobby or a business.
Summer is a time many Americans take their fishing poles and gardening tools out of storage. Hobbies – such as woodworking, stamp collecting and scrapbooking – are often done for pleasure, but can result in a profit.
If your favorite activity does make a profit every year or so, there may be tax implications. You must report income to the IRS from almost all sources, including hobbies.
Here are eight questions that will help determine if your activity is a hobby or a business.
1. Is the purpose of your activity to make a profit? Generally, your activity is considered a business if it is carried on with the reasonable expectation of earning a profit.
2. Do you participate in your activity just for fun? Hobbies – also called not-for-profit activities – are those activities that are not pursued for profit.
3. Do you depend on income from the activity? If so, your activity is likely considered a business.
4. Have you changed methods of operation to improve profitability? If so, your hobby may actually be a business.
5. Do you have the knowledge needed to carry on the activity as a successful business? People who carry out hobbies just for fun, often don’t have the business acumen to turn their not-for-profit activity into a profitable business venture.
6. Have you made a profit in similar activities in the past? This may indicate your activity is a business rather than a not-for-profit hobby. An activity is presumed carried on for profit if it makes a profit in at least three of the last five tax years, including the current year – or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
7. Does the activity make a profit in some years? Even if your activity does not make a profit every year, it still may be considered a business.
8. Do you expect to make a profit in the future from the appreciation of assets used in the activity? This indicates your activity may be a business rather than a hobby.
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity. If you are conducting a trade or business you may deduct your ordinary and necessary expenses.
More information about not-for-profit activities is available in Publication 535, Business Expenses, available on the IRS.gov Web site or by calling 800-TAX-FORM (800-829-3676).
IRS Publication 535, Business Expenses
As always, please don't hesitate to call us if we can assist you in any way.
Summer is a time many Americans take their fishing poles and gardening tools out of storage. Hobbies – such as woodworking, stamp collecting and scrapbooking – are often done for pleasure, but can result in a profit.
If your favorite activity does make a profit every year or so, there may be tax implications. You must report income to the IRS from almost all sources, including hobbies.
Here are eight questions that will help determine if your activity is a hobby or a business.
1. Is the purpose of your activity to make a profit? Generally, your activity is considered a business if it is carried on with the reasonable expectation of earning a profit.
2. Do you participate in your activity just for fun? Hobbies – also called not-for-profit activities – are those activities that are not pursued for profit.
3. Do you depend on income from the activity? If so, your activity is likely considered a business.
4. Have you changed methods of operation to improve profitability? If so, your hobby may actually be a business.
5. Do you have the knowledge needed to carry on the activity as a successful business? People who carry out hobbies just for fun, often don’t have the business acumen to turn their not-for-profit activity into a profitable business venture.
6. Have you made a profit in similar activities in the past? This may indicate your activity is a business rather than a not-for-profit hobby. An activity is presumed carried on for profit if it makes a profit in at least three of the last five tax years, including the current year – or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
7. Does the activity make a profit in some years? Even if your activity does not make a profit every year, it still may be considered a business.
8. Do you expect to make a profit in the future from the appreciation of assets used in the activity? This indicates your activity may be a business rather than a hobby.
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity. If you are conducting a trade or business you may deduct your ordinary and necessary expenses.
More information about not-for-profit activities is available in Publication 535, Business Expenses, available on the IRS.gov Web site or by calling 800-TAX-FORM (800-829-3676).
IRS Publication 535, Business Expenses
As always, please don't hesitate to call us if we can assist you in any way.
Five Facts About The Home Office Deduction Email
If you have a home business, these tips may be helpful to you.
With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.
Here are five important things the IRS wants you to know about claiming the home office deduction.
1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly: • As your principal place of business, or• As a place to meet or deal with patients, clients or customers in the normal course of your business, or• In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business
For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.
2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.
5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.
For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link: Publication 587, Business Use of Your Home
As always, please don't hesitate to call us if we can assist you in any way.
With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.
Here are five important things the IRS wants you to know about claiming the home office deduction.
1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly: • As your principal place of business, or• As a place to meet or deal with patients, clients or customers in the normal course of your business, or• In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business
For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.
2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.
3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.
4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.
5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.
For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link: Publication 587, Business Use of Your Home
As always, please don't hesitate to call us if we can assist you in any way.
Wednesday, September 2, 2009
Ten Tips for Taxpayers Making Charitable Donations
Ten Tips for Taxpayers Making Charitable Donations
Every year, millions of taxpayers itemize their deductions on their federal tax return. One of the most common itemized deductions is a donation made to a charitable organization.
Here are the top ten things the IRS wants every taxpayer to know before deducting charitable donations.
1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the donor’s name, or a payroll deduction record.
6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
8. For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
Form 8283, Noncash Charitable Contributions
Publication 526, Charitable Contributions
Every year, millions of taxpayers itemize their deductions on their federal tax return. One of the most common itemized deductions is a donation made to a charitable organization.
Here are the top ten things the IRS wants every taxpayer to know before deducting charitable donations.
1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the donor’s name, or a payroll deduction record.
6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
8. For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
Form 8283, Noncash Charitable Contributions
Publication 526, Charitable Contributions
Coping With Recession, Amish-Style
This week's alert is a little different from our usual tax and finance discussion. But every once in awhile, it's worth taking a broader look at how our finances affect our lives.
Pick up any newspaper or turn on the television and you'll see reports of how this economy is affecting your fellow Americans. We're coming together to help each other in all sorts of ways. And it's especially instructive to see how one particular community is working to weather the storm.
When we think of Amish Americans, we picture horses pulling black buggies and plain-dressed farmers living and farming much like their ancestors. That stereotype belies a complicated reality. There are over 233,000 Amish living in 27 states and Canada. As their population has grown, many have taken jobs in modern factories and non-Amish businesses. In fact, some experts estimate that over half of the Amish earn their main income outside of farming.
The Amish have also become more sophisticated about technology. While few of them surf the internet as we do, the computers that have become an indispensable part of our lives have affected theirs as well. Back in 2006, a group of Amish writers for "The Budget," a weekly newspaper selling 20,000 paper copies by mail, threatened to strike if their articles were posted online!
Today's recession has pushed many Amish out of their jobs "among the English." When that happens, they don't sit back and wait for their job to return. They create their own job by starting businesses. Typically, these are home-based businesses that let them stay closer to their families. (Of course, the recession is hitting Amish-owned businesses as hard as any others.)
The recession has brought other changes to the Amish as well. In one vivid example, the affluent Amish teens who used to shop at Walmart and Target have returned to buying fabric and making their own clothing.
In the end, the Amish, like many of the rest of us, are rediscovering day-to-day pleasures of home and family. Their choice reminds us that as difficult as today's economic storm may be, we can weather it until sunnier skies reappear.
Having said that, we still want to make the smartest possible choices to minimize the brunt of the recession where we can. That means smart financial choices and smart tax moves. If you're wondering what's the right move, call us. And if your friends, family, and colleagues are wondering, have them call us too!
Pick up any newspaper or turn on the television and you'll see reports of how this economy is affecting your fellow Americans. We're coming together to help each other in all sorts of ways. And it's especially instructive to see how one particular community is working to weather the storm.
When we think of Amish Americans, we picture horses pulling black buggies and plain-dressed farmers living and farming much like their ancestors. That stereotype belies a complicated reality. There are over 233,000 Amish living in 27 states and Canada. As their population has grown, many have taken jobs in modern factories and non-Amish businesses. In fact, some experts estimate that over half of the Amish earn their main income outside of farming.
The Amish have also become more sophisticated about technology. While few of them surf the internet as we do, the computers that have become an indispensable part of our lives have affected theirs as well. Back in 2006, a group of Amish writers for "The Budget," a weekly newspaper selling 20,000 paper copies by mail, threatened to strike if their articles were posted online!
Today's recession has pushed many Amish out of their jobs "among the English." When that happens, they don't sit back and wait for their job to return. They create their own job by starting businesses. Typically, these are home-based businesses that let them stay closer to their families. (Of course, the recession is hitting Amish-owned businesses as hard as any others.)
The recession has brought other changes to the Amish as well. In one vivid example, the affluent Amish teens who used to shop at Walmart and Target have returned to buying fabric and making their own clothing.
In the end, the Amish, like many of the rest of us, are rediscovering day-to-day pleasures of home and family. Their choice reminds us that as difficult as today's economic storm may be, we can weather it until sunnier skies reappear.
Having said that, we still want to make the smartest possible choices to minimize the brunt of the recession where we can. That means smart financial choices and smart tax moves. If you're wondering what's the right move, call us. And if your friends, family, and colleagues are wondering, have them call us too!
Cinderella's Carriage
We're all familiar with Cinderella's story. Her fairy godmother turned a pumpkin into a gorgeous carriage to take her to the ball -- with a strict warning to be home by midnight, lest the carriage turn back into a pumpkin! (Those of you with teenage drivers might wish that you could do the same with your children's cars!)
Tax planning works the same way. That's because at midnight on December 31, some of the most valuable tax breaks turn into pumpkins. In some cases, you miss the chance to take advantage of them this year. In others, they expire entirely and you lose them forever.
In recent years, Washington has made taxes even more complicated than usual. Strict budget rules mean that new breaks come and go. This year, there are 22 tax breaks expiring on or near December 31. Some of them may be renewed before the end of the year. But it still makes sense to look at them now to make sure you don't lose anything the law offers:
The deduction for sales tax you pay to buy a new car or truck
The "First-time Homebuyer" tax credit (this one actually expires November 30, although it may be extended)
The itemized deduction for state and local sales taxes (as opposed to income taxes)
The special deduction for state and local property taxes for clients who don't otherwise itemize
The $4,000 deduction for "qualified tuition and related expenses"
The increased exemptions for calculating the dreaded alternative minimum taxable income
The $100,000 exemption for IRA distributions paid by the trustee directly to a qualified charity
Several valuable business tax deductions also expire this year:
The 50% "bonus depreciation" for new business equipment
The expanded "first-year expensing" dollar limit of $250,000 (which drops to $125,000 in 2010)
Accelerated depreciation benefits for certain tangible assets (including "qualified leasehold property," restaurant property, retail space improvement property, and "qualified machinery and equipment" used in farming businesses)
Expanded first-year depreciation benefits for business vehicles
Special credits for "COBRA" continuation subsidies for laid-off employees
None of us want to miss any of these breaks. But the only way you can be sure not to is to ask! If you're worried about missing valuable deductions -- especially if you own your own business -- call us. And if your friends, family, and colleagues are worried, have them call us too!
Tax planning works the same way. That's because at midnight on December 31, some of the most valuable tax breaks turn into pumpkins. In some cases, you miss the chance to take advantage of them this year. In others, they expire entirely and you lose them forever.
In recent years, Washington has made taxes even more complicated than usual. Strict budget rules mean that new breaks come and go. This year, there are 22 tax breaks expiring on or near December 31. Some of them may be renewed before the end of the year. But it still makes sense to look at them now to make sure you don't lose anything the law offers:
The deduction for sales tax you pay to buy a new car or truck
The "First-time Homebuyer" tax credit (this one actually expires November 30, although it may be extended)
The itemized deduction for state and local sales taxes (as opposed to income taxes)
The special deduction for state and local property taxes for clients who don't otherwise itemize
The $4,000 deduction for "qualified tuition and related expenses"
The increased exemptions for calculating the dreaded alternative minimum taxable income
The $100,000 exemption for IRA distributions paid by the trustee directly to a qualified charity
Several valuable business tax deductions also expire this year:
The 50% "bonus depreciation" for new business equipment
The expanded "first-year expensing" dollar limit of $250,000 (which drops to $125,000 in 2010)
Accelerated depreciation benefits for certain tangible assets (including "qualified leasehold property," restaurant property, retail space improvement property, and "qualified machinery and equipment" used in farming businesses)
Expanded first-year depreciation benefits for business vehicles
Special credits for "COBRA" continuation subsidies for laid-off employees
None of us want to miss any of these breaks. But the only way you can be sure not to is to ask! If you're worried about missing valuable deductions -- especially if you own your own business -- call us. And if your friends, family, and colleagues are worried, have them call us too!
Tuesday, August 4, 2009
Who Really Pays the Taxes?
Earlier this week, Treasury Secretary Tim Geithner appeared on ABC's "This Week." He said that he can't rule out higher taxes to help tame the budget deficit.
Geithner's comments just confirm what many of us have always assumed -- taxes will go up to pay for general deficit spending, as well as specific priorities like financing healthcare reform and extending jobless benefits.
If you're like most clients, you're wondering what this means for you. So it's worth taking a look at who really pays the taxes in our economy.
It's popular in some circles to say that "the rich" just need to pay their fair share. It's not hard to find examples of "the rich" skating without paying their fair share. But beyond those standouts, recent IRS data shows this just isn't the case.
Here's what IRS statistics reveal for 2007:
The top 0.1% of taxpayers - 141,000 households with adjusted gross incomes (AGIs) topping $2,155,365 - paid 11.9% of all federal income taxes. Their average tax rate was 21.5% - a figure that reflects preferential rates for dividends and capital gains.
The top 1% of taxpayers - 1,410,710 households with adjusted gross incomes (AGIs) of $410,096 or more - paid 40.4% of the federal government's income taxes. Their average tax rate was 22.45%.
The next 4% of taxpayers - 7,053,549 households with adjusted gross incomes of $160,041 through $410,095 - paid 20.2% of the federal government's income taxes. Their average tax rate was 17.52%.
Finally, the bottom 95% of taxpayers, with AGIs up to $160,040 - paid 39.6% of federal income taxes. Their average tax rate anged from 12.66% all the way down to 2.99% for the bottom 50%.
In other words, the top 1% of taxpayers paid more than the bottom 95% combined. This is the highest level in history - Back in 1987, the top 1% paid just 24.8 percent of income taxes.
Now that we know who pays the current taxes, who can we expect to pay new taxes?
The top earners obviously have more room to pay -- and the fact that the top 0.1% pays a lower average rate than the overall top 1% suggests that higher taxes on dividends and capital gains are likely. But even hiking those rates won't raise enough revenue to close trillion-dollar deficits or reform healthcare.
The real opportunity - at least as far as the IRS is concerned - lies in the top 5%. The Obama administration has already pledged to raise taxes on the portion of that group earning above $200,000. But it appears likely that taxes will have to go up for more than even just that group.
Even those of you who don't pay more will face more complicated taxes. Just look at the confusing collection of deductions and credits Washington has already enacted this year -- sales tax deductions for new cars (but only up to $49,500, and only if your AGI is under a certain amount), credits for first-time homebuyers (but only if you buy before December 1, and only if your AGI is below a certain, different limit), and enhanced tax breaks for energy-efficient home improvements (but how many know what those are or even how to find them).
If you own your own business or professional practice, proper tax planning has always been important. If your income is puts you in the top 5%, it's imperative. But even if you're not there yet, you'll appreciate us keeping our eyes out for you. As always, call with any specific questions or concerns.
Have you discussed the economy, taxes, or similar issues recently with friends, family, or business colleagues? Are they worried how they might cope with the same challenges we've just outlined here? If you trust us to help you navigate these waters, please give us the opportunity to help them with the same challenges. Your referrals make it possible for us to spend more of our time focused on protecting your interests.
Geithner's comments just confirm what many of us have always assumed -- taxes will go up to pay for general deficit spending, as well as specific priorities like financing healthcare reform and extending jobless benefits.
If you're like most clients, you're wondering what this means for you. So it's worth taking a look at who really pays the taxes in our economy.
It's popular in some circles to say that "the rich" just need to pay their fair share. It's not hard to find examples of "the rich" skating without paying their fair share. But beyond those standouts, recent IRS data shows this just isn't the case.
Here's what IRS statistics reveal for 2007:
The top 0.1% of taxpayers - 141,000 households with adjusted gross incomes (AGIs) topping $2,155,365 - paid 11.9% of all federal income taxes. Their average tax rate was 21.5% - a figure that reflects preferential rates for dividends and capital gains.
The top 1% of taxpayers - 1,410,710 households with adjusted gross incomes (AGIs) of $410,096 or more - paid 40.4% of the federal government's income taxes. Their average tax rate was 22.45%.
The next 4% of taxpayers - 7,053,549 households with adjusted gross incomes of $160,041 through $410,095 - paid 20.2% of the federal government's income taxes. Their average tax rate was 17.52%.
Finally, the bottom 95% of taxpayers, with AGIs up to $160,040 - paid 39.6% of federal income taxes. Their average tax rate anged from 12.66% all the way down to 2.99% for the bottom 50%.
In other words, the top 1% of taxpayers paid more than the bottom 95% combined. This is the highest level in history - Back in 1987, the top 1% paid just 24.8 percent of income taxes.
Now that we know who pays the current taxes, who can we expect to pay new taxes?
The top earners obviously have more room to pay -- and the fact that the top 0.1% pays a lower average rate than the overall top 1% suggests that higher taxes on dividends and capital gains are likely. But even hiking those rates won't raise enough revenue to close trillion-dollar deficits or reform healthcare.
The real opportunity - at least as far as the IRS is concerned - lies in the top 5%. The Obama administration has already pledged to raise taxes on the portion of that group earning above $200,000. But it appears likely that taxes will have to go up for more than even just that group.
Even those of you who don't pay more will face more complicated taxes. Just look at the confusing collection of deductions and credits Washington has already enacted this year -- sales tax deductions for new cars (but only up to $49,500, and only if your AGI is under a certain amount), credits for first-time homebuyers (but only if you buy before December 1, and only if your AGI is below a certain, different limit), and enhanced tax breaks for energy-efficient home improvements (but how many know what those are or even how to find them).
If you own your own business or professional practice, proper tax planning has always been important. If your income is puts you in the top 5%, it's imperative. But even if you're not there yet, you'll appreciate us keeping our eyes out for you. As always, call with any specific questions or concerns.
Have you discussed the economy, taxes, or similar issues recently with friends, family, or business colleagues? Are they worried how they might cope with the same challenges we've just outlined here? If you trust us to help you navigate these waters, please give us the opportunity to help them with the same challenges. Your referrals make it possible for us to spend more of our time focused on protecting your interests.
Thursday, July 16, 2009
Northwest Chamber of Commerce
If you are looking to market or network in the northwest area the North West Chamber of Commerce is place to do so. Here is the last meeting of the NWCC networking luncheon. Here business professionals meet to discuss possible sales opportunities and possibly pass referrals. This group had grown significantly since it started just a few months ago and there have been several success stories. I am very proud of it's progress and look forward to seeing what the future holds. If you are interested in attending a meeting you do not have to be a member to do so. This group meets the 1st and 3rd Tuesday's of the month from 11:30am-12:30pm at Syberg's restaurant on Dorsett. You can rsvp your spot by email Amy at amy@favazzacpa.com
Sorry the photo is a little blurry. Someone else took the photo.
Here is Amy Smith along with our clients Dwight Alberhasky and Ron Rendleman of Money Mailer at the Northwest Chamber of Commerce Networking Luncheon. They sell advertising from business to consumer via the Money mailer packet that you probably receive in your mail box. It offers discounts to local restaurants, retail stores, and service providers in your area. Money Mailer is a great way to advertise is the consumer is your target market because they can help establish a targeting market list for your business as well as manage it for you. They do postcard advertising as well and will even provide the service of developing the art work.
If you are interested in advertising with Money Mailer or finding out more about how they can help your business call them at (636) 447-5555 or email dalberhasky@moneymailer.com you can also visit their website at http://www.moneymailerstl.com/
Wednesday, July 8, 2009
Cash for Clunkers
The Car Allowance Rebate System -- better known as CARS Act or "Cash for Clunkers" program -- is a new subsidy designed to help you trade in an old gas guzzler for a new, fuel-efficient vehicle. But is it really all it promises to be?
Or is it a lemon of a bill with little real value for most Americans?
Your car is an official "clunker" if:
It's not more than 25 years old.
Your combined city/highway mileage is 18 miles/gallon or less.
It's in driveable condition.
You can show that you've had it continuously registered and insured for at least a year. (That's to keep scammers from buying junk cars and trading them in.)
Your new car can cost up to $45,000. You can buy it or lease it. The combined fuel economy has to be 18 miles/gallon or more for trucks, or 22 miles/gallon or more for cars.So -- if you meet those requirements, and if you choose to participate, the dealer will credit you the the scrap value of the car, and the government will give the dealer a voucher to bring the trade-in price up to $3,500 (if the new vehicles combined fuel economy is 4-10 miles/gallon greater than your trade-in) or $4,500 (if your new vehicle's combined fuel economy is 10 or more miles/gallon greater than your trade-in). (There are different, less restrictive rules for trucks and SUVs.)
Notice I just said the government will give the a voucher. You don't actually get the cash -- the dealer gets the cash, so you don't have to finance as much, which makes it easier for you to qualify for the new car.But -- as dealers love to tell you -- this is a limited offer! Some dealers have already started ofering the vouchers, but the program ends on November 1, 2009.There are also strict dollar limits on subsidies for trucks -- just 7.5% of the total amount available under the bill. Once those subsidies are gone, they're gone!Want some good news?
The CARS Act specifically provides that the subsidy is not taxable income. And you can combine the "Cash for Clunkers" subsidy with other government programs, like the credit for hybrid vehicles and the new deduction for sales tax.In the end, the "Cash for Clunkers" program probably won't mean much for you. But buying or leasing a new car is an important financial decision, especially if you use it for your trade or business. So be sure to call us with your car and truck questions before you make an expensive mistake!
Or is it a lemon of a bill with little real value for most Americans?
Your car is an official "clunker" if:
It's not more than 25 years old.
Your combined city/highway mileage is 18 miles/gallon or less.
It's in driveable condition.
You can show that you've had it continuously registered and insured for at least a year. (That's to keep scammers from buying junk cars and trading them in.)
Your new car can cost up to $45,000. You can buy it or lease it. The combined fuel economy has to be 18 miles/gallon or more for trucks, or 22 miles/gallon or more for cars.So -- if you meet those requirements, and if you choose to participate, the dealer will credit you the the scrap value of the car, and the government will give the dealer a voucher to bring the trade-in price up to $3,500 (if the new vehicles combined fuel economy is 4-10 miles/gallon greater than your trade-in) or $4,500 (if your new vehicle's combined fuel economy is 10 or more miles/gallon greater than your trade-in). (There are different, less restrictive rules for trucks and SUVs.)
Notice I just said the government will give the a voucher. You don't actually get the cash -- the dealer gets the cash, so you don't have to finance as much, which makes it easier for you to qualify for the new car.But -- as dealers love to tell you -- this is a limited offer! Some dealers have already started ofering the vouchers, but the program ends on November 1, 2009.There are also strict dollar limits on subsidies for trucks -- just 7.5% of the total amount available under the bill. Once those subsidies are gone, they're gone!Want some good news?
The CARS Act specifically provides that the subsidy is not taxable income. And you can combine the "Cash for Clunkers" subsidy with other government programs, like the credit for hybrid vehicles and the new deduction for sales tax.In the end, the "Cash for Clunkers" program probably won't mean much for you. But buying or leasing a new car is an important financial decision, especially if you use it for your trade or business. So be sure to call us with your car and truck questions before you make an expensive mistake!
Thursday, June 18, 2009
Susan Spitz, Certified Coach
Had lunch this week with Susan Spitz of Focal Point. Focal Point is Powered by world-reknowned Brian Tracy, FocalPoint is the only Brian Tracy certified coaching program in the metro area. Mid-sized or small business owners and executives can double their productivity and profits while increasing their time off. Individual or group coaching, or combination thereof. Average ROI for exec coaching is 500%! Other offerings include speaking, training and consulting in these areas: sales, multi-cultural diversity, multiple generations in the workforce, personal productivity, strategic planning, goal-setting, and time management.
Susan's specialites are effective questioning, listening and motivating. Speaker, meeting facilitator, workshop designer, creation of multi-cultural direct response ads, hiring and testing, training, fluency in French, conversant in Spanish.
To contact Susan for more information check out her website at www.focalpointcoaching.com or email her at sspitz@focalpointccoaching.com
Wednesday, June 17, 2009
Just had a great meeting with Debi Enders with Commerce Bank. She has a great remote deposit product for companies that take checks but are spending a lot of time driving to the bank everyday. She also has several great bank products for small businesses. If you would like to learn more about remote deposit or the other products Commerce Bank has to offer email Debi at debi.enders@commercebank.com or call her at (636) 949-8407. Learn more at Favazza CPA St. Louis
Tuesday, June 16, 2009
IRS Warning Taxpayers About New Email Scams
If you have an email account, you know about all the scam emails you get. Scammers are getting braver and using the IRS name in their new tactics.
IRS Warning Taxpayers About New Email Scams
The IRS has begun warning taxpayers that it is seeing a surge in tax scam emails. Many of the emails even have the hubris to use the IRS name! Brave souls, indeed. Regardless, the scams seem to fall in the area of identity theft through phishing tactics.
First and foremost, you should understand that the IRS does NOT send emails to taxpayers. Never, never, never! If you get an email from the IRS, it is a fake. Unconditionally! Do not respond to it under any circumstances. Do not click links in the body of the email. Take one action and one action only delete it!
Since the turn of the year, the IRS has identified 99 new email scams targeted at taxpayers. All of the scams are aimed at bilking you out of your private information. Most try to do this by claiming your must provide information or your will not receive your tax refund. In some cases, the fake emails threaten you with an audit. Again, this is all false information.
Many people fall victim to the IRS scam emails because they click through to the site linked in the email. There, they find a site that appears for all intensive purposes to be the one published by the IRS. Make no mistake this means nothing. Anyone can copy and republish a site. Yes, even the site of the IRS. It is pretty scary when you think about it. Best Buy, in fact, had major problems with this for some time.
So, where are these scammers? It should come as no surprise that few in the boundaries of the United States would have the nerve to try this. Instead, the IRS has tracked most of the scamming emails to other countries, but not necessarily the usual suspects. The countries include England, Italy, Japan, Germany, Australia and Singapore. Usual suspects include China, Aruba, Mexico, Indonesia and Argentina. Surprisingly, only a few have originated from the scam mecca of Nigeria.
The best way to beat scammers is to know the facts. The IRS does not communicate in any way with taxpayers by email. If you get an email purportedly from the IRS, it is a fake. If you have a nagging doubt, call the agency to find out if anything is up. Otherwise, delete that email!
IRS Warning Taxpayers About New Email Scams
The IRS has begun warning taxpayers that it is seeing a surge in tax scam emails. Many of the emails even have the hubris to use the IRS name! Brave souls, indeed. Regardless, the scams seem to fall in the area of identity theft through phishing tactics.
First and foremost, you should understand that the IRS does NOT send emails to taxpayers. Never, never, never! If you get an email from the IRS, it is a fake. Unconditionally! Do not respond to it under any circumstances. Do not click links in the body of the email. Take one action and one action only delete it!
Since the turn of the year, the IRS has identified 99 new email scams targeted at taxpayers. All of the scams are aimed at bilking you out of your private information. Most try to do this by claiming your must provide information or your will not receive your tax refund. In some cases, the fake emails threaten you with an audit. Again, this is all false information.
Many people fall victim to the IRS scam emails because they click through to the site linked in the email. There, they find a site that appears for all intensive purposes to be the one published by the IRS. Make no mistake this means nothing. Anyone can copy and republish a site. Yes, even the site of the IRS. It is pretty scary when you think about it. Best Buy, in fact, had major problems with this for some time.
So, where are these scammers? It should come as no surprise that few in the boundaries of the United States would have the nerve to try this. Instead, the IRS has tracked most of the scamming emails to other countries, but not necessarily the usual suspects. The countries include England, Italy, Japan, Germany, Australia and Singapore. Usual suspects include China, Aruba, Mexico, Indonesia and Argentina. Surprisingly, only a few have originated from the scam mecca of Nigeria.
The best way to beat scammers is to know the facts. The IRS does not communicate in any way with taxpayers by email. If you get an email purportedly from the IRS, it is a fake. If you have a nagging doubt, call the agency to find out if anything is up. Otherwise, delete that email!
Tuesday, June 2, 2009
Important Tax Deadline Coming the 15th
What went through your head when you read this email's subject line? Something like "wait a minute, April 15 was six weeks ago?"
It's true that the April 15 tax filing deadline has passed. But the sad truth is that taxes are due every day you earn income. And if you make quarterly estimated tax payments, the next one is due on -- you guessed it -- June 15th. So this email's subject line holds true, even though April 15 has passed.
Tax deadlines are even worse if you get a paycheck. If that's the case, April 15 comes 12, 24, or 26 times a year! And withholding is the dirty little secret to making today's tax system work. That's because when your employer withholds tax, you don't actually write the checks for the tax you pay. Withholding saves time, eliminates paperwork, collects taxes regularly and timely, and verifies that you report all your wages. But it also takes the sting out of writing that tax check yourself!
What can you do? The best advice is to review your withholding and estimated tax payments any time your tax picture changes. (Employers have to make new W-4s effective by the start of the first payroll period ending on or after the 30th day after you submit your form.) Do this as soon as possible if:
You get married or divorced
You have a baby (or adopt a child)
You or your spouse takes a new job (or one of you loses a job)
You or your spouse gets a raise
You buy or sell a house
You sell appreciated property
If you own your own business, here's a trick you can consider for deferring payment until as late as possible. Withheld taxes are treated as paid equally throughout the year, while estimated taxes are credited when they're actually paid. If you operate your business as a corporation, you can draw income through the year in the form of loans, then convert it into income (and withhold the resulting tax) in a single lump sum at the end of the year.
As always, call us with any questions or concerns. You don't have to wait until April 15th to save taxes. In fact, April 15th is usually too late. So call us now for the proactive planning that gives you the savings you really want!
It's true that the April 15 tax filing deadline has passed. But the sad truth is that taxes are due every day you earn income. And if you make quarterly estimated tax payments, the next one is due on -- you guessed it -- June 15th. So this email's subject line holds true, even though April 15 has passed.
Tax deadlines are even worse if you get a paycheck. If that's the case, April 15 comes 12, 24, or 26 times a year! And withholding is the dirty little secret to making today's tax system work. That's because when your employer withholds tax, you don't actually write the checks for the tax you pay. Withholding saves time, eliminates paperwork, collects taxes regularly and timely, and verifies that you report all your wages. But it also takes the sting out of writing that tax check yourself!
What can you do? The best advice is to review your withholding and estimated tax payments any time your tax picture changes. (Employers have to make new W-4s effective by the start of the first payroll period ending on or after the 30th day after you submit your form.) Do this as soon as possible if:
You get married or divorced
You have a baby (or adopt a child)
You or your spouse takes a new job (or one of you loses a job)
You or your spouse gets a raise
You buy or sell a house
You sell appreciated property
If you own your own business, here's a trick you can consider for deferring payment until as late as possible. Withheld taxes are treated as paid equally throughout the year, while estimated taxes are credited when they're actually paid. If you operate your business as a corporation, you can draw income through the year in the form of loans, then convert it into income (and withhold the resulting tax) in a single lump sum at the end of the year.
As always, call us with any questions or concerns. You don't have to wait until April 15th to save taxes. In fact, April 15th is usually too late. So call us now for the proactive planning that gives you the savings you really want!
Wednesday, May 27, 2009
Food for Thought
Most tax disputes are resolved directly with the IRS or in Tax Court, and very few make it to "real" courts. When they do, billions of dollars can turn on the decision.
Sometimes, though, tax litigation turns on less profound issues.
A British court just confronted one such instance when it ruled that Pringles are potato chips.
You may not like Pringles yourself -- but you've certainly tried the uniformly-shaped chips from the tube-shaped can. Pringles start life as baked dough, with just 42% actual potato content.
They come packed in tubular can with foil-lined interior and resealable plastic cap.
That packaging is so distinctive that when its inventor died, his children honored his
wishes to actually bury his cremated ashes in one of those cans!
The issue reached court because Britain levies a 15% value-added tax on "products made from the potato, or from potato flour, or from potato starch." The tax naturally makes potato chips more expensive. So Proctor & Gamble, the chips' manufacturer, argued that Pringles don't look like chips, don't feel like chips, and don't taste like chips.
A lower court agreed with Proctor & Gamble. However, a Court of Appeals panel ruled last week that it wasn't the lower court's job to look into scientific or technical questions about the chips' composition, and that a child could give a "more relevant and sensible answer" than a food scientist. The court's decision could cost Pringles $31 million in tax per year.
This Memorial Day weekend marks the unofficial start of "summer." If you're like most clients, you'll spend your share of time around picnic tables loaded with snacks. Don't waste too much time crying for Pringles. But let this story serve as a lesson in just how far "tax planning" reaches into all of our lives. And don't be afraid to let us help you navigate your way through whatever tax questions you have!
Sometimes, though, tax litigation turns on less profound issues.
A British court just confronted one such instance when it ruled that Pringles are potato chips.
You may not like Pringles yourself -- but you've certainly tried the uniformly-shaped chips from the tube-shaped can. Pringles start life as baked dough, with just 42% actual potato content.
They come packed in tubular can with foil-lined interior and resealable plastic cap.
That packaging is so distinctive that when its inventor died, his children honored his
wishes to actually bury his cremated ashes in one of those cans!
The issue reached court because Britain levies a 15% value-added tax on "products made from the potato, or from potato flour, or from potato starch." The tax naturally makes potato chips more expensive. So Proctor & Gamble, the chips' manufacturer, argued that Pringles don't look like chips, don't feel like chips, and don't taste like chips.
A lower court agreed with Proctor & Gamble. However, a Court of Appeals panel ruled last week that it wasn't the lower court's job to look into scientific or technical questions about the chips' composition, and that a child could give a "more relevant and sensible answer" than a food scientist. The court's decision could cost Pringles $31 million in tax per year.
This Memorial Day weekend marks the unofficial start of "summer." If you're like most clients, you'll spend your share of time around picnic tables loaded with snacks. Don't waste too much time crying for Pringles. But let this story serve as a lesson in just how far "tax planning" reaches into all of our lives. And don't be afraid to let us help you navigate your way through whatever tax questions you have!
Friday, May 22, 2009
Obama's New Tax Credit
Most of you have heard that under the Obama Administration's American Recovery and Reinvestment Act you will be receiving a "Making Work Pay" tax credit. But what does this actually mean to you? When can you expect to receive the money?
In 2009 and 2010, the "Making Work Pay" provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
Note: This tax credit is calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
For people who receive a paycheck and are subject to withholding, the credit is typically handled by their employers through automated withholding changes. These changes needed to begin by April 1, 2009 and may result in an increase in take-home pay. The amount of the credit will be computed on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.
It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may choose to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income.
If you have questions about the Making Work Pay provision, call us at (636) 916-1010.
In 2009 and 2010, the "Making Work Pay" provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
Note: This tax credit is calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
For people who receive a paycheck and are subject to withholding, the credit is typically handled by their employers through automated withholding changes. These changes needed to begin by April 1, 2009 and may result in an increase in take-home pay. The amount of the credit will be computed on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.
It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may choose to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income.
If you have questions about the Making Work Pay provision, call us at (636) 916-1010.
Tuesday, May 19, 2009
Summer Entertainment Deductions
Summer's almost here, and you're probably looking forward to some summer entertaining. So today we'll review the rules for making the most of your summer fun expenses.
Meals and entertainment you host in the course of your business are deductible if they're directly related to the active conduct of your business or they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. That means, clients, customers, or patients; prospective clients, customers or patients; referral sources; and other business relationships (vendors, professional colleagues, etc.).
The general rule is that you can deduct 50% of most meals. Specific deductions include meals, drinks, taxes and tips. Now for the fine print:
You'll need a diary, day planner, or similar log to verify your deductions. IRS Publication 463 directs you to record the cost of the meal, date of the meal, establishment where the meal takes place, the business purpose for the expense (or business benefit you gain or expect to gain from the meal), and your business relationship with your guest.
You'll need receipts for expenses over $75. (Many clients mistakenly think they have to keep receipts for expenses over $25.) Credit card statements work if you corroborate them by recording the business purpose of the expense in your business diary.
You can't deduct meals with your spouse unless you're traveling together for business. However, you can include the cost of a spouse or other "closely connected" person (such as children or parents) if your guest brings their spouse.
Too many clients forget the cost of entertaining at home! You can deduct costs for small gatherings at your home under the same rules that apply when you go out to eat. If you invite more than 12 guests, you can deduct "reasonable" costs if your primary purpose is business. To prove your primary purpose is business, include your employees; let your guests know your business purpose; and discuss or display your product or service at the event.
Expenses for sporting and theatrical events, golf and boating outings, and similar entertainment are also 50% deductible if they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets (but not a scalper's premium) to sporting and theatrical events, food and beverages, travel and parking expenses, taxes, and tips.
Meal and entertainment expenses are easy to overlook -- especially when it comes to entertaining at home. But over time, those little expenses add up. Don't lose out on those easy savings!
Meals and entertainment you host in the course of your business are deductible if they're directly related to the active conduct of your business or they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. That means, clients, customers, or patients; prospective clients, customers or patients; referral sources; and other business relationships (vendors, professional colleagues, etc.).
The general rule is that you can deduct 50% of most meals. Specific deductions include meals, drinks, taxes and tips. Now for the fine print:
You'll need a diary, day planner, or similar log to verify your deductions. IRS Publication 463 directs you to record the cost of the meal, date of the meal, establishment where the meal takes place, the business purpose for the expense (or business benefit you gain or expect to gain from the meal), and your business relationship with your guest.
You'll need receipts for expenses over $75. (Many clients mistakenly think they have to keep receipts for expenses over $25.) Credit card statements work if you corroborate them by recording the business purpose of the expense in your business diary.
You can't deduct meals with your spouse unless you're traveling together for business. However, you can include the cost of a spouse or other "closely connected" person (such as children or parents) if your guest brings their spouse.
Too many clients forget the cost of entertaining at home! You can deduct costs for small gatherings at your home under the same rules that apply when you go out to eat. If you invite more than 12 guests, you can deduct "reasonable" costs if your primary purpose is business. To prove your primary purpose is business, include your employees; let your guests know your business purpose; and discuss or display your product or service at the event.
Expenses for sporting and theatrical events, golf and boating outings, and similar entertainment are also 50% deductible if they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets (but not a scalper's premium) to sporting and theatrical events, food and beverages, travel and parking expenses, taxes, and tips.
Meal and entertainment expenses are easy to overlook -- especially when it comes to entertaining at home. But over time, those little expenses add up. Don't lose out on those easy savings!
Wednesday, April 29, 2009
New Recovery Package - Questions and Answers
Taxpayers, like you, have many questions related to the American Recovery and Reinvestment Act of 2009, especially since the legislation was enacted while many taxpayers are working to file their 2008 tax returns. How will this new legislation affect you? Here are a few questions and answers to help guide you.
Q: Could the new law affect 2008 tax returns?
A: Generally, no. The new law does not have any major impact for the vast majority of individuals preparing their 2008 tax returns due April 15. Instead, these changes will largely impact 2009 tax returns filed next year, in 2010. Taxpayers should continue to prepare their 2008 tax returns as they normally would.
Note: There are a few limited areas in the law that could impact 2008 tax returns. For some small businesses, changes in the net operating loss provisions could affect 2008 tax returns. For first-time homebuyers, there is an expanded credit available on 2008 tax returns.
Q: Does this new recovery program have any impact on the recovery rebate credit for 2008 tax returns being filed now?
A: No. But the IRS reminds taxpayers and tax preparers to make sure they properly determine eligibility for the recovery rebate credit before they file their 2008 federal tax returns.
New Tax Relief for Individuals
The American Recovery and Reinvestment Act (ARRA) of 2009 was signed into law by President Obama on February 17, 2009.
The bill is intended to provide a stimulus to the U.S. economy in the wake of the economic downturn.
The bill includes federal tax cuts, expansion of unemployment benefits and other social provisions such as domestic spending in education, health care, and infrastructure-including the energy sector.
It sets forth both short-term and long-term legislation to restore economic growth, create jobs and strengthen the American middle class.
But what does it mean to you?
Here are some key highlights of the tax relief for individuals:
Payroll Checks Increase This Spring. The "Making Work Pay" Tax Credit will mean an additional $400 to $800 for many Americans. New withholding tax tables have been issued for employers, thereby increasing paychecks. This credit, however, begins to phase out for single taxpayers with an AGI of $75,000, or $150,00 for joint taxpayers.
First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement. For further information, see the article below titled First Time Homebuyer's Credit.
Expansion of the Hope Tax Credit for College. The Hope Credit for college costs increases to $2,500 for 2009 and 2010 (from $1,800 in 2008). The credit is now allowed for 100% of the first $2,000 of qualified expenses and 25% of the second $2,000. Furthermore, the qualified expenses now include course materials (in addition to tuition and fees). The credit can now be claimed for up to 4 years (up from 2 years).
Expansion of Low Income Tax Credits. More taxpayers will qualify for the Earned Income Tax Credit and Child Tax Credit in 2009 due to revisions in the phase out and qualifying income limits.
Unemployment Compensation Tax Exclusion. In 2009, the first $2,400 a person receives in unemployment compensation benefits will be excluded from taxation.
$250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.
Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid.
Home Energy Credit. Homeowners will benefit from extended energy saving credits when making their homes more energy-efficient in 2009 and 2010. Projects include energy efficient windows, doors, heating and air conditioning systems. The existing 10 percent tax credit for energy saving home improvements has been increased to 30 percent of a cost up to $1,500 and extends through 2010.
Alternative Minimum Tax (AMT). The floor for the AMT calculation has been increased to $70,950 for joint filers in 2009.
Wednesday, April 8, 2009
Meet Amy Smith
Amy Smith is director of marketing and client relations for Favazza & Associates, LLC, a firm of certified public accountants and business consultants serving the St. Charles County and St. Louis, Missouri, areas. The firm specializes in income tax, planning and preparation for small businesses.
Ms. Smith began her financial career in retail banking industry by providing financial solution accounts and loan products to small businesses. She also sold payroll services to small and medium sized businesses for a leading payroll company. Her role with Favazza & Associates is to introduce clients to the firm and help clients create marketing and selling opportunities that benefit their business.
Her marketing expertise shows small businesses the advantages of contracting accounting services, which frees the business owner to use their time more effectively on income generating tasks. Favazza & Associates serves a wide variety of businesses, and industries.
Ms. Smith began her financial career in retail banking industry by providing financial solution accounts and loan products to small businesses. She also sold payroll services to small and medium sized businesses for a leading payroll company. Her role with Favazza & Associates is to introduce clients to the firm and help clients create marketing and selling opportunities that benefit their business.
Her marketing expertise shows small businesses the advantages of contracting accounting services, which frees the business owner to use their time more effectively on income generating tasks. Favazza & Associates serves a wide variety of businesses, and industries.
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