Sum of All Numbers

Many Business Tax Breaks Expired at the End of 2009

By Holly · Comments (0)

Tuesday, March 16th, 2010

Although there is some talk of extension, unless Congress acts to retroactively restore them, the following business tax breaks that expired on December 31, 2009 will not be available in 2010:

The additional first-year 50% bonus depreciation for qualified property, generally equipment, machinery, electronics, etc.
The $8,000 increase in the first-year depreciation limit for passenger automobiles used in business
The Sec 179 expense deduction for 2010 is substantially reduced. The maximum amount that may be expensed is $134,000 (down from $250,000 for 2009). The maximum annual expensing amount generally is reduced dollar-for-dollar by the amount of property placed in service during the tax year in excess of $530,000 (down from $800,000 in 2009).
The five-year depreciation for farming business machinery and equipment
The fifteen-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
The credit for construction of new energy-efficient homes (this provided a credit up to $2,000 for site-built homes and $1,000 to $2,000 for manufactured homes)
The enhanced (greater than cost) charitable deduction for contributions of food inventory by a non-corporate taxpayer from its trade or business of apparently wholesome food inventory for the care of the ill, needy, or infants
The enhanced charitable deduction for contributions of book inventories to public schools
The enhanced deduction for corporate contributions of computer equipment for educational purposes
The seven-year straight-line cost recovery period for property used for land improvement and support facilities at motorsports entertainment complexes
The film and television producers’ election to expense the first $15 million of production costs incurred in the U.S. ($20 million if the costs are incurred in economically depressed areas in the U.S.)
The credit for eligible small business employers equal to 20% of the sum of differential wage payments to activated military reservists

If you have questions relating to any of the above, please give this office a call at 888-564-5777

Categories : Tax Information

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Little-Known – But Important – Credit Card Rules for Merchants

By Holly · Comments (0)

Thursday, March 11th, 2010

Businesses that accept credit and debit cards must comply with privacy laws that aim to protect customer identity. There are regulations that even the most seasoned of merchants aren’t always aware of. It’s important for merchants, as well as consumers, to be aware of these little-known credit card rules to protect themselves and their information.

Stay Compliant with Federal Laws – The Fair Credit Reporting Act is the federal law that establishes the foundation of consumer credit rights. This law regulates the collection and use of consumer credit information by merchants.

Passed as an amendment to the Fair Credit Report Act, the Fair and Accurate Credit Transaction Act prohibits merchants from showing credit card numbers on receipts. To comply with this law, businesses must truncate credit card information on electronically printed receipts. Merchants can include no more than the last five digits of the card number and must delete the card’s expiration date.

Example: ACCT: **********00714
Exp: **-**

The law does not apply to imprinted or handwritten receipts; however, merchants using these are also required to protect customer identity. For more information, check out the Federal Trade Commission’s guide Slip Showing?

Comply with State Laws
After complying with the Fair Credit Reporting and Accurate Credit Transaction Act, be sure to familiarize yourself with your state’s laws on the use of consumer credit information.

Many states have laws that establish what kind of information merchants can and cannot ask for or write down when a customer uses a credit card. For example, California prohibits merchants from requesting or requiring that a consumer write any personal information (like their address or telephone number) on any form associated with their credit card transaction.

Not all states have additional laws that specifically regulate credit card practices. For more information, read more about state merchant laws, or check with a small business expert in your state.

Beyond the Law – Merchant Contracts
Beyond these government regulations, credit card practices are also policed by the credit card companies themselves through terms of service or rules manuals. These agreements details how transactions using their cards should be carried out.

Interestingly, many merchants cannot require a customer to provide identification as a requirement for accepting a credit card. Although a merchant is allowed to ask for identification, customers can refuse without suffering a penalty. The rules manual for popular cards like Visa or MasterCard state that a merchant must accept their card regardless of whether or not the customer provides personal identification. Note: If a customer prefers to be asked for identification, they can write “See I.D.” or “Ask for I.D.” on the back of their card. Although merchants are not required to follow this request, many happily comply.

Another little-known, but common, rule is that credit card companies generally prohibit merchants from establishing a “minimum purchase amount” when processing transactions with their cards. It is very common to walk into a store and see a sign stating that credit card transactions require a $10 minimum purchase. Credit card companies want to promote the use of their cards and usually include rules that prohibit merchants from making these statements. More often than not, these merchants are violating their processing agreement with their card companies. Official rules vary from card to card but it is safe to say that it is either strongly discouraged or explicitly prohibited in many agreements. Unfortunately, for small businesses, transaction fees often mean that a small purchase made on a credit card hurts their profits.

It is not uncommon for merchants to ignore aspects of their rules manuals, usually because many are unaware the rules even exist. Businesses should be sure to review the rules manuals for each company whose card they accept as payment. Consumers should do the same to be aware of the rights they have for each card they carry.

If you have questions, please call this office at 888-564-5777.

Categories : Bookkeeping

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Tax Breaks for Charity Volunteers

By Holly · Comments (0)

Tuesday, March 9th, 2010

If you volunteer your time for a charity, you may qualify for some tax breaks. Although no tax deduction is allowed for the value of services performed for a charity, there are deductions permitted for out-of-pocket costs incurred while performing the services. The normal deduction limits and substantiation rules also apply. The following are some examples:

• Away-from-home travel expenses while performing services for a charity, including out-of-pocket roundtrip travel cost, taxi fares, and other costs of transportation between the airport or station and hotel, plus lodging and meals are allowed at 100%. Unlike other areas of taxes, meals are not subject to the 50% limitation. These expenses are only deductible if there is no significant element of personal pleasure associated with the travel, or if your services for a charity do not involve lobbying activities. Any “significant element of personal pleasure” negates a deduction (i.e., not even partial deduction is allowed). Significant personal pleasure is assumed if the taxpayer has only minor duties and is not required to perform any duties for the charity for major portions of the away-from-home stay.
• The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor (but the cost of your own entertainment or meal is not deductible).
• If you use your car while performing services for a charitable organization, you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs, or you may deduct a flat 14 cents per mile for the charitable use of your car. You may also deduct parking fees and tolls.
• You can deduct the cost of the uniform you wear when doing volunteer work for the charity, as long as the uniform has no general utility. The cost of cleaning the uniform can also be deducted.

No charitable deduction is allowed for a contribution of $250 or more unless the contribution is substantiated with a written acknowledgment from the charitable organization. To verify your contribution:

• Get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out-of-town as a volunteer, request a letter from the charity explaining why you’re needed at the out-of-town location.
• Submit a statement of expenses if you are out-of-pocket for substantial amounts and, preferably, a copy of the receipts to the charity. Also arrange for the charity to acknowledge in writing the amount of the contribution.
• Maintain detailed records of your out-of-pocket expenses – includes receipts plus a written record of the time, place, amount and charitable purpose of the expense.

Please call us if you have questions related to your volunteer expenses or any other charitable contributions. 888-564-5777.

Categories : Tax Information

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Are You Required to File 1099s?

By Holly · Comments (0)

Friday, March 5th, 2010

If you use independent contractors to perform services for your business or rental and you pay them $600 or more for the year, you are required to issue them a Form 1099 after the end of the year to avoid facing the loss of the deduction for their labor and expenses. The 1099s for 2009 must be provided to the independent contractor no later than February 1st of 2010. Generally, this due date is January 31, but when the due date falls on a Saturday, Sunday or holiday, it is not due until the next business day.

It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later and have the total for the year be $600 or more. As a result, you overlook getting the information needed to file the 1099s for the year. Therefore, it is good practice to always have individuals who are not incorporated complete and sign the IRS Form W-9 the first time you use their services. Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts.

IRS Form (W-9, Request for Taxpayer Identification Number and Certification) is provided by the government as a means for you to obtain the data required to file the 1099s from your vendors. It also provides you with verification that you complied with the law should the vendor provide you with incorrect information. We highly recommend that you have a potential vendor complete the Form W-9 prior to engaging in business with them. The form can either be printed out or filled onscreen and then printed out. The W-9 is for your use only and is not submitted to the IRS.

In order to avoid a penalty, copies of the 1099s need to be sent to the IRS by the last day of February. However, the due date is extended to March 1, 2010 since the last day of February 2010 falls on a Sunday. This must be submitted on magnetic media or on optically scannable forms (OCR forms). This firm prepares 1099s in OCR format for submission to the IRS with the 1096 submittal form. This service provides recipient and file copies for your records. Use the worksheet to provide us with the information we need to prepare your 1099s.

Please attempt to have the information to this office by January 20, so that the 1099s can be provided to the service providers by the January 31st due date.

If you have questions, please call this office at 888-564-5777.

Categories : Bookkeeping, Payroll

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Bunching Your Deductions Can Provide Big Tax Benefits

By Holly · Comments (0)

Wednesday, March 3rd, 2010

If your tax deductions normally fall short of itemizing your deductions or even if you are able to itemize, but only marginally, you may benefit from using the “bunching” strategy.

The tax code allows taxpayers to utilize the standard deduction or itemize their deductions if that provides to be a greater benefit. As a rule, most taxpayers just wait until tax time to add everything up and then use the higher of the standard deduction or their itemized deductions.

If you want to be more proactive, you can time the payments of tax-deductible items to maximize your itemized deductions in one year and take the standard deduction in the next.

For the most part, itemized deductions include medical expenses, property taxes, state and local income taxes, home mortgage and investment interest, charitable deductions, unreimbursed job-related expenses and casualty losses. The “bunching strategy” is more commonly associated with medical expenses, tax payments and charitable deductions; although, there are circumstances where the other deductions might be come into play. There are many opportunities to bunch deductions, and the following are examples of the most commonly used with the “bunching” strategy:

• Medical Expenses – You contract with a dentist for your child’s braces. He may offer you an up-front lump sum payment or a payment plan. By making the lump sum payment, the entire cost is credited in the year paid, thereby dramatically increasing your medical expenses for that year. If you do not have the cash available for the up-front payment, then you can pay by credit card, which is treated as a lump-sum payment for tax purposes. If you use a credit card, you must realize that the credit card interest is not deductible and you need to determine if incurring the interest is worth the increased tax deduction. Another important issue with medical deductions is that only the amount of the total medical expenses that exceeds 7.5% of your income is actually deductible. If you are caught by the Alternative Minimum Tax (AMT), then only the amount that exceeds 10% of your AGI is actually deductible. So, there is no tax benefit of bunching medical deductions if the total is less than 7.5% (10% if taxed by the AMT).

If the current year is an abnormally high-income year, you may, where possible, wish to put off making medical expense payments until the subsequent year when the 7.5% (10%) threshold is less.

• Taxes – Property taxes are generally billed annually at mid-year and most locales allow the tax bill to be paid in semi-annual or quarterly installments. Thus, you have the option of paying it all at once or paying in installments. This provides the opportunity to bunch the tax payments by paying one semi-annual (or 2 quarterly) installment and a full year’s tax liability in one year and only paying one semi-annual (or 2 quarterly) in the other year. In doing so, you are able to deduct 1-½ year’s taxes in one year and ½ a year’s taxes in the other. If you are thinking of being late on the property tax payments as means of bunching, you should be cautious. The late payment penalty will probably wipe out any potential tax savings.

If you reside in a state that has state income tax, the state income tax paid or withheld during the year is deductible as a federal itemized deduction. So, for instance, if you are making state quarterly estimates, the fourth quarter estimate is generally due in January of the subsequent year. This gives you the opportunity to either make that payment before December 31st, and be able to deduct the payment on the current year’s return, or pay it in January before the January due date and use it as a deduction in the subsequent year.

A word of caution about the itemized deduction for taxes! Taxes are only deductible for regular tax purposes. So, to the extent you are taxed by the AMT, you derive no benefits from the itemized deduction for taxes.

• Charitable Contributions – Charitable contributions are a nice fit for “bunching” because they are entirely payable at the taxpayer’s discretion. For example, if you normally tithe at your church, you could make your normal contributions during the year and then prepay the entire subsequent years’ tithing in a lump sum in December of the current year, thereby doubling up on the church contribution one year and having no deduction for charity in the other year. Normally, charities are very active with their solicitations during the holiday season, giving you the opportunity to make the contributions at the end of the current year or simply wait a short time and make them after the end of the year.

If you think a “bunching” strategy might benefit you, please call this office to discuss the issue and set up an appointment for some in-depth strategizing.

If you have questions, please call this office at 888-564-5777.

Categories : Tax Information

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2010 Tax Brackets Change Little Due to Inflation

By Holly · Comments (0)

Monday, March 1st, 2010

To keep taxpayers from being pushed into higher tax brackets or from losing tax benefits simply because of inflation, the federal tax code since the 1980s has included inflation adjustments for tax brackets, exemptions, high-income phase-outs of various deductions and limitations, allowable retirement savings and the annual gift-tax exclusion, just to mention a few. For example, indexing tax brackets lowers tax bills when there is inflation by including more of one’s income in a lower bracket, such as the 15% rather than the 25% bracket.

In 2010, for the first time ever, those inflation adjustments will be virtually nil because of a very low inflation rate. This means that taxpayers with the same taxable income in 2010 as in 2009 will not see much of a tax savings due to inflation. For example, joint filers with a taxable income of $100,000 will pay approximately $13 less in income taxes in 2010 than on the same income for 2009, compared with a $313 savings between 2008 and 2009. A single filer with taxable income of $50,000 will owe $6 less next year, compared to a $156 savings due to the significantly higher inflation rate between 2008 and 2009.

The lack of change for 2010 creates a level playing field for taxpayers from all brackets, but those with high incomes actually stand to benefit in 2010 because “stealth taxes,” those that don’t involve changing tax rates, are being phased out. Among them are limits on itemized deductions and personal exemption amounts.

If you have questions, please call this office at 888-564-5777.

Categories : Tax Information

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It Is Tax Time! Are Your Ready?

By Holly · Comments (0)

Friday, February 26th, 2010

If you’re like most taxpayers, you find yourself with an ominous stack of “homework” around TAX TIME! Unfortunately, the job of pulling together the records for your tax appointment is never easy, but the effort usually pays off when it comes to the extra tax you save! When you arrive at your appointment fully prepared, you’ll have more time to:

• Consider every possible legal deduction;
• Better evaluate your options for reporting income and deductions to choose those best suited to your situation;
• Explore current law changes that affect your tax status;
• Talk about possible law changes and discuss tax planning alternatives that could reduce your future tax liability.

Choosing Your Best Alternatives

The tax law allows a variety of methods for handling income and deductions on your return. Choices made at the time you prepare your return often affect not only the current year, but later-year returns as well. When you’re fully prepared for your appointment, you will have more time to explore all avenues available for lowering your tax.

For example, the law allows choices in transactions like:

Sales of property. . . .

If you’re receiving payments on a sales contract over a period of years, you are sometimes able to choose between reporting the whole gain in the year you sell or over a period of time, as you receive payments from the buyer.

Depreciation. . . .

You’re able to deduct the cost of your investment in certain business property using different methods. You can either depreciate the cost over a number of years, or in certain cases, you can deduct them all in one year.

Where to Begin?

Ideally, preparation for your tax appointment should begin in January of the tax year you’re working with. Right after the New Year, set up a safe storage location – a file drawer, a cupboard, a safe, etc. As you receive pertinent records, file them right away, before they’re forgotten or lost. By making the practice a habit, you’ll find your job a lot easier when your actual appointment date rolls around.

Other general suggestions to consider for your appointment preparation include. . .

• Segregate your records according to income and expense categories. For instance, file medical expense receipts in an envelope or folder, interest payments in another, charitable donations in a third, etc. If you receive an organizer or questionnaire to complete before your appointment, make certain you fill out every section that applies to you. (Important: Read all explanations and follow instructions carefully to be sure you don’t miss important data – organizers are designed to remind you of transactions you may miss otherwise.)

• Keep your annual income statements separate from your other documents (e.g., W-2s from employers, 1099s from banks, stockbrokers, etc., and K-1s from partnerships). Be sure to take these documents to your appointment, including the instructions for K-1s!

• Write down questions you may have so you don’t forget to ask them at the appointment. Review last year’s return. Compare your income on that return to the income for the current year. For instance, a dividend from ABC stock on your prior-year return may remind you that you sold ABC this year and need to report the sale.

• Make certain that you have social security numbers for all your dependents. The IRS checks these carefully and can deny deductions for returns filed without them.

• Compare deductions from last year with your records for this year. Did you forget anything?

• Collect any other documents and financial papers that you’re puzzled about. Prepare to bring these to your appointment so you can ask about them.

Accuracy Even for Details

To ensure the greatest accuracy possible in all detail on your return, make sure you review personal data. Check name(s), address, social security number(s), and occupation(s) on last year’s return. Note any changes for this year. Although your telephone number isn’t required on your return, current home and work numbers are always helpful should questions occur during return preparation.

Marital Status Change

If your marital status changed during the year, if you lived apart from your spouse, or if your spouse died during the year, list dates and details. Bring copies of prenuptial, legal separation, divorce, or property settlement agreements, if any, to your appointment.

Dependents

If you have qualifying dependents, you will need to provide the following for each:

• First and last name
• Social security number
• Birth date
• Number of months living in your home
• Their income amount (both taxable and nontaxable)

If you have dependent children over age 18, note how long they were full-time students during the year. To qualify as your dependent, an individual must pass five strict dependency tests. If you think a person qualifies as your dependent (but you aren’t sure), tally the amounts you provided toward his/her support vs. the amounts he/she provided. This will simplify making a final decision about whether you really qualify for the dependency deduction.

Some Transactions Deserve Special Treatment

Certain transactions require special treatment on your tax return. It’s a good idea to invest a little extra preparation effort when you have had the following transactions:

Sales of Stock or Other Property: All sales of stocks, bonds, securities, real estate, and any other type of property need to be reported on your return, even if you had no profit or loss. List each sale, and have the purchase and sale documents available for each transaction.

Purchase date, sale date, cost, and selling price must all be noted on your return. Make sure this information is contained on the documents you bring to your appointment.

Gifted or Inherited Property: If you sell property that was given to you, you need to determine when and for how much the original owner purchased it. If you sell property you inherited, you need to know the date of the decedent’s death and the property’s value at that time. You may be able to find this information on estate tax returns or in probate documents.

Reinvested Dividends: You may have sold stock or a mutual fund in which you participated in a dividend reinvestment program. If so, you will need to have records of each stock purchase made with the reinvested dividends.

Sale of Home: The tax law provides special breaks for home sale gains, and you may be able to exclude all (or a part) of a gain on a home if you meet certain ownership, occupancy, and holding period requirements. If you file a joint return with your spouse and your gain from the sale of the home exceeds $500,000 ($250,000 for other individuals), record the amounts you spent on improvements to the property. Remember too, possible exclusion of gain applies only to a primary residence, and the amount of improvements made to other homes is required regardless of the gain amount. Be sure to bring a copy of the sale documents (usually the closing escrow statement) with you to the appointment.

Purchase of a Home: If you purchased a home during 2009 and you are a first-time homebuyer or a long-term homeowner after November 6, 2009, you may qualify for a substantial tax credit. Be sure to bring a copy of the escrow closing statement if you purchased a home.

Vehicle Purchase: If you purchased a new car (or cars) this year, you can deduct the sales tax. If the car was a hybrid vehicle or one that qualifies as a lean burn vehicle, you may also qualify for a special credit. Please bring the purchase statement to the appointment with you.

Standard Deduction: If you usually take the standard deduction, you should be aware that a portion of your property taxes, certain vehicle sales taxes and disaster casualty losses can be deducted as part of your standard deduction this year without itemizing your deductions. Be sure to bring your property tax statements, car purchase statements and records relating to any losses incurred in a federally declared disaster area.

Home Energy-Related Expenditures: If you made home modifications to conserve energy (such as special windows, roofing, doors, etc.) or installed solar, geothermal, or wind power generating systems, please bring the details of those purchases and the manufacturer’s credit qualification certification to your appointment. You may qualify for a substantial energy-related tax credit.

Ponzi Scheme or Bank Failure Losses: If you suffered losses as the result of a Ponzi scheme or as the result of a bank failure, there is special tax treatment for these types of losses. Please be prepared with the details of the losses and the amounts lost.

Car Expenses: Where you have used one or more automobiles for business, list the expenses of each separately. The government requires that you provide your total mileage, business miles, and commuting miles for each car on your return, so be prepared to have them available. If you were reimbursed for mileage through an employer, know the reimbursement amount and whether the reimbursement is included in your W-2.

Charitable Donations: Cash contributions (regardless of amount) must be substantiated with a bank record or written communication from the charity showing the name of the charitable organization, date and amount of the contribution.

Cash donations put into a “Christmas kettle,” church collection plate, etc., are not deductible. For clothing and household contributions, the items donated must generally be in good or better condition, and items such as undergarments and socks are not deductible. A record of each item contributed must be kept, indicating the name and address of the charity, date and location of the contribution, and a reasonable description of the property. Contributions valued less than $250 and dropped off at an unattended location do not require a receipt. For contributions of $500 or more, the record must also include when and how the property was acquired and your cost basis in the property. For contributions valued at $5,000 or more and other types of contributions, please call this office for additional requirements.

If you have questions, please call this office at 888-564-5777.

Categories : Tax Information

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Tips for Year-End Donations

By Holly · Comments (0)

Wednesday, February 24th, 2010

Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years.

One provision offers older owners of individual retirement arrangements (IRAs) a different way to give to charity. There are also rules designed to provide both taxpayers and the government greater certainty in determining what may be deducted as a charitable contribution. Some of these changes include the following.

Special Charitable Contributions for Certain IRA Owners – An IRA owner, age 70 ½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charitable organization. This option, only available through 2009, applies to eligible IRA owners, regardless of whether they itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the amount given to the charity.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Transferred amounts are counted in determining whether the owner has met the IRA’s required minimum distribution rules. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions.

Rules for Clothing and Household Items – To be deductible, clothing and household items donated to charity must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to be in good used condition or better if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.

Guidelines for Monetary Donations - To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

The following additional reminders are offered to help taxpayers plan their holiday-season and year-end giving:

• Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2009. This is true even if the credit card bill isn’t paid until next year. Also, checks count for 2009 as long as they are mailed this year.
• Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions.
• For individuals, only taxpayers who itemize their deductions can claim deductions for charitable contributions. This deduction is not available to people who choose the standard deduction. A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceeds the standard deduction.
• For all donations of property, including clothing and household items, a receipt is required that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. A receipt from the charity is not required if a donation valued at less than $250 is left at a charity’s unattended drop site. However, the taxpayer must keep a written record of the donation that includes the foregoing information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
• The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
• If the amount of a taxpayer’s deduction for all non-cash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
If you have questions regarding your specific situation and planned year-end contributions, please call the office for additional information.

If you have questions, please call this office at 888-564-5777.

Categories : Tax Information

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Deduction Tips for Contributors to Haiti Relief Effort

By Holly · Comments (0)

Monday, February 22nd, 2010

Haiti Contributions Deductible on 2009 Return – Congress has passed a bill (HR 4462) to permit taxpayers contributing to Haitian relief charities to elect to treat contributions made after Jan. 11, 2010, and before Mar. 1, 2010, as if the contributions had been made on Dec. 31, 2009. If the election is made, Haiti relief donations would be deductible on the 2009 return, not the 2010 return. This option would be available only if the contribution is made in cash and otherwise meets the requirements for charitable contribution deductions under Code Sec. 170 as summarized below.

• Contributions to domestic, tax-exempt, charitable organizations providing assistance to individuals in foreign lands are tax-deductible, provided that the U.S. organization has full control and discretion over the uses of donations.
• Contributions to foreign organizations generally are not deductible, nor are contributions to benefit specific individuals or families.
• To substantiate charitable contributions of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. One additional substantiation method is allowed individuals for Haitian relief contributions: monetary contributions made via text message on a cellular telephone may be substantiated with a telephone bill that shows the charitable organization’s name, contribution date, and the amount of the contribution.
• Contributions are deductible in the year made unless donated for Haitian relief after Jan. 11, 2010, and before Mar. 1, 2010, in which case the contribution can be taken in on either the 2009 or 2010 return. To claim the donations, the taxpayer must itemize deductions.
• Generally, the deduction for charitable contributions is limited to 50% of the taxpayer’s adjusted gross income, with a 5-year carryover period for excess deductions. The Haitian relief donations are subject to the normal limitations and carryover.
For high-income taxpayers, there is also a limitation on overall itemized deductions for 2009, but there is no overall limitation for 2010. Therefore, the tax benefit for these individuals may be greater by waiting until 2011 to claim their Haitian relief donations on their 2010 returns.

On its website, the IRS has posted deduction tips for taxpayers planning to make contributions to aid Haitian earthquake victims.

California – At this time, California does not conform to the accelerated deduction for Haiti contributions but did enact conformity when similar federal legislation was passed in regards to Indian Ocean tsunami contributions. It is anticipated that California will likely conform.

If you have questions, please call this office at 888-564-5777.

Categories : Tax Information

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Taxes & Worker Status: Employee vs. Independent Contractor?

By Holly · Comments (0)

Thursday, February 18th, 2010

If you are a small business owner, whether you hire people as independent contractors or as employees will impact the amount of taxes you withhold from their paychecks, as well as the amount and types of taxes you pay. Furthermore, it will affect how much additional cost your business must bear, what documents and information must be provided to you, and what tax documents must be given to the individuals you are hiring.
The obvious advantage to treating an individual as an independent contractor is avoiding the added expense of payroll taxes and employee benefits. Unfortunately, the decision is not an optional one, and employers must be careful when making the decision, lest they set themselves up for a payroll audit and back taxes, penalties and interest.
According to industry sources, the IRS will begin auditing companies in early 2010, focusing their efforts on businesses failing to pay taxes on fringe benefits and misclassifying workers as independent contractors instead of W-2 employees.

Here are some things every business owner should know about hiring people as independent contractors versus hiring them as employees.

Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.
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.
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.
The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
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.
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.
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 not filing required tax forms.
Workers can avoid higher tax bills and lost benefits if they know their proper status.
Employers can request 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. A worker may also file Form SS-8, requesting an IRS determination. IRS does not issue determinations for proposed or hypothetical situations.

If you need more information about the critical determination of a worker’s status as an independent contractor or employee, please give this office a call at 888-564-5777.

Categories : Payroll, Tax Information

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