Tax season is fast approaching, and those of you with home offices know how hard it is to calculate your residence-based business deductions under current tax laws. But there’s good news: After acknowledging how “complex and burdensome” the necessary recordkeeping was. The IRS just recently amended them to add an easy to calculate safe harbor method. Here’s what you need to know:
Comparison of methods
Simplified Option Regular Method Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes Same Allowable square footage of home use for business (not to exceed 300 square feet) Percentage of home used for business Standard $5 per square foot used to determine home business deduction Actual expenses determined and records maintained Home-related itemized deductions claimed in full on Schedule A Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F) No depreciation deduction Depreciation deduction for portion of home used for business No recapture of depreciation upon sale of home Recapture of depreciation on gain upon sale of home Deduction cannot exceed gross income from business use of home less business expenses Same Amount in excess of gross income limitation may not be carried over Amount in excess of gross income limitation may be carried over Loss carryover from use of regular method in prior year may not be claimed Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year
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The term "capital asset" for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.
1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments. 2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset. 3. You must include all capital gains in your income. 4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property. 5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term. 6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a 'net capital gain.’ 7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2013 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains. 8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately. 9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year. Stanek Tax Services · 15701 State Road 50 Ste 204 · Clermont, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 · e-Mail: jay@stanektax.com The Affordable Care Act (ACA) requires most Americans to have some form of health insurance by 2014 or face a tax penalty. It also may provide you and your family with a generous subsidy to purchase health insurance.
The law is complex and the impact is far-reaching, but you don’t have to figure it out on your own. We can help. Not only will we help you comply with the law, but we will ensure you receive the most benefits allowed under the law. How? Through our Healthcare Evaluation process, we will: • Estimate your eligibility for the premium assistance credit • Estimate the amount of your premium assistance credit • Show you how the ACA might affect your tax future • Make sure you avoid any tax penalties • Explain the cost-sharing provisions of the ACA, which may reduce your out-of-pocket costs Let us help make sense of the new healthcare mandate. Call us today to set up your Healthcare Evaluation appointment. Here is a link that will help you calculate your costs: http://drakehealth.com/site/svc/egateway?sid=163875 Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit "at ease" when it comes to their taxes.
1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. 2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received. 3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military. 4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. 5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return. 6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties. 7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable. 8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests. STANEK TAX SERVICES · 15701 STATE ROAD 50 STE 204 · CLERMONT, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 Do you rent property to others? If so, you’ll want to read the following tips about rental income and expenses.
You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. When to report income. You generally must report rental income on your tax return in the year that you actually receive it. 1. Advance rent. Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it, regardless of the period covered. 2. Security deposits. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 3. Property or services in lieu of rent. If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 4. Expenses paid by tenant. If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses. 5. Rental expenses. Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. 6. Personal use of vacation home. If you have any personal use of a vacation home or other dwelling unit that you rent out, you must divide your expenses between rental use and personal use. If your expenses for rental use are more than your rental income, you may not be able to deduct all of the rental expenses. STANEK TAX SERVICES · 15701 STATE ROAD 50 STE 204 · CLERMONT, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 A federal district court in Ohio has issued a permanent injunction ordering ITS Financial LLC, the parent company of Instant Tax Service tax franchiser, to cease operations. The order, which was issued as a result of a two-week trial in June, also bars Fesum Ogbazion, the sole owner and CEO of ITS Financial, from operating or being involved with any business relating to tax-return preparation.
ITS Financial, which claims to be the fourth largest tax-preparation business in the country, had more than 150 franchisees that filed more than 100,000 tax returns each year in 2011 and 2012. Ogbazion also owned two other entities, Tax Tree LLC and TCA Financial LLC, that were also shut down. The Justice Department cited a long list of the company’s transgressions, including:
The court cited an IRS study that showed that the tax harm the company’s franchisees caused in just five cities during a single filing season was between $10 million and $25 million. The company also had failed to comply with the terms of a preliminary injunction order that the company had agreed to in October 2012. In a Justice Department press release, Assistant Attorney General Kathryn Keneally said of the company, “As described by the court, this company grew large through abhorrent means—filing returns without customer authorization, forging customer signatures, pushing fraudulent loan products, and much more. As the court’s decision recognizes, a business model based on false and fraudulent conduct cannot be allowed to prevail.” WASHINGTON — The Internal Revenue Service today warned consumers about a
sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. “This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail Other characteristics of this scam include:
Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS. The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov. 5 Things You Should know about Required Minimum Distributions (RMD) from Retirement Accounts10/29/2013 Required minimum distributions (RMDs) are amounts you are required to take from qualified retirement plans and IRAs in order to avoid a 50% penalty on insufficient annual distributions.
Here are 5 things to know: 1. If you turned 70 1/2 in 2013, for example, you must take your first RMDs before the end of this year unless you postpone it until April 1, 2014. However, postponement means taking two RMDs in 2014 and that can adversely impact taxation of Social Security benefits in 2013 and result in increased Medicare premiums for Parts B and D in 2015. 2. If you are still working, you can postpone your RMDs from company retirement plans until you retire; this rule does not apply to IRAs. 3. RMDs for IRAs can be taken from one or more accounts. Total up all IRAs and then decide from which one or more accounts to take the required distribution amount. This rule does not apply to qualified retirement plans; separate RMDs are required from each type of retirement plan. 4. No lifetime distributions are required from Roth IRAs for the owner, but beneficiaries usually must draw down the accounts over their lifetime (a special rule applies to spouses). 5. The penalty for insufficient withdrawals can be waived if you ask the IRS to do so. You must explain why you failed to take RMDs and show that you remedied the situation as soon as you discovered the insufficiency. Stanek Tax Services · 15701 State Road 50 Ste 204 · Clermont, FL 34711 Tel: (407) 434-1040 · Fax: (877) 386-1040 · e-Mail: jay@stanektax.com It’s the gift that keeps on giving. Remember the government shutdown that ended last week? It seems the effects of that little debacle are rippling through the American tax system.
The Internal Revenue Service says the shutdown – and the furlough of federal workers that it mandated – meant that the IRS lost valuable time it would have used to program and test its tax processing systems. So the official start of filing, which would have been Jan. 21, 2014, will now be pushed back one or two weeks. That means filing won’t start any earlier than Jan. 28, and could start as late as Feb. 4. Very Bad Timing. About 90 percent of IRS operations were closed during the shutdown – and some major work projects were shut down entirely, putting the IRS nearly three weeks behind its timetable for the start of the 2014 tax season. The agency had big plans to add additional refund fraud and identity theft detection to the tax system, so there are extra training, programming and testing demands on the system this year. Acting IRS Commissioner Danny Werfel says the delay simply gives the IRS the time it needs to get ready. “Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right,” Werfel said. “The adjustment to the start of the filing season provides us the necessary time to program, test and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers. We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.” Early Birds Get No Worm. Werfel says taxpayers who attempt to send in paper returns before the announced start date will not get quicker attention. No returns will be processed before that new start date. In fact, the IRS is still digging out from the mountain of paperwork it got during the shutdown. The agency had about a million items being processed before the government shutdown – and another 400,000 came in while workers were on furlough. For now the bottom line is to use IRS automated systems whenever possible if you need assistance. The human-powered help lines are going to be very busy as they dig out of the shutdown’s backlog. Werfel urges patience. And that may be the best advice of all. The Internal Revenue Service has temporarily stopped sending out tax refunds, and the Tax Court has suspended operations during the federal government shutdown, as lawmakers in Congress continue their battle over delaying or defunding “Obamacare” for a year.
“Tax refunds will not be issued until normal government operations resume,” said the IRS. The IRS emphasized, however, that the underlying tax law remains in effect, and all taxpayers should continue to meet their tax obligations as normal. “Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law,” said the IRS. “The IRS will accept and process all tax returns with payments, but will be unable to issue refunds during this time. Taxpayers are urged to file electronically, because most of these returns will be processed automatically.” In addition, the IRS noted that no live telephone customer service assistance will be available. However, most automated toll-free telephone applications will remain in operation. IRS walk-in taxpayer assistance centers will be closed, though. While federal government offices are closed, people who have appointments with the IRS related to examinations and audits, as well as tax collection, appeals or Taxpayer Advocate cases should assume their meetings are canceled, the IRS noted. IRS personnel will reschedule the meetings at a later date once the government shutdown ends. In addition, IRS computer systems will continue to mail out automated notices to taxpayers, but IRS employees will not be sending any paper correspondence during the period when the federal government is shut down. The IRS provided some basic steps to follow during this period: • Continue to file and pay taxes as normal. Individuals who have requested an extension of time to file should file their returns by Oct. 15, 2013. • All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships and employers. The regular payroll tax deadlines remain in effect as well. • Taxpayers can file their tax returns electronically or on paper—although the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them. • Tax refunds will not be issued until normal government operations resume. • Tax software companies, tax practitioners and Free File will remain available to assist with taxes. A number of IRS services will remain available, but in a limited way. For taxpayers and preparers seeking assistance, only the automated applications on the regular (800) 829-1040 telephone line will remain open. |
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