Rick’s Tax Tips
- Travel and Transportation are two big expense items in most businesses. You don’t want to lose them. IRS does require you to maintain a written log to qualify those expenses. At this point, we are not required to have a copy of the log to use those expenses, but should you be audited, IRS will definitely be looking for that log. It’s the beginning of the year, a good time to start that log.
Travel and Transportation food for thought. You go to IF Christmas Shopping and incidentally pick up business supplies. That is a non-deductible trip. Let’s change it up. You go to IF to pick up business supplies, incidentally Christmas Shop, go out for supper, spend the night, have breakfast out and head home. That trip, the supper, the breakfast, the lodging, and the mileage both ways are all deductible. It’s less expensive to travel for business than for pleasure!
Quick review of the American Taxpayer Relief Act of 2012 (post Fiscal Cliff)
- Tax rates remain pretty much the same with the exception of the 39.6% bracket starting at $400,000 of Taxable income.
- Long Term Capital Gains remain at 0% for Taxpayers in the 10 and 15% tax brackets.
- Personal Residence gain exclusion of $250,000 single, or $500,000 joint is still available.
- Qualified Principal Residence Indebtedness cancelled is not taxable up to $2 million.
- Dependent Care Credit, along with Earned Income Credit, Adoption Credit, Educational Credits and Child Tax Credit have all been preserved.
- Section 179 $500,000 deduction limit for depreciation has been extended.
- Bonus Depreciation (50% of the NEW cost) first year write off has been extended.
- Most of the Energy Credits are still available in 2013, including the Residential Credit.
- Some forms will not be processed until March 1, 2014.
- The Teacher $250 above the line expense deduction has survived.
- We are completing tax returns right now, so don’t delay coming in to see us.
More Tax Information
- The Business Mileage Rate for 2013 is 56.5 cents.
- Health Saving Account limits for 2013 are $3250 Single, $6450 Joint plus $1000 for over age 55.
- In general, if in the course of your business you pay out $600 or more to a non-corporate entity, you are required to file a 1099 to that person/business by February 1, of the following year. See 1099 Questionnaire
- Keep in mind that hiring children under the age of 19, in your business, could save you tax dollars.
- Hiring your spouse could also be a tax savings maneuver to deduct health insurance cost on your business schedule, saving you an additional 15% of tax over alternative health insurance deduction options.
- Do you have employees or sub-contractors? If you control the wages, hours required to work, provide the tools, materials and supplies for that person and you maintain substantial control over that person, you most likely have an ‘employee’. You would be required to withhold tax and file payroll reports. A sub-contractor, in most cases, would be a person that establishes a price that he will perform a specific amount of work for and he furnishes his own tools and supplies. NOTE: These are very generic guidelines. If you have specific questions regarding sub-contractors, please contact our office. My point is to make you aware if IRS were to reclassify a sub-contractor to an employee would be very expensive, requiring filing late payroll reports, paying back withholding taxes and upwards of 25% penalties.
- Now that December 31st, the last day to take advantage of 2012 expenses and income deferrals’, is behind us, there are limited tax savings opportunities remaining. But there is still hope. You have the IRA , the SEP, the HSA and a few others. We can still help.
- Another big one with the IRS is the Hobby Business. Some points you need to consider in your business. If it is a Hobby, you may only deduct expenses up to your income. You may not deduct your loss against other ordinary income. Areas that the IRS looks at are: the amount of expertise you have in the business or the amount of expertise you have hired, the amount of hours you spend in the business, your intent and ability to make a profit, the manner in which the business is run – are there business cards, letterhead, etc.; what type of advertising has been done to promote the business; is there any formal business registry. Here again, these are just some guidelines for you to think about. Please call for any specific concerns.
Helpful Tax Season Filing Tips
- Extensions are good! They allow us more time on your taxes and the risk of audit for tax returns filed in the extension period is much lower.
- If you need last-minute payroll or 1099’s, we’re available to help.
- When bringing in your tax information, please let us know if there are any time restraints. We will bend over backwards to have them when you need them.
- Corporations are due on the 15th of March. If you don’t want to file an extension, please try to have your information to us by no later than the beginning of March.
- Tax Organizers (all your prior year info is in one column and you simply insert your current year data in the adjacent column) are available upon request. Call 307-885-‘Zero’Tax (0829), Contact us by Email or text 307-203-7433
Drop Off’s as usual are welcome. Appointments are available Mornings, Afternoons and Evenings. Check us out at www.ReedRickMiller.com
