25. February 2009 by admin.

For primary homes purchased before Dec 1, 2009, the max credit is $8,000 and it need not be paid back unless the home is sold within three years of purchase.

The 2009 purchase can be carried back to 2008 for the full $8,000.

Homes purchased in 2008 still have the 15-year repayment rule.

The credit is fully refundable.. meaning, to be received in full even if it exceeds the tax bill for the year.

Posted in Income Tax | No Comments »

19. February 2009 by admin.

The following is from the IRS website and it is good information……

IRS TAX TIP 2009-11

1. If you receive a letter or notice from the IRS which leads you to believe someone may have fraudulently used your Social Security Number, respond immediately to the name and address or phone number printed on the IRS notice.

2. If you receive a letter from the IRS that indicates more than one tax return was filed for you, this may be a sign that your SSN was used fraudulently.

3. Another sign that you may be the target of identity theft is an IRS letter indicating you received wages from an employer unknown to you.

4. The IRS has a department which deals specifically with identity theft issues. The IRS Identity Protection Specialized Unit is available if you have been in contact with the IRS about an identity theft issue and have not achieved a resolution.

5. You can contact the IRS Identity Protection Specialized Unit by calling the Identity Theft Hotline at 800-908-4490 Monday through Friday from 8:00 am to 8:00 pm local time (Alaska and Hawaii follow Pacific Standard Time).

6. The IRS Identity Protection Specialized Unit is also available if you believe your identity may be at risk of being stolen due to a lost or stolen purse or wallet or due to questionable activity on your credit card or your credit report.

7. The IRS never initiates communication with taxpayers about their tax account through emails. If you receive an e-mail or find a Web site you think is pretending to be the IRS, forward the e-mail or Web site URL to the IRS at phishing@irs.gov.

8. The IRS has many more resources available to help inform taxpayers about identity theft on the IRS Web site at IRS.gov. On IRS.gov you can access information on how to report scams and bogus IRS Web sites. You can also visit the IRS Identity Theft Resource Page, which you can find by typing Identity Theft Resource Page in the search box on the IRS.gov home page.

9. The Federal Trade Commission is also available to assist taxpayers with identity theft issues. You can reach them at 877-ID-THEFT (877-438-4338).

10. Visit OnGuardOnline.gov for protection tips from the federal government and the technology industry.

Posted in General | 1 Comment »

19. February 2009 by admin.

If you are on CASH BASIS, and you never rec’d payment, you have no write off because you only declare it when you receive it.. never received it, never declared it, no write off.
 
If you are on ACCRUAL BASIS, then you declared the revenue when the invoice was generated.  NOW, you can write off a bad debt expense.

use the search box for further explanation of CASH BASIS

This is an area of confusion for many taxpayers, especially since Sales Tax (at least in Florida) has to be reported on an ACCRUAL BASIS even if for IRS purposes the taxpayer is on a CASH BASIS.  If you need any more help with this, contact us www.USATaxHelp.com

Posted in Income Tax | 1 Comment »

16. February 2009 by admin.

First Time Homebuyer Credit

We understand there are many questions about this new refundable tax credit.

How Much is the Credit?

AS CURRENTLY WRITTEN (this is the tax law today.. at least it was this morning 02.16.09!) the credit amount is the lesser of $7,500 or 10% of the purchase price of a principal residence ($3,750 if Married, Filing Separate).

The closing date for the new home must be between April 9, 2008 and June 30, 2009. If the home is purchased in 2009 the taxpayer may elect to claim the credit on their 2008 tax return (original or amended).

Who Qualifies?

The credit only applies to taxpayer’s who have not had any ownership interest in a principal residence during the three year period prior to the purchase of the home. The three year period applies only to a principal residence. This means that a renter who owns a vacation home may qualify for the first time homebuyer credit if they meet the other criteria.

There is no requirement that a taxpayer have any income to get this fully refundable credit. This means that taxpayer’s with only Social Security or Disability income may purchase a home and get this credit. The credit phases out for single taxpayers with income between $75,000 and $95,000. The phase out range for married taxpayers is $150,000 to $170,000.

Property acquired from a related person does not qualify for the credit! Property acquired through gift or inheritance is not purchased and therefore does not qualify for the credit.

Do I Have to Pay it Back?

AS CURRENTLY WRITTEN, the tax law requires the credit to be recaptured (repaid on the tax return), interest free, over 15 years beginning the second year after the credit is claimed…. The payback is $500 per year; which actually makes it an interest free loan.

There is a possibility the law may change and no repayment be required and that the amount of the credit may increase.

If the house is sold or no longer the principal residence prior to this period, the remaining credit is recaptured (paid back to IRS) that year. There are some exceptions to the payback requirement (death of homeowner, divorce and involuntary conversion of the home).

Overall, this First Time Homebuyer Credit appears to be a good incentive to help qualified taxpayers buy a principal residence.

Posted in Income Tax | 2 Comments »

13. February 2009 by admin.

Per IRS Notice 2008-1, Special Rules for Health Insurance Costs of 2-Percent Shareholder-Employees, health insurance must be included in the shareholder employee’s 2008 Form W-2 in order to take the self-employed health insurance deduction for shareholder employees owning greater than two percent of the S Corporation.

The requirement existed in prior years but there was a work around… we could include the health insurance on the K-1.  In either method the result tax wise is exactly the same… the W2 requirement adds no more revenue to the U.S. Treasury and it takes longer to prepare the year end payroll reports.  BUT THAT IS THE REQUIREMENT NOW… if not on W2, no deduction!

There is more information about Sub S Corporations on our website www.USATaxHelp.com

Posted in Payroll Tax, Sub S Corporations, Income Tax | 2 Comments »

12. February 2009 by admin.

You are welcome to ask questions or make comments.

Posted in Ask Question or Comment | 3 Comments »

7. February 2009 by admin.

There is a sales tax deduction for sales tax paid on major items such as cars, trucks, airplanes, (this includes leasing of the vehicle) motor homes, mobile or pre-fab homes…   and improvements to your home (think bricks and mortar, not cosmetics, not large TV’s, not fans, not appliances).. best examples are tile floor, wood floor, screen enclosure, etc….

It works like this… you deduct

• ACTUAL sales tax paid  or
• table amount based on
  • Income
  • State
  • County within the state
  • Number of Exemptions
  • PLUS MAJOR PURCHASES at the State rate (not including the county)

Posted in Income Tax | 2 Comments »

6. February 2009 by admin.

Driving from home to your first place of business (notice I did not say office) is not deductible.  From home if you visit a client first, no deduction (first place of business) but to the next place of business (office or another client) is deductible.

From your last place of business home (again, notice I did not say office) is not deductible.   

We are not taking about overnight stays in other towns.  We are talking about driving day to day in town business driving.

Posted in Income Tax | 1 Comment »

6. February 2009 by admin.

 In the Simpliest Terms…….CASH BASIS REVENUE means you declare it when you RECEIVE the money.ACCRUAL BASIS REVENUE means you declare it when you EARN the money (usually that is when the invoice is generated whether you receive a portion of the money or none at all at the time the invoice is generated).  When you subsequently receive payment, it is not taxed.  The accounting entry upon receipt of the money is to reduce the Account Receivable.  The revenue was declared when the invoice was generated.

CASH BASIS EXPENSE means you expense it when you PAY it.

ACCRUAL BASIS EXPENSE means you expense it when you OWE it, regardless of when you pay for it.  The accounting entry is to post the payment to the liability.  Paying a liability when on an accrual basis does NOT generate an expense.  The expense was deducted when it was accrued (shown as a liability).

So, that means…..

If you are on cash basis, and you never rec’d payment, you have no write off because you only declare it when you receive it.. never received it, never declared it, no write off.
 
If you are on accrual basis, then you declared the revenue when the invoice was generated.  NOW, you can write off a bad debt expense.

This is an area of confusion for many taxpayers, especially since Sales Tax (at least in Florida) has to be reported on an ACCRUAL BASIS even if for IRS purposes the taxpayer is on a CASH BASIS.  If you need any more help with this, contact us www.USATaxHelp.com

Posted in Income Tax, General | 1 Comment »

4. February 2009 by admin.

As an Authorized ERO (Electronic Return Originator), we receive notification from the IRS on a Form 9325. 

IRS Publication 1345 is periodically updated but no changes have been made in over 4 years.   

The latest IRS Revenue Procedures (rev procs) refer to it:  “The ERO must, at the request of the taxpayer, provide the Declaration Control Number (DCN) and the date the electronic individual income tax return data was accepted by the IRS. Form 9325, Acknowledgement and General Information for Taxpayers Who File Returns Electronically, may be used for this purpose.” 

This document is what we use to track the status of all electronically filed tax returns whether they be Corporate, Partnership, Estates and Trusts, Individual Income Tax, etc. 

Posted in Income Tax | No Comments »