6. July 2010 by admin.

SUMMARY 

The Hiring Incentives to Restore Employment Act. Businesses can receive two tax incentives for each new worker. To qualify the employee must have been unemployed during the 60 days before beginning their new job or worked fewer than 40 hours during that 60 day period. It applies to anyone hired between February 3rd and December 31st of 2010 but the calculations of the credit do not start until March 19th.

The first benefit is a 6.2 percent payroll tax incentive, exempting businesses from their share of the employee’s social security taxes. The second is a tax credit of up to $1-thousand dollars for every worker retained for at least a year.A spokesman for the IRS says the HIRE Act is too new to know how well it’s working or how many companies are filing for the exemptions.

YOU MUST HAVE THE TAX EXEMPTION FORM W-11. 

We must have a signed copy to process this information.Click here to download the tax exemption form W-11. 

DETAIL http://hireact.org/ 

Posted in Payroll Tax, Sub S Corporations, LLC's, Income Tax, General | No Comments »

23. June 2010 by admin.

If a spouse had not owned a home within the past three years, could that spouse qualify as a first-time homebuyer for the credit even though the wife would not qualify?

No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since the wife had ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. The husband may not take the credit even if he filed on a separate return.

Posted in Income Tax | 1 Comment »

21. June 2010 by admin.

If you gave money to a homeless person or anyone needing assistance, thank you but that is not a 501(c)(3) deductible charitable organization.  Nice gesture but no deduction.

Posted in Income Tax | No Comments »

21. June 2010 by admin.

How do you prove a deduction?

First, a cancelled check, credit card charge or cash receipt.  BUT, that only proves you paid for something.

Second, an invoice showing what was paid. 

For example, you have a cancelled check to an insurance company.  It only proves you paid for something.  You might have paid your Grandmothers insurance policy instead of business liability.  So it takes the invoice AND proof of payment.

Every deduction it requires PROOF of PAYMENT and PROOF of the expense, meaning an invoice.

Posted in Payroll Tax, International Taxation, Sub S Corporations, LLC's, Income Tax | 1 Comment »

1. June 2010 by admin.

Recourse vs. Nonrecourse

When a debt is canceled by any means (deed in lieu of, foreclosure, short sale, cancellation of debt), the tax impact depends on the type of debt.

Debt for which the borrower is personally liable is “recourse debt,” all other debt is “nonrecourse debt.”

RECOURSE debt holds the borrower personally liable for any unsatisfied amount owed when the property is surrended (by any means).

If a lender forecloses on property subject to recourse debt, and cancels the portion in excess of the fair market value (FMV), the canceled part is “ordinary income from cancellation of indebtedness”.  That figure must be included in gross income unless it qualifies for an exception of exclusion (personal residence, Mortgage Debt Relief Act, bankruptcy or insolvency).

Additionally taxpayer may realize a gain or loss on the disposition of the property by the difference between the tax basis and the FMV at the time of foreclosure.

NONRECOURSE debt is satisfied by the surrender of the property regardless of FMV.  Borrower is not personally liable for the debt.

If nonrecourse debt is abandoned, foreclosed, short sale or repossessed, it is treated as a sale.  The usual method to determine gain or loss is used.  The balance of the nonrecourse debt at the time of the disposition is treated as the amount realized (in other words you actually sold it for the total debt of the property, not just what a short sale closing document may indicate).

Posted in International Taxation, Sub S Corporations, LLC's, Income Tax, General | 1 Comment »

5. March 2010 by admin.

Question:   Are the amounts a taxpayer receives from a “reverse mortgage” taxable?  Deductible?

Answer:   NO to both.  Interest on a reverse mortgage loan added monthly to the outstanding loan balance as it accrues is neither taxable in a cash method lender’s gross income nor deductible by a cash method borrower at the time it is added.

• The primary purpose of a reverse mortgage loan is to enable elderly persons with limited incomes to remain in their homes.
• Repayment of the loan is due when the principal amount has been fully paid to the borrower (they receive monthly allotments),
• The residence that secures the loan is sold,
• The borrower dies, or the borrower ceases to use the home as the borrower’s principal residence

Posted in Income Tax | 1 Comment »

3. March 2010 by admin.

Are Work Clothes a Deduction? 

Generally yes if they are work clothes or uniforms if required and NOT suitable for everyday use.  That deduction would include the cost and upkeep if both requirements are met.

If I purchase a nice suit for business, it is not a deduction as it has alternate use.

If I am a professional clown (no comments please), then the clown suit with the big shoes, etc. would be a deduction.  Yes, It has alternate use but I probably would not use it to go to the mall.

Nor is it enough that you do not, in fact wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.  www.USATaxHelp.com

Posted in Income Tax | 1 Comment »

12. February 2010 by admin.

According to Publication 17, “A scholarship received by a child who is a full-time student is not taken into account in determining whether or not the child provided more than half of his or her own support.”  

Posted in Income Tax | 1 Comment »

7. February 2010 by admin.

2009 Standard Mileage rates for the use of a car (includes Pickups, Vans and Panel Trucks):

• 55 cents per mile for business miles driven (decreases to 50 cents per mile in 2010)
• 24.0 cents per mile driven for medical or moving purposes (decreases to 16.5 in 2010)
• 14 cents per mile driven in service of charitable organizations (same in 2010)

Runzheimer International conducts an annual study of fixed and variable expenses to operate a vehicle.  Please note the Business Mileage Deduction may not be used if a vehicle has been depreciated using MACRS or depreciated using  §179.

Posted in International Taxation, Sub S Corporations, LLC's, Income Tax | No Comments »

5. February 2010 by admin.

That depends on the AMOUNT of income AND the TYPE of income.  Filing is not required if all of your income is from W2 Wages, Interest, Dividends and Other Miscellaneous Inocme (excluding Social Security) AND if the total income is less than the Standard Deduction plus personal exemptions.

2009 example:A Single person’s standard deduction is $5,700.  Add a personal exemption of $3,650.  Total $9,350.  That means on the first $9,350 of income there is no Income Tax liability and NO filing requirement.  If the taxpayer is 65 or older, or blind add another $1,400 to the standard deduction for a total of $10,750.

But it’s not really that simple.  Let’s assume this single person’s only source of income was $1,000 of self employment income.  The Income Tax is zero BUT the return must be filed due to Self Employment Tax liability on Self Employment Income of $400 or greater!

Suppose the person’s self employment income is $200 and that’s all.  Sounds like no filing requirement.  The self employment income bottom line may be only $200, but let’s say the business of the self employed person generated $1,000,000 in sales with enough expenses to generate only a $200 profit. 

YES, there is a filing requirement!  Think about it.. a million dollars passing through a self employed person’s hand should be accounted for.  

Posted in Income Tax, General | No Comments »