Monthly Archives: September 2014

TAX COURT NIXES CHARITABLE DEDUCTION

Having incomplete substantiation of donations when filing nixes a deduction for the contributions, according to the Tax Court. Here’s what happened: A couple made regular gifts of $250 or more to their church.  However, the acknowledgment from the church failed to state that no goods or services were given for the donation–I see this a lot.  After the IRS denied their deduction because of the faulty acknowledgment, they got a letter from the church saying they received no benefits for the contributions.  But that came too late.  The deduction was propertly denied because the donors didn’t have a valid substantiation in hand before filing.  Check your donation letters and if it doesn’t say “No Goods or Services Were Given for the Donation” have the organization reissue with this terminology.

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IRS Admits Mistake

IRS Now Says No Payroll Taxes on Family Employment in a Single Member LLC

The IRS admits that its regulation that made the single-member LLC a corporation for payroll tax purposes is unfair to small business family employment.

To right this wrong, the IRS allows the single-member LLC to use the family employment rules to exempt FICA and Medicare taxes (for your children who are under age 18) retroactively to January 1, 2009. The regulation granting this change expires on or before October 31, 2014

You can amend your payroll tax returns.

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Random Audits of Small Corporations

Random line-by-line audits of small corporations will start soon!

IRS examiners will scrutinize the 2010 returns of about 2,500 corporations with assets of less than $250,000 to look for pockets on noncompliance by firms and their owners.

If you do not have a good way to keep your books, we can help.  We are Certified QuickBooks Pro Advisors and can setup and train you on QuickBooks or handle your bookkeeping needs for you.

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1099 Reporting

The recent expansion of the 1099 reporting rules are officially repealed.  President Obama has signed the legislation, which scraps the requirement that business issue 1099-MISC forms when paying $600 or more to corporations or for goods.  Also gone is the rule making owners of rental properties file 1099s on payments of $600 or more for goods & services.  Business, landlords and lobbying firms complained that the increased reporting was a hassle, and lawmakers finally agreed.

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MAKE THE BEST OF YOUR TAX APPOINTMENT

CHARLOTTE: With football season winding down, basketball and hockey seasons in full swing, and baseball season right around the corner, there’s another season we all need to gear up for. That’s tax filing season…and it’s quickly approaching.

it’s important for you to contact your tax professional early to reserve a convenient time for your appointment.  Your tax return can be done more accurately and in a shorter period of time if all of the information is available at the initial appointment, so being organized can help both you and your tax preparer.

Start preparing early for your tax appointment by compiling a list of the documents you expect to receive based on last year’s statements and this year’s activities.  If you’re not sure of what documents you may need, call your tax preparer to discuss.  As you start receiving your documents in the mail (usually around the end of January), mark them off your list and put them in a tax folder with the list to stay organized.  Better yet, use a tax organizer if provided.

If employed, you will need to include your W-2.  If you received income from interest, dividends, pensions, self-employment, government payments, or the sale of property, you will receive a Form 1099.  It is helpful to bring the actual statements to your appointment.

Remember that all forms will not look alike; be sure to check the bottom of year-end statements that may be substitute 1099s.  Also don’t forget to include any Schedule K-1s you receive from a partnership, an S corporation, or estate.  If you had any income not reported on the forms listed above, make a note for your tax preparer to include it

If you sold stock during the year, you will receive a 1099 as described above that includes the gross proceeds.  However the price you paid for the stock, the cost basis, is not listed on the 1099.  If the stock was received as a gift or inheritance, other means of determining the cost will be necessary.  For every stock you sold, you should include the basis for your tax professional to calculate the net gain/loss.

If you own a home, it is probable that you can itemize deductions.  Each year, bring the property tax bill and the mortgage interest statement to your tax appointment. County vehicle tax and medical expenses are deductible if they exceed 7.5% of your adjusted gross income (AGI).  Prescription drugs, doctor, dental, hospital bills, medical insurance premiums, and the mileage to and from the doctor’s office enter into this category.

Charitable contributions are a good source of deductions.  Contributions can be cash, property, or out-of-pocket expenses you paid to do volunteer work. If you drove to and from the volunteer work, you can take the actual cost of gas and oil or use the standard rate of 14 cents a mile.  You need a receipt for any donation you claim.

This article contains general tax information for taxpayers and is not all inclusive.  Each tax situation may be different, so don’t rely upon this information as your sole source of authority.  Please seek professional advice for all tax situations.  Remember, tax professionals are experts who keep current on tax law changes.  They can save you time and offer insight on how to use the tax breaks available to you.

This is a good time to discuss with the tax professional any questions and changes in your financial situation that may have an impact on your future taxes.

Scott Boyar is a Charlotte-based CPA, PLLC, with 30 years of corporate and personal tax experience, providing full-time, year-round accounting services and tax support . He is licensed as a Certified Public Accountant in North Carolina and New York.

Reach him at: http://www.sboyarcpa.com, 704.527.2725 or scott@sboyarcpa.com

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IRS Feasts on Low S-Corp Salaries

S-Corp owners take low salaries so they can receive the bulk of the corporation’s profits as dividends, which are not subject to payroll taxes (Social Security & Medicare tax).  IRS and the courts balk at this practice.  In a recent case, a CPA (who should have known better) took a $24,000 salary in a year when his share of the S-Corp’s profits was around $200,000.  A district court agreed with the with the IRS that his pay was unreasonably low and ruled that the dividends are properly reclasified as salary and subject to payroll taxes.

PostHeaderIcon It’s Not What You Earn, But What You Keep, After Taxes.™