Displaying items by tag: deductible - Colorado Springs Small Business Accountant - Colorado Springs Small Business Accountant

Monday, 12 October 2009 10:34

Child Care Tax Credit

Many parents who worked or were looking for work this summer had to arrange for care of their children under 13 years old during the school vacation. The Child and Dependent Care Credit is available for expenses incurred over summer break and throughout the rest of the year. Here are five facts you should know about this tax credit:

1. The cost of day camp can count as an expense towards the credit.

2. Expenses for overnight camps do not qualify.

3. If your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify.

4. The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.

5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual ($6,000 for two or more) to figure the credit.

For information, including credit for your spouse or dependents over 13 that cannot take care of themselves, contact your local office.

Published in Accounting

Monday, 19 October 2009 10:32

Accountable Plan Reimbursements

If you often reimburse employees for job-related expenses they incur, accountable plans can offer significant benefits. Accountable plan reimbursements are not taxable to the employee and are fully deductible by the employer, with the exception of meal and entertainment expenses.

In one particular Field Service Advice (FSA), the IRS addressed the reimbursement of expenses of couriers. The couriers picked up and delivered packages in a certain geographic area. The employees used their own vehicles and the company reimbursed them for such use and paid them for their mileage expenses. However, the expense reimbursements were not based on the employees’ actual expenses but rather a percentage of their commissions were to be allocated to wages and a percentage to equipment rental (i.e., use of the employees’ vehicles). The employees were not required to submit mileage or expense documentation to the employer. The employees’ wages were reported on their W-2s and the expense reimbursements were reported on Form 1099s.

The IRS found that since the employees did not report their actual expenses to the employer, the reimbursements were not part of an “accountable plan,” so the full amount reported on the 1099 was subject to employment taxes. While this FSA involved a delivery service, the rules apply to all businesses. Although some exceptions exist, it’s best to either include the full amount in wages, or require employees to submit detailed expense reports for reimbursement under an accountable plan. Reimbursements must be for job-related expenses that the employee would reasonably expect to incur, and the employee must provide substantiation and return any excess reimbursements within a reasonable period of time.

Published in Small Business

Friday, 11 December 2009 09:56

Tax Entity Change and Year End Decisions

The end of the year is a good time to consider making a tax entity change. If you’re thinking of switching, talk to your Padgett Representative first to find out if changing makes sense for your business, given the potential tax consequences. Some changes have few or no tax implications, but others can be costly. It is very important to consider the tax consequences of making the change.

Incorporating a sole proprietorship or partnership should be tax free if done correctly, but failure to adhere to the rules can trigger tax. Get good advice before making a move and then follow the advice carefully.

Another year end decision includes equipment deductions.

It generally makes sense to write off eligible equipment using the Section 179 expense option in the year of purchase. You’ll get the tax deduction faster than if you took depreciation over time. However, expensing may not make sense if you’re in a low tax bracket in the year of purchase but expect to be in a higher bracket in future years, or if your new sole proprietorship is not making enough to trigger self-employment tax.

While the depreciation deductions may be spread out over time, if you’re in a higher tax bracket or paying self-employment tax, the deductions will be worth more. You’ll have to crunch the numbers and consider the time-value of money to be sure. Keep in mind that you don’t have to write off the entire asset. If a machine cost $5,000, you can claim the Section 179 expense option on $2,000 and take regular depreciation over time on the remainder.

BusinessAdvice_01

Published in Tax

Friday, 18 December 2009 09:52

Overlooked Tax Deductions

Tax season is coming and mistakes are as well. Every year many income tax paying submitters forget to write their socia security numbers on their submitted forms. Many also just put in the incorrect numer. Unfortunately this is not the only overlooked tax blunder. There are actually many tax deduction mistakes that could save you money if you only knew about them.

CPA’s across America are required to have continuing education classes to retain their certifications. This is a valuable requirment for the everyday Joe because it insures that if you take your accounting needs to a Certified Public Accountant, you will recieve the benefits that are owed to you. Accounting_05

Many taxpayers overpay their taxes every year by overlooking just one of the money-savers listed below:

State sales taxes
Reinvested dividends
Charitable contributions
Student-loan interest paid by parents
Moving expenses to take your first job
Travel expenses for those in the military reserve
Child-care credit
Decendent estate tax on income
State tax paid last spring
Refinancing points
Nonitemized Property-tax deductions
Hope credit for college juniors and seniors
Jury pay turned over to your employe
New vehicle sales-tax deduction
Casualty-loss deduction for nonitemizers>
Home improvement energy-saving credits
Credit for home-buyers
Sale of demutualized stock break

Contact your local CPA to insure that you receive the maximum tax deductions you deserve.

Published in Income Tax

Wednesday, 24 February 2010 02:45

Bartering Transactions for Businesses

In today’s economy, small-business owners sometimes look to the oldest form of commerce the exchange of goods and services, or bartering. The Internal Revenue Service wants to remind small-business owners that bartering transactions generally have associated tax reporting, accounting and record-keeping responsibilities.

Bartering is the trading of one product or service for another. Usually there is no swap of cash. Barter may take place on an informal direct one-on-one basis between businesses and individuals, suppliers, customers, distributors, partners, contract labor, and employees, or it can take place on a third party basis through a modern Internet barter exchange.

Bartering is an exchange of one taxpayer’s property or services for another taxpayer’s property or services. The fair market value of property or services received through barter is taxable income. Be sure to use a reasonable fair market value for the property or services received in a barter transaction to include in your income. The transaction is not a wash if you report the fair market value of the property received that is greater than your cost or basis in the property given up.

For example: if bowling equipment given up has a cost or other basis of $500 to you
there is a $500 gross profit on the transaction if the fair market value of the fishing
equipment received in the barter exchange is $1,000. Simply put, you should identify the transaction in your records and report the income and any related business deductions and cost of goods sold on your tax return.

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Published in Small Business