Accounting & Tax News

 

Publication 17
Tax-filing information and tips on what income to report and how to report it, figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions and using IRAs to save for retirement


Five Basic Tax Tips For New Businesses

If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.
1. Business Structure.  As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.
2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.
3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.
5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.
For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.
Get all the tax basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.

IRS July 28, 2014

Top Ten Tax Facts if You Sell Your Home

Do you know that if you sell your home and make a profit, the gain may not be taxable? That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

  1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.
  2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details see Publication 523, Selling Your Home.
  3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
  4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
  6. Generally, you can exclude the gain from the sale of your main home only once every two years.
  7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
  8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.
  9. If you sell your main home at a loss, you can’t deduct it. 10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.

Important note about the Premium Tax Credit. If you receive advance payment of the Premium Tax Credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

If you still need to do your 2013 taxes, use IRS e-file to prepare and file your tax return. The tax software will do most of the hard work for you. You can use IRS e-file through Oct. 15. If you file a paper return, you may use the worksheets in Publication 523 to help you file.

For more on the sale of a home see Publication 523 on IRS.gov. You can call 800-TAX-FORM (800-829-3676) to get it by mail.

IRS July 22, 2014

Social Security Benefits

If you are at, or nearing, retirement age, and considering when to start drawing your social security benefits, consider that usually it’s best to wait until “full” retirement age, which is typically between 65 and 67, depending on your birth date, rather than beginning to draw your benefits early, which is typically between 62 and 65 years of age. There are a couple of reasons to hold off on receiving your benefits, but the primary reason is that you will likely end up receiving more in total benefits, if you wait until full retirement age, since you are paid considerably more per month under this scenario. Additionally, due to the fact that any earned income that you currently receive, from wages or a self employment activity may restrict the amount of social security benefits you are eligible to receive, prior to full retirement age. Finally, since social security may be taxable income to you, depending on your overall taxable income, you may have less of an associated tax burden if you wait until later in life to receive your benefits, considering that most taxpayers receive less overall income later in life. Of course the good news, if you are at or near retirement age, is that you will be receiving your social security benefits, however in order to optimize your benefits, and minimize the associated tax cost, please contact us to discuss your specific circumstances!

Posted July 18, 2014/wittenbergcpa.com

Health Care Law And Its Effect On Your Taxes

There is a lot of information in the news and online about the health care law and its effect on your taxes. For the most current answers to questions you may have, visit IRS.gov/aca. From the individual shared responsibility provision to the definition of minimum essential coverage, the IRS website covers a wide range of health care topics and how they relate to your taxes.

The IRS knows that many taxpayers want to know how the health care law will affect them when filing their taxes next year. When questions come up, IRS.gov is a great place for taxpayers to begin finding the answers they need – when they need them.

This information is especially important for individuals because several provisions of the law went into effect this year, such as the premium tax credit and the requirement for individuals to have minimum essential coverage. The IRS will continue to post information that is relevant and helpful to you as you get ready to prepare and file your 2014 tax return.

At IRS.gov/aca, you’ll find frequently asked questions, legal guidance, and links to other useful sites. You can also access valuable information about specific topics, including the premium tax credit for individuals, rules and responsibilities for employers, as well as tax provisions for insurers, tax-exempt organizations and other businesses.

Aside from IRS.gov, we also post new guidance and information about the health care law on the official IRS twitter feed , & IRS facebook . Find out more about the health care law at healthcare.gov.

July 18, 2014 IRS Press Release