Archive

You are currently browsing the archives for the Bookkeeping Tips category.

Dec

6

W-2 and 1099 January 31st Filing Deadline

By Bill

W-2 and 1099 January 31st Filing Deadline

IR-2017-189, Nov. 16, 2017

WASHINGTON — The Internal Revenue Service today reminded employers and other businesses of the Jan. 31 filing deadline that now applies to filing wage statements and independent contractor forms with the government.

The Protecting Americans from Tax Hikes (PATH) Act includes a requirement for employers to file their copies of Form W-2 and Form W-3 with the Social Security Administration by Jan. 31. The Jan. 31 deadline also applies to certain Forms 1099-MISC filed with IRS to report non-employee compensation to independent contractors. Such payments are reported in box 7 of this form.

This deadline makes it easier for the IRS to verify income that individuals report on their tax returns and helps prevent fraud. Failure to file these forms correctly and timely may result in penalties. As always, the IRS urges employers and other businesses to take advantage of the accuracy, speed and convenience of filing these forms electronically.

Hints to help filers get ready

Employers should verify employees’ information. This includes names, addresses, Social Security or individual taxpayer identification numbers. They should also ensure their company’s account information is current and active with the Social Security Administration before January. If paper Forms W-2 are needed, they should be ordered early.

An extension of time to file Forms W-2 is no longer automatic. The IRS will only grant extensions for very specific reasons. Details can be found on the instructions for Form 8809.

For more information, read the instructions for Forms W-2 & W-3 and the Information Return Penalties page at IRS.gov.

Aug

17

Summer Scams To Watch For

By Bill


Summer Scams to Watch For

IR-2017-112, June 26, 2017                                                                                       Español

WASHINGTON – The Internal Revenue Service today issued a warning that tax-related scams continue across the nation even though the tax filing season has ended for most taxpayers. People should remain on alert to new and emerging schemes involving the tax system that continue to claim victims.

“We continue to urge people to watch out for new and evolving schemes this summer,” said IRS Commissioner John Koskinen. “Many of these are variations of a theme, involving fictitious tax bills and demands to pay by purchasing and transferring information involving a gift card or iTunes card. Taxpayers can avoid these and other tricky financial scams by taking a few minutes to review the tell-tale signs of these schemes.”

EFTPS Scam

A new scam which is linked to the Electronic Federal Tax Payment System (EFTPS) has been reported nationwide. In this ruse, con artists call to demand immediate tax payment. The caller claims to be from the IRS and says that two certified letters mailed to the taxpayer were returned as undeliverable. The scammer then threatens arrest if a payment is not made immediately by a specific prepaid debit card. Victims are told that the debit card is linked to the EFTPS when, in reality, it is controlled entirely by the scammer. Victims are warned not to talk to their tax preparer, attorney or the local IRS office until after the payment is made.

“Robo-call” Messages

The IRS does not call and leave prerecorded, urgent messages asking for a call back. In this tactic, scammers tell victims that if they do not call back, a warrant will be issued for their arrest. Those who do respond are told they must make immediate payment either by a specific prepaid debit card or by wire transfer.

Private Debt Collection Scams

The IRS recently began sending letters to a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies. Taxpayers should be on the lookout for scammers posing as private collection firms. The IRS-authorized firms will only be calling about a tax debt the person has had – and has been aware of – for years. The IRS would have previously contacted taxpayers about their tax debt.

Scams Targeting People with Limited English Proficiency

Taxpayers with limited English proficiency have been recent targets of phone scams and email phishing schemes that continue to occur across the country. Con artists often approach victims in their native language, threaten them with deportation, police arrest and license revocation among other things. They tell their victims they owe the IRS money and must pay it promptly through a preloaded debit card, gift card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls” or via a phishing email.

Tell Tale Signs of a Scam:

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. The IRS will usually first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

For anyone who doesn’t owe taxes and has no reason to think they do:

  • Do not give out any information. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their IRS Impersonation Scam Reporting web page. Alternatively, call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. Please add “IRS Telephone Scam” in the notes.

For anyone who owes tax or thinks they do:

How to Know It’s Really the IRS Calling or Knocking

The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as:

  • when a taxpayer has an overdue tax bill,
  • to secure a delinquent tax return or a delinquent employment tax payment, or,
  • to tour a business as part of an audit or during criminal investigations.

Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail. For more information, visit “How to know it’s really the IRS calling or knocking on your door” on IRS.gov.

Jul

28

Good Time To Review Your Withholding

By Bill


Taxpayers Should Review Their Withholding; Avoid Having Too Much or Too Little Federal Income Tax Withheld

IR-2017-121, July 20, 2017

WASHINGTON — The Internal Revenue Service today encouraged taxpayers to consider checking their tax withholding, keeping in mind several factors that could affect potential refunds or taxes they may owe in 2018.

Reviewing the amount of taxes withheld can help taxpayers avoid having too much or too little federal income tax taken from their paychecks. Having the correct amount taken out helps to move taxpayers closer to a zero balance at the end of the year when they file their tax return, which means no taxes owed or refund due.

During the year, changes sometimes occur in a taxpayer’s life, such as in their marital status, that impacts exemptions, adjustments or credits that they will claim on their tax return. When this happens, they need to give their employer a new Form W-4, Employee’s Withholding Allowance Certificate, to change their withholding status or number of allowances.

Employers use the form to figure the amount of federal income tax to be withheld from pay. Making these changes in the late summer or early fall can give taxpayers enough time to adjust their withholdings before the tax year ends in December.

The withholding review takes on even more importance now that federal law requires the IRS to hold refunds a few weeks for some early filers claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the steps the IRS and state tax administrators are now taking to strengthen protections against identity theft and refund fraud mean some tax returns could face additional review time next year.

So far in 2017, the IRS has issued more than 106 million tax refunds out of the 142 million total individual tax returns processed, with the average refund well over $2,700. Historically, refund dollar amounts have increased over time.

 Making a Withholding Adjustment

In many cases, a new Form W-4, Employee’s Withholding Allowance Certificate, is all that is needed to make an adjustment. Taxpayers submit it to their employer, and the employer uses the form to figure the amount of federal income tax to be withheld from their employee’s pay.

The IRS offers several online resources to help taxpayers bring taxes paid closer to what they owe. They are available anytime on IRS.gov. They include:

Self-employed taxpayers, including those involved in the sharing economy, can use the Form 1040-ES worksheet to correctly figure their estimated tax payments. If they also work for an employer, they can often forgo making these quarterly payments by instead having more tax taken out of their pay.

Mar

30

Basic Tax Tips for the Sharing Economy

By Bill

Keep in Mind These Basic Tax Tips for the Sharing Economy

If taxpayers use one of the many online platforms to rent a spare bedroom, provide car rides or a number of other goods or services, they may be involved in the sharing economy. The IRS now offers a Sharing Economy Tax Center. This site helps taxpayers find the resources they need to help them meet their tax obligations.

Here are a few key points on the sharing economy:

  1. Taxes. Sharing economy activity is generally taxable. It does not matter whether it is only part time or a sideline business, if payments are in cash or if an information return like a Form 1099 or Form W2 is issued. The activity is taxable.
  2. Deductions. There are some simplified options available for deducting many business expenses for those who qualify. For example, a taxpayer who uses his or her car for business often qualifies to claim the standard mileage rate, which was 54 cents per mile for 2016.
  3. Rentals. If a taxpayer rents out his home, apartment or other dwelling but also lives in it during the year, special rules generally apply. For more about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). Taxpayers can use the Interactive Tax Assistant Tool, Is My Residential Rental Income Taxable and/or Are My Expenses Deductible? to determine if their residential rental income is taxable.
  4. Estimated Payments. The U.S. tax system is pay-as-you-go. This means that taxpayers involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Use Form 1040-ES to figure these payments.
  5. Payment Options. The fastest and easiest way to make estimated tax payments is through IRS Direct Pay. Or use the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). 98005
  6. Withholding. Taxpayers involved in the sharing economy who are employees at another job can often avoid making estimated tax payments by having more tax withheld from their paychecks. File Form W-4 with the employer to request additional withholding. Use the Withholding Calculator on IRS.gov.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Apr

1

Tips about the Home Office Deduction

By Bill

Must-Know Tips about the Home Office Deduction

If you use your home for business, you may be able to deduct expenses for the business use of your home. If you qualify, you can claim the deduction whether you rent or own your home. You may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction:

1. Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:

  • Your principal place of business, or
  • A place where you meet clients or customers in the normal course of business, or
  • A separate structure not attached to your home. Examples could include a garage or a studio.

2. Simplified Option. If you use the simplified option, multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the rules for claiming a home office deduction.

3. Regular Method. This method includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.

4. Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.

6. Employees. You must meet additional rules to claim the deduction if you are an employee. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.

For more on this topic, see Publication 587, Business Use of Your Home. You can view, download and print IRS tax forms and publications on IRS.gov/forms anytime.

Jan

20

IRS, States and Tax Industry Deploy New Safeguards for 2016

By Bill

IRS, States and Tax Industry Deploy New Safeguards for 2016

 

Because of improved protections in recent years, the Internal Revenue Service stops the vast majority of fraudulent tax returns using stolen identities. But identity thieves and criminal syndicates continue to persist and evolve.

 

As the threat has changed, so has the IRS. In a new era of cooperation, the IRS, the states and the entire tax industry came together to identify what additional steps could be taken to better fight identity theft and better protect the taxpayers.

 

Starting in January 2016, this renewed effort will make for a safer, more secure filing season for taxpayers.

 

Many changes will be invisible, but they are critical to making sure the IRS can verify the taxpayer and the legitimacy of the tax return before it ever enters into the tax processing system. More than 20 shared data elements will help the software industry and the IRS stop fraudulent returns at the door.

 

For example, the IRS will receive information from software providers about the duration of time it took to create the return. This will help identify the computer-generated tax returns that are fraudulent and filed in bulk.

 

The IRS, states and tax industry will share details of any fraudulent schemes they see on a frequent basis so everyone will have the same information and adjust accordingly to provide increased protection to taxpayers.

 

The most publicly visible aspect of these partnership efforts will be for those taxpayers who prepare their own tax returns using tax software or online products. There will be new procedures that will help prevent fraudsters from taking over the accounts of taxpayers. These include:  

  • New password standards to access tax software will require a minimum of 8 characters with upper case, lower case, alpha, numerical and special characters.
  • A new timed lockout feature and limited unsuccessful log-in attempts.

  • The addition of three security questions.

Out-of-band verification for email addresses, which is sending an email or text to the customer with a PIN – a common practice used throughout the financial sector.

 

The IRS also has teamed up with state revenue departments and the tax industry to make sure you understand the dangers to your personal and financial data. Taxes. Security. Together. Working in partnership with you, we can make a difference.

 

It’s important that everyone take steps to protect their personal and financial data online and at home. Computer users should always use security software that includes firewall and anti-virus protections. Sensitive information such as tax records should be encrypted if stored on your computer or secured by lock and key if on paper.

Sep

24

Standard Mileage Rates for Deducting Auto Expense

By Bill

Can You Use the Standard Mileage Deduction?

IR-2014-114, Dec. 10, 2014

WASHINGTON — The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.

Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan.

Mar

9

Self Employed Tax Tips From The IRS

By Bill

Are You Self Employed? Check Out These IRS Tax Tips

Many people who carry on a trade or business are self-employed. Sole proprietors and independent contractors are two examples of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. Here are six important tips about income from self-employment:

  • SE Income.  Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
  • Schedule C or C-EZ.  There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form.
  • SE Tax.  You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, make sure you file the schedule with your federal tax return.
  • Estimated Tax.  You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You usually pay this tax in four installments for each year. If you do not pay enough tax throughout the year, you may owe a penalty.
  • Allowable Deductions.  You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
  • When to Deduct.  In most cases, you can deduct expenses in the same year you paid for them, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms on IRS.gov/forms anytime.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Aug

15

Atlas Shrugged III, The Movie

By Bill

Atlas Shrugged III, the movie is slated for release on Sept 12, 2014.

If you want to see it at your local theatre you need to get involved…

Click on the link to the official movie web site, www.atlasshruggedmovie.com and click the link to ‘Get Involved.’

atlasShruggedIIIBanner

 

May

22

Summer Hiring Rules for Sole Proprietors & Partnerships

By Bill

Summer Hiring Rules for Sole Proprietors and Partnerships 

Sole proprietorships and partnerships100%-owned by parents:

  • Children of the owner can work any number of hours or time of day, regardless of their age. If under 16, they cannot do any hazardous work (e.g., work with lawn mowers, sewing machines), work near flammable or hazardous materials, or where food is cooked.
  • If a 100% parent-owned sole proprietorship’s or partnership’s only employees are immediate family, the owners’ children need not be paid the minimum wage—but if others are regularly employed, even family must be paid minimum wage.
  • If the owner’s children are under 21:

Wages are exempt from FUTA.

  • Any children (i.e., not just the owners’ children) who are under 18:

If the business is 100% parent-owned, the children under 18 are exempt from FICA.

If not an owners’ child, obtain an age certificate recognized by the DOL and your state Wage and Hour Division (WHD). DOL often accepts state age certificates, but ask your WHD to be sure. Return it to the worker at termination.

The workers may not do hazardous work.

  • Workers of 14-15 years of age who are not theowners’ children can work 8 hrs./day, 40 hrs./wk., June 1-Labor Day, between 7 a.m.-9 p.m. if school is not in session.

Exceptions: Limits do not apply to news carriers or children employed exclusively by a parent/sole proprietor. For agricultural jobs, contact the DOL.

·   Other children under 14cannot be hired unless they work for a parent/sole owner.