Home Office Deduction

The IRS provides tax tips via YouTube videos. The tax tips concerning home office deduction can be viewed here.

Here is a summary of the home office deduction that self-employed and employees who use a portion of their homes for business purposes may be able to take.

• Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly as your place of business, or as a place to meet with customers or in any connection with your trade or business where the business portion of your house is a separate structure not attached to your home.
  


• For storage use, rental use, or daycare-facility use, you are required to use the property regularly but not exclusively.
  
  
  
• The amount you can deduct depends on the percentage of your home used for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.
  
  
  
• Special rules apply to qualified daycare providers and for people storing business inventory or product samples.
  
  
  
• Form 8829, Expenses for Business Use of Your Home is used by self-employed people to figure the home office deduction. That deduction is then reported on Schedule C, Profit or Loss From Business.
  
  
  
• Additional rules apply to an employee such as the regular and exclusive business use of the home must be for the convenience of the employer.
  

Additional information can be found in IRS Publication 587, Business Use of Your Home.

Congress Retroactively Reinstates Airline Excise Tax Then Provides Relief For Retroactively Reinstated Tax

This week Congress extended the Federal Aviation Administration's authority to collect federal passenger air transportation excise taxes ("ticket taxes'). On the brink of a possible government shutdown, the FAA budget authority expired on July 22, 2011. Airline tickets purchased between July 23 and August 5 were not assessed the ticket tax. The Congressional action retroactively reinstated the tax. However, the IRS is providing relief to purchasers of tickets and will not attempt to collect any unpaid taxes from the purchasers or the airlines.

Even the IRS recognizes that assessing and collecting taxes retroactively is foolish and nearly impossible to enforce.

All In The Family

If you own a trade or business and have a child under 18 that are capable of providing services, hiring him could provide a tax benefit for both you and the child. Payments to a child under age 18 are not subject to social security and medicare taxes if the business is a sole proprietorship or a partnership that both parents are the only partners. The payments are also not subject to federal unemployment tax.

Wages to a child are subject to social security , Medicare, and FUTA taxes if he or she works for:

A corporation, even if it is solely owned by the child's parent,

A partnership unless each partner is a parent of the child,

An estate, even if it is the estate of a deseased parent.

If you own your own business and have minor children that could work for you, now would be a great time to plan ways to minimize taxes for both you and your children.

Casualty Losses (Tornado/Storm Damage)

With the storms that ripped through Bartow County, GA Wednesday night and the aftermath I saw on Thursday, I thought I would post the rules for deducting casualty losses. Hopefully, my friends and neighbors won't have to exercise this information.

The definition of a casualty loss is loss as a result of the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption. It does not include normal wear and tear or progressive deterioration.

For personal use property the casualty loss is the lesser of the adjusted basis of the property or the decrease in fair market value of the of the property as a result of the casualty. The loss is reduced by any insurance or other reimbursement you receive or expect to receive.

You claim the casualty loss on Schedule A Itemized deductions. After you have subtracted any insurance reimbursement you must then subtract $100 for each event. Then subtract 10% of your AGI to determine your allowable casualty loss for the year.

To take a casualty loss, complete Form 4684.

If you are located in a federally declared disaster area you have the option of taking the loss on the tax return for the year it occurred or the preceding tax year. If you have already filed your preceding year's tax return, you can take the loss by filing an amended return. Once you have filed to take the loss in a prior year, you have 90 days to revoke that election if it is later determined to be more advantageous to take the loss in the current year.

If you have any questions about this, please consult your tax professional.

Checklist Of Employer Responsibilities

With the upcoming quarterly payroll filing deadline looming, here is a checklist of responsibilities to help employers meet deadlines. More information can be found in IRS Publication 15.

New Employees:

□ Verify work eligibility of new employees 4
□ Record employees' names and SSNs from social security cards
□ Ask employees for Form W-4

Each Payday:

□ Withhold federal income tax based on each employee’s Form W-4
□ Withhold employee's share of social security and Medicare taxes
□ Deposit:
• Withheld income tax
• Withheld and employer social security taxes
• Withheld and employer Medicare taxes
Note: Due date of deposit generally depends on
your deposit schedule (monthly or semiweekly)

Annually (By January 31 of the current year, for the prior year):

□ File Form 940 if required (pay tax with return if not required to deposit)

Quarterly (By April 30, July 31, October 31, and January 31):

□ Deposit FUTA tax if undeposited amount withholding is over $500
□ File Form 941 (pay tax with return if not required to deposit)

Annually:

□ Remind employees to submit a new Form W-4 if they need to change their withholding □ Ask for a new Form W-4 from employees claiming exemption from income tax withholding
□ Reconcile Forms 941 (or Form 944) with Forms W-2 and W-3
□ Furnish each employee a Form W-2
□ File Copy A of Forms W-2 and the transmittal Form W-3 with the SSA
□ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income)
□ File Forms 1099 and the transmittal Form 1096
□ File Form 940
□ File Form 945 for any nonpayroll income tax withholding

A New E-file Record

The IRS is announcing that taxpayers set a new record for e-filing with 101 million returns being e-filed as of the April 18th tax deadline. This is an 8.8 percent increase from the 2010 e-filed returns. This is attributable to the requirement that paid preparers must e-file the returns of clients.

Also, the IRS announced that the milestone of 1billion e-filed returns since the e-file program began is within reach.

Will the local IRS offices start have signs like this one?