Wednesday, February 22, 2012
1.888.639.0404
Tax Treatment of Work Cell Phones The IRS has issued a guidance to clarify how work cell phones will provide record keeping relief to small businesses. Last fall, the IRS provided a guidance to a provision of  the Small Business Jobs Act of 2010, which removed cell phones from their definition of listed property. Being on this list would create a tremendous amount of record keeping by tax payers. When an employer gives an employee a cell phone for business and it is also used for personal usage, the employee will not have to log business time used in order to receive this tax free treatment. This provision also refers to an employee who uses their own cell phone for business purposes. The employer might have an arrangement with the employee to give reimbursement for the cell phone’s business usage to cover the employee costs made towards the cell phone bill. This treatment does not apply to any excessive or unusual expense reimbursements or any reimbursements made as a substitute for an employee’s wages. Perris CPA tax service has updated information on this and all IRS publications.
Be Aware of 2011 Tax Law Changes The IRS wants you to be aware of the 2011 tax changes that have taken affect. The IRS web page has updates and law changes that may affect your taxes. Due Date: The due date for you to file your tax return has been changed to APril 17th due to the 15th being a Sunday and the Monday is the District of Columbia’s Emancipation Day Holiday. New Forms:
  • Form 8949 for capital gains and losses
  • Schedule D from Form 1040 would be used to report certain totals from Form 8949
  • Form 8938 is for those tax payers who have foreign financial assets in 2011
Standard Mileage Rates: From January 1 through June 30 you may deduct 51 cents a mile for business use of your car and from July 1 through December 31 the deduction is 55.5 cents. Medical and moving mileage are 19 cents per mile for the first half of the year and 23.5 for the second half. Standardized deductions and exemptions increased:
  • Tax payers who do not itemize deductions on IRS Schedule A (Form 1040) have a standard deduction increase depending on your filing status.
  • $50 increase to $3,700 for each exemption for 2011 taxes.
Alternative minimum tax (AMT) exemption amount increased: $48,450 single, $74,450 married  filing jointly or qualifying widow(er), and $37,225 if married filing separately. Health savings accounts and Archer MSAs: 20% tax increase  on distributions from these not used for medical expenses. Beginning in 2011, only prescribed drugs or insulin count as qualified medical expenses. Roth IRAs: If you did not report a conversion or roll over from an IRA or Roth IRA in 2010, you must report half on your 2011 return and the remainder in 2012. Alternative motor vehicle credit:If you purchased a new fuel cell motor vehicle in 2011, you can claim the alternative motor vehicle credit. First-time home buyer credit: This credit expired in 2011 for most tax payers. If you are in the military or a member of the intelligence community, you may still be able to claim the credit for 2011. Health coverage tax credit: Participants who receive the 65% tax credit from March to December 2011 may claim an additional 7.5% when they file their 2011 taxes. Mailing a return: The IRS changed the filing location for several areas. If you are mailing a paper return see Form 1040 for correct address instructions. Wildomar Tax Service provides you with the latest tax update information. This tax service provides your area with professional CPA services.
Difference Between Taxable and Non-Taxable Income Most income that you receive is taxable and must be reported on your taxes. There are some instances where income may not be taxable.  The IRS is offering lists to help you clarify between non- taxable  and  those incomes with special circumstances. Non-Taxable Income:
  • Child support payments.
  • Gifts, bequests and inheritances
  • Worker’s compensation benefits ( this has some exceptions, see Publication 525, Taxable and Non-taxable income)
  • Meals and lodging for the convenience of your employer
  • Compensation awarded for physical injury or sickness
  • Welfare benefits
  • Adoption qualifying expenses reimbursements
  • Cash rebates from a manufacturer or dealer
Incomes with special circumstances: Life Insurance: If you surrender your life insurance policy early for cash, any proceeds above the cost of the policy will be included as taxable income. If you receive proceeds from a person’s death will not be taxable unless they were turned over to your for a price. Scholarship or fellowship grant:  Money from these used for your education are excused, but any money used for room or board must be included as taxable income. Non-cash income: Taxable income could be in forms of non cash items such as bartering. You and the other party  must include the fair market value of goods and services exchanged as taxable income on Form 1040. If you have any questions or concerns regarding this information, you can contact Hemet tax preparers, a professional CPA company.
Direct Deposit Your Refund Choosing to have your refund directly deposited into your bank account is the safest and most secure way to get your money. When you couple a direct deposit with electronic filing of your tax return, you could possible receive your refund in ten days. Here are four major reasons why direct deposit is the choice of 79 million taxpayers in 2011: Security: Paper checks run the risk of being lost, stolen or returned to the IRS as undeliverable. Convenience: No need to go to the bank to deposit a check that is all ready there! Ease: The instructions are easyto follow when preparing your tax return at home. Double check to make sure you enter the correct bank account and routing numbers. Options: There is a split refund options that will deposit your refund into as many as three bank accounts. The IRS has a Form 8888 to be used in splitting your refund. This form may not be used to send a payment to your tax preparer. Please be aware that some banking institutions do not allow a joint return to be deposited into an individual account, so check with your bank before you file. Temecula CPA tax specialists are here to assist you with your taxes.

Latest News

Veterans Tax Credit

The IRS has recently released a guidance and forms for employers who will claim the newly-expanded tax credit when they hire veterans. These employers will have extended time to file the mandatory certification form for employees hired on or after November 22, 2011 and before May 22, 2012. The  Work Opportunity Tax Credit (WOTC) given to businesses for hiring unemployed veterans has been expanded by the VOW to Hire Heroes Act of 2011. This expansion of WOTC has also made this credit available to qualified tax-exempt organizations.

For-profit employers can earn up to $9,600 and up to $6,240 for non-profit employers. Employers maybe eligible for the maximum credit if the veterans they hire have service -related disabilities. The amount of credit that can be received is dependent on factors:

  • veteran’s length of unemployment before being hired
  • how many hours veteran works
  • amount of first years wages

Form 8850 is normally filed with the state workforce agency within 28 days after the eligible worker starts working. The guidance issued will give an extension until June 19, 2012 to complete the form for veterans hired on November 22, 2011 and before May 22, 2012. Those hired on or after May 22, 2012 will fall back onto the 28 day rule.

The IRS guidance has also expanded their regulations to include the use of electronic signatures on Form 8850 for transmission to state workforce agencies. The IRS expects that the Department of Labor will issue more clarification to the state workforce agencies.

Murrieta Certified Public Accountants are a team of seasoned professionals here to answer any questions you have concerning this topic or others.

Foreign Account Tax Compliance Act (FATCA)

The IRS and the Treasury Department has issued proposed regulations for the next major phase implementing FATCA. This law, which was enacted by Congress in 2010, is targeting U.S. taxpayers who use foreign accounts.  These proposed regulations describe the process by which the U.S. will be able to gather information regarding account identification, reporting information, and withholding requirements for foreign financial institutions, entities, and U.S. withholding agents.

FATCA  is implementing it’s obligation in stages which will minimize costs and burdens consistent with fighting offshore noncompliance. Foreign Financial Institutions (FFI) are required to report information regarding U.S. taxpayers who hold overseas accounts or those who own interest in foreign entities to the IRS.

A participating FFI will be required to report information under FATCA to the IRS:

  • Identify U.S. accounts
  • Report certain information regarding these U.S. accounts to the IRS
  • Verify its willingness to comply with the IRS agreement
  • Ensure that 30% tax will be withheld when paid to nonparticipating FFIs and account holders (anyone who is unwilling to share the information with the IRS).

There will be an online registration for all FFIs beginning the first of January, 2013. Those FFIs who do not register and enter an agreement with the IRS will be subject to with holdings.

Murrieta Tax Service is available to answer any questions or concerns regarding foreign accounts and how these laws will affect you and your accounts. Being knowledgeable in any area concerning your money is the best protection with IRS and the law.

As Trading Volume Drops, Brokerage Firms Lose Jobs

Independent brokerages in the U.S. have been hurt in the drop off in trading volume of 2011.  Average daily trading volumes in the major U.S. exchanges fell 20% from 2009. The lower trading volume, concern for Europe’s debt crisis and potential for increased regulatory costs have created job losses, small firms closing and the possibility for more of both.

Investors are leary about sinking money into firms that are struggling right now, which will continue to hurt their productivity. Morgan Stanley was the only large firm that posted an increase in trading revenue. A Bloomberg study shows that there have been over 200,000 job cuts  from financial institutions world wide with the decline in  trading and investment – banking revenue.

The smaller brokerages are having trouble operating in the very competitive environment which has been stressed by the trading slump.

Murrieta CPA is keeping a watchful eye over the trading industry. Financial planning needs a constant monitoring of  the market news and as financial advisors,  Murrieta CPA will work hard to protect their clients.

Tax Reform Bill

Senator Sheldon Whitehouse, a Democrat from Rhode Island has introduced legislation following President Obama’s State of the Union speech.

President Obama stated that millionaires should be paying at least 30% income tax. Sen. Whitehouse proposed Paying a Fair Share Act, nicknamed, “Buffet Rule”, after the billionaire Warren Buffet who is known to argue that millionaires and billionaires should not be paying lower tax rates than their secretaries.

The goal of this Paying a Fair Share Act is to strengthen our country’s economy with everyone paying in their fair share of taxes. As of now, the tax system is permitting the top earners to pay a lower tax rate than janitor’s and secretaries, and passing this legislation will fix the unfair system.

The language in the proposed bill will still encourage charitable contributions. There is also a phasing in approach to the new tax percentage for those who earn between one and two million dollars.

There is hope that this new legislation will reduce the deficit by tens of billions of dollars.

Murrieta CPA Tax Services is available to help you out with any tax question or concern you may have.

« Older Entries