If you are an employee and you are worried this year or any tax year that you might owe money you may have some tax deductions you didn’t think about. Many employees have “Employee Business Expenses”. Expenses you incurred for the purpose of working for your employer that was not reimbursed by your employer can be eligible.
Examples of these expenses are:
1.Business Travel Away from home
2.Business use of your own personal vehicle
3.Business meals and entertainment
4.Business use of your home
5.Education/Training
6.Business supplies you purchase
7.Business tools you purchase
Now if your employer reimburses you for these expenses you cannot claim them on your return. IRS publication 552 will give you more details on what can and cannot be claimed. It is your responsibility to keep accurate records of these expenses in the event of an audit.
Lastly, only the amount of the expenses that are in excess of 2% of your adjusted gross income can be deducted and are still subject to the standard deduction.
Call your Tax Accountant or preparer if you have any questions.
Last year Americans were able to benefit from tax law changes that for some resulted in an increase in their refunds of up to an additional $1,000. This year filers have not been so lucky. Although there have been some tax law changes that are beneficial to Tax filers, many will be seeing a decrease in their refunds. Many of 2009's Tax Breaks were not extended and you will see a difference.
Below information is Courtesy of J.K. Lasser
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which was signed into law on December 17, 2010, extended numerous tax breaks that had expired in 2009. However, not every expired provision has been extended, and there is much confusion about which rules apply for 2010 returns. Here is a list of tax breaks that applied on 2009 returns but do not apply in 2010.
Additional Standard Deduction for Real Property Taxes
In 2009, those who did not itemize deductions could add to their standard deduction up to $500 ($1,000 for joint filers) for real property taxes. The deduction was allowed for taxes paid on any property, such as a personal residence, vacant land, or a vacation home. This additional standard deduction has not been extended for 2010.
Additional Standard Deduction for Disaster Losses
In 2009, taxpayers who experienced property losses in federal disaster areas did not have to itemize in order to deduct uninsured losses; they could add the net disaster losses to their standard deduction amount. This additional standard deduction has not been extended for 2010.
For those who claim disaster losses in 2010, note that each loss must be reduced by only $100; in 2009, there was a $500 reduction. Personal disaster losses, after the reduction, can be deducted as itemized deductions on 2010 returns to the extent losses exceed 10% of adjusted gross income.
Sales Taxes on Car Purchases
In 2009, state and local sales tax on vehicle purchases was deductible, either as an additional standard deduction or as an itemized deduction. The deduction applied to taxes paid on new vehicles purchased from February 17, 2009, through December 31, 2009. The deduction was limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction was reduced for joint filers with modified adjusted gross income (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes did not qualify for any deduction. The deduction has not been extended for 2010.
Unemployment Benefits
In 2009, up to $2,400 in unemployment benefits were excludable from gross income. The exclusion applied without regard to adjusted gross income or overall benefits received. In 2010, all unemployment benefits are includable in gross income.
Additional IRA Contributions in Certain Bankruptcy Cases
If you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy, you were able to contribute an additional $3,000 in 2009 to your IRA if certain conditions were met. There is no additional IRA contribution allowed for 2010.
Suspension of Required Minimum Distributions
For 2009, owners and beneficiaries of IRAs and qualified retirement plans did not have to take annual required minimum distributions (RMDs). This suspension applied only for 2009. RMD rules continue to apply for 2010 and later years.
Business-Related Breaks
For self-employed individuals, certain deductions, credits, and other beneficial tax rules expired at the end of 2009 and have not been extended. These include:
Five-year recovery period for depreciating farming business machinery and equipment.
Extended net operating loss (NOL) carryback (there had been an option to carry NOLs back for up to 5 years).
Reduced estimated tax payments for small business owners.
The amount of income you can receive before having to file your taxes has increased for the 2010 tax year. See the table below.
Filing Status
End of 2010 were
Then File a Return if your Gross income was at least…
Single
Under 65
$9,350
65 or Older
$10,750
Married Filing Jointly
Under 65 (both spouses)
$18,700
65 or Older (one spouse)
$19,800
65 or Older (both spouses0
$20,900
Married Filing Separately
Any Age
$3,650
Head of Household
Under 65
$12,050
65 or Older
$13,450
Qualifying Widow(er) with Dependent Child
Under 65
$15,050
65 or Older
$16,150
Just because you fall within these guidelines does not mean you should not file your taxes. Talk with your tax preparer because chances are… if you don’t file your return you will be missing out on your refund…. and the IRS will not be calling you if they owe you money… they will just keep it.
Did you know that if you are caring for children in your home as your main source of income but are not a licensed home day care provider, you cannot take the Home office deduction?
See the following information courtesy of J.K. Lasser:
Usually, in order to deduct home office expenses for conducting a business at home, the space for the office must be used regularly and exclusively for business. However, special rules apply for figuring a home office deduction by a daycare provider. The usual exclusive use requirement that a portion of the home be used solely for business does not apply; children may use many areas of the home that are also used by the provider's family for nonbusiness purposes.
In order to qualify foranyhome office deduction, a daycare provider must meet state licensing requirements. In one recent case, a daycare provider who regularly cared for five to six children in her home failed to obtain a state license because she didn't know she needed one. State law (Illinois) requires licensing for anyone providing daycare services to more than three children (including the provider's children) under the age of 12.
Note:The fact that the taxpayer claimed home office deductions in earlier years and these deductions were not disallowed does not change the results. The fact that she escaped audit was her good fortune for those earlier years.
People are always asking me what they can and cannot claim on their taxes so I thought I would put a list of items that are NOT deductible on the blog. These are items you cannot claim on your taxes and this list came directly from the IRS website.
Nondeductible Expenses
You cannot deduct the following expenses.
List of Nondeductible Expenses
Adoption expenses.
Broker's commissions that you paid in connection with your IRA or other investment property.
Burial or funeral expenses, including the cost of a cemetery lot.
Campaign expenses.
Capital expenses.
Check-writing fees.
Club dues.
Commuting expenses.
Fees and licenses, such as car licenses, marriage licenses, and dog tags.
Fines and penalties, such as parking tickets.
Health spa expenses.
Hobby losses—but see Hobby expenses, earlier.
Home repairs, insurance, and rent.
Home security system.
Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535.
Investment-related seminars.
Life insurance premiums.
Lobbying expenses.
Losses from the sale of your home, furniture, personal car, etc.
Lost or misplaced cash or property.
Lunches with co-workers.
Meals while working late.
Medical expenses as business expenses other than medical examinations required by your employer.
Personal disability insurance premiums.
Personal legal expenses.
Personal, living, or family expenses.
Political contributions.
Professional accreditation fees.
Professional reputation, expenses to improve.
Relief fund contributions.
Residential telephone line.
Stockholders' meeting, expenses of attending.
Tax-exempt income, expenses of earning or collecting.
The value of wages never received or lost vacation time.
Travel expenses for another individual.
Voluntary unemployment benefit fund contributions.
Wristwatches.
Do you have tax questions? Feel free to post them here or email me at Tami@highbaughtax.com
Did you know that Earned Income Credit increased this year?
Amount of credit increased. The maximum amount of the credit has increased. The most you can get for 2010 is:
$3,050 if you have one qualifying child,
$5,036 if you have two qualifying children,
$5,666 if you have three or more qualifying children, or
$457 if you do not have a qualifying child.
Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2010. You may be able to take the credit if:
You have three or more qualifying children and you earn less than $43,352 ($48,362 if married filing jointly),
You have two qualifying children and you earn less than $40,363 ($45,373 is married filing jointly),
You have one qualifying child and you earn less than $35,535 ($40,545 if married filing jointly), or
You do not have a qualifying child and you earn less than $13,460 ($18,470 if married filing jointly).
Investment income amount. The maximum amount of investment income you can have and still get the credit is still $3,100 for 2010.
Advance payment of the credit. If you get the advance payments of the credit from your employer with your pay, the total advance payments you get during 2010 can be as much as $1,830.
Want to see the Earned Income Credit Table so you can figure your EIC Credit? Click the link go to page 43 to see the schedule.
Do you have any Tax Questions? Feel Free to ask them here or email me at Tami@highbaughtax.com
Seems as though every year there is some tax law change that can delay our tax refunds. This year is no different… only this year the delay will affect anyone who:
• Files a Schedule A (itemized deductions)
• Teachers taking the classroom expense deduction
• Parents taking the Higher Education Tuition Deduction
• Those who are Repaying their First Time Home Buyers Credit (taken on 2008 return)
• Those taking credit for the purchase of an Electric Vehicle
The reason for the delay are late tax law changes made by congress in late December that has caused the IRS to reprogram their processing system for accepting paper and electronic tax returns. Tax filers claiming the above deductions or credits will have to wait until Mid to Late February before their returns can be accepted.
This doesn’t mean you should delay filing your return with your Tax Preparer. If your preparer files electronically, your return will be held until the system can accept it; your preparer will be notified once the return has been accepted.
For the rest of us who don’t claim any of the above, the Tax Season Officially Started January 14th, 2011. Get your Tax documents together, go through your personal and business tax checklists, and schedule your appointment with your Tax Preparer ASAP to beat the tax year rush.
***The IRS has just recently announced that they will begin accepting and processing these returns on the 14th of February***
The tax season starts January 14th, 2011. I will begin answering questions that clients ask me via the blog. Question #1 is what is the Standard Deduction?
The Standard Deduction for 2010 for each filing status:
Single $5,700
Head of Household $8,400
Married, Filing Jointly $11,400
Married, Filing Separately $5,700
Qualifying Widow(er) $11,400
If your filing status is Married Filing Separately, you and your spouse will both need to either itemize your deductions or take the standard deduction.
A good number of my clients own businesses and having a Business Tax Checklist helps them gather all their information together when it is time to prepare their taxes. Below I have compiled a list of general tax deductions for businesses. Every business is different therefore, it is best to talk to your tax accountant to ensure you are claiming everything.
1.Accounting or Bookkeeping Fees
2.Automobile Expenses – with this deduction you must use mileage or actual expenses, talk to your tax accountant to see which is best to use, ensure you keep record of both.
a.Mileage
b.Repairs
c.Insurance
d.Gas/Oil
e.Car Washes
f.Tags / Registrations
g.Vehicle Purchase
h.License
i.Parking / Toll Charges
j.Drivers Training Expense
3.Business start up costs
a.Incorporation, LLC, or Partnership Set up costs
4.Advertising
a.TV, Radio, Print, Internet
b.Billboards
c.Promo Products
d.Automobile signs
e.Market research
f.Mailing lists
g.Business Cards
h.Trade Show Costs – Booths
i.Search Engine Optimization
j.Paid Internet Marketer
k.Flyers
5.Bank Charges for your business account
6.Internet Access Charges
7.Charitable Contributions
8.Continuing Education/Seminars/Training
a.Books
b.Tuition
c.cd’s and dvd’s
d.Business starter kits
e.Webinars
f.Conference Calls
9.Commissions and Fees
10.Delivery, Postage, Shipping Costs
11.Dues to Clubs, Organizations, or Associations for Business
12.Entertainment Costs
13.Equipment purchases
14.Fax line
15.Insurance Premiums
16.Interest Expense
17.Laundry / Dry Cleaning – Depends on your occupation ask your tax accountant to be sure
18.Legal Fees
19.Offices Supplies
20.Property Taxes
21.Protection Costs such as an alarm for the office
