As we've discussed in previous postings, the new Sales Tax deduction is a boon to Washington taxpayers. Just remember to let us know about any major purchases you've made in 2004 that would qualify for an additional deduction. Sales taxes paid on (non-business) purchases of vehicles, boats, planes, and home improvements can be deducted in addition to the base sales tax deduction given by the IRS.
Many clients tell us that they have purchased their home building materials tax-free in Oregon. These expenses aren't deductible -- no tax was paid, so there's no tax to deduct.
We'll be glad to help you with any questions you have on this new deduction!
Thursday, January 20, 2005
Thursday, January 06, 2005
Tsunami aid donations could be tax-deductible for 2004
Tsunami aid donations could be tax-deductible for 2004 - coshoctontribune.com
The congress has passed a bill that would allow contributions made in January for tsunami relief to be deducted on your 2004 income tax return. Usually, contributions are only deductible in the year that they're made. With the massive size of this disaster, and the timing being so close to year end, Congress wanted to encourage people to contribute to the relief efforts.
The bill has not yet been signed into law, but should be shortly. We'll provide any other relevant details as they're released.
The congress has passed a bill that would allow contributions made in January for tsunami relief to be deducted on your 2004 income tax return. Usually, contributions are only deductible in the year that they're made. With the massive size of this disaster, and the timing being so close to year end, Congress wanted to encourage people to contribute to the relief efforts.
The bill has not yet been signed into law, but should be shortly. We'll provide any other relevant details as they're released.
Wednesday, January 05, 2005
Credit Where Credit Is Due
We all know about the IRS and their tendency to take, take, take. Did you know they also hand out money to businesses? Here's a list of some business credits they award. Are you missing out on any of them?
Work Opportunity Tax Credit - Hire certain food-stamp or SSI recipients, disabled vets, or ex-felons, and you can receive up to $2,400 per employee.
Welfare to Work Credit - Employing individuals who had been on welfare for at least 18 months can get you as much as $8,500 per employee.
Small Employer Pension Plan Credit - Small companies who have expenses related to establishing a new retirement plan can get up to $500 credit if they spend at least $1,000.
Tip Credit - Businesses in the food and beverage industries can claim a credit for payroll taxes the business has paid on tips reported by the employees, under certain circumstances.
Also, credits are available for things like employer-provided child care facilities, research and development, and creating electricity from renewable sources.
Work Opportunity Tax Credit - Hire certain food-stamp or SSI recipients, disabled vets, or ex-felons, and you can receive up to $2,400 per employee.
Welfare to Work Credit - Employing individuals who had been on welfare for at least 18 months can get you as much as $8,500 per employee.
Small Employer Pension Plan Credit - Small companies who have expenses related to establishing a new retirement plan can get up to $500 credit if they spend at least $1,000.
Tip Credit - Businesses in the food and beverage industries can claim a credit for payroll taxes the business has paid on tips reported by the employees, under certain circumstances.
Also, credits are available for things like employer-provided child care facilities, research and development, and creating electricity from renewable sources.
Sunday, December 26, 2004
Working at home? Make it pay!
If you operate your business from your home, you may be entitled to claim the "Home-Office Deduction".
To qualify for the home-office deduction, the portion of your home that is used for business purposes must be:
used "regularly and exclusively"
your "principal place of business"
used for the employer's convenience (in the case of an employee)
You can also claim the deduction for any space you use "regularly and exclusively" to conduct administrative and managerial activities when you have no other fixed location to do so.
The deductions are limited. The office-in-home deduction can never create or increase a loss. Any disallowed expenses can be carried forward to future years.
We can help you determine whether you qualify for this deduction and the tax consequences if you eventually sell your home.
To qualify for the home-office deduction, the portion of your home that is used for business purposes must be:
used "regularly and exclusively"
your "principal place of business"
used for the employer's convenience (in the case of an employee)
You can also claim the deduction for any space you use "regularly and exclusively" to conduct administrative and managerial activities when you have no other fixed location to do so.
The deductions are limited. The office-in-home deduction can never create or increase a loss. Any disallowed expenses can be carried forward to future years.
We can help you determine whether you qualify for this deduction and the tax consequences if you eventually sell your home.
Friday, December 17, 2004
Do You Know How Much Sales Tax You Pay?
Sales Tax deduction tables issued
As promised, the IRS has finally given us the tables we can use to calculate the sales tax deduction. (See our previous post on this deduction).
I'm a little underwhelmed at the tax from the table; for instance, a family of four that makes $70,000 is only given a $1,001 sales tax deduction. At 7.6% tax, that means the IRS assumes you only spend $13,100 each year on sales-taxable items. I guess if you back out all of the non-sales-taxable expenditures you make (rent/mortgage payments, groceries, utilities, etc.) it might approach reality.
Of course, you also get to add the tax paid on certain major purchases. These are now spelled out by the IRS as the following:
As promised, the IRS has finally given us the tables we can use to calculate the sales tax deduction. (See our previous post on this deduction).
I'm a little underwhelmed at the tax from the table; for instance, a family of four that makes $70,000 is only given a $1,001 sales tax deduction. At 7.6% tax, that means the IRS assumes you only spend $13,100 each year on sales-taxable items. I guess if you back out all of the non-sales-taxable expenditures you make (rent/mortgage payments, groceries, utilities, etc.) it might approach reality.
Of course, you also get to add the tax paid on certain major purchases. These are now spelled out by the IRS as the following:
- Motor vehicles - (including car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle)
- Aircraft
- Boats
- Homes or home building materials
Sunday, December 12, 2004
Last-Minute Tax Tips for 2004
Gail Buckner from Fox News provides some good Last-Minute Tax Tips for 2004
Wednesday, December 08, 2004
Keeping Track of Your Employees
A recent workshop that some of our team attended reminded us of the importance of maintaining the appropriate information in your employee files. Did you know that you could be assessed a $250 penalty for each employee file that does not contain the correct information?
The employee files should contain, at a minimum, federal forms W-4 (wage withholding information) and I-9 (proof of employment eligibility). Also, form I-9 requires you to review copies of the employee's documents verifying eligibility. Most businesses should protect themselves by keeping copies of the documents reviewed. (You can find copies of forms W-4 and I-9 in our forms section.)
If you use a payroll service (even from our office), keep in mind that the responsibility for maintaining these files still rests with the employer. Payroll services are not required to keep this type of information on file.
The employee files should contain, at a minimum, federal forms W-4 (wage withholding information) and I-9 (proof of employment eligibility). Also, form I-9 requires you to review copies of the employee's documents verifying eligibility. Most businesses should protect themselves by keeping copies of the documents reviewed. (You can find copies of forms W-4 and I-9 in our forms section.)
If you use a payroll service (even from our office), keep in mind that the responsibility for maintaining these files still rests with the employer. Payroll services are not required to keep this type of information on file.
Year End Reporting Requirements
As we head toward the end of the calendar year, we like to remind businesses of some of the more obscure requirements they face in year-end reporting. These are things you don't want to miss, or you risk exposing yourself to potential penalties.
1. 1099's: Generally, you must issue a 1099-MISC to individuals or unincorporated businesses who you paid more than $600 in rent or services during the year. A 1099-INT should be issued for interest or dividends paid in excess of $10.
2. Employer-provided vehicles: If employees (including owners!) are allowed to use a company vehicle for any personal use, the value of that use must be included in the employee's W-2 at the end of the year. We can calculate the inclusion amount for you; just use our form to send us the information.
3. Fringe benefits to owners: If an S-corporation shareholder receives certain fringe benefits, such as health or disability insurance, the amount must be included on their W-2.
4. Group life insurance: If you provide more than $50,000 of group term life insurance to an employee (again, including owners), there's a small amount that should be added to the employee's W-2.
This is just intended to be a heads-up to help you remember these requirements. If you need help with any of these calculations, please give us a call!
1. 1099's: Generally, you must issue a 1099-MISC to individuals or unincorporated businesses who you paid more than $600 in rent or services during the year. A 1099-INT should be issued for interest or dividends paid in excess of $10.
2. Employer-provided vehicles: If employees (including owners!) are allowed to use a company vehicle for any personal use, the value of that use must be included in the employee's W-2 at the end of the year. We can calculate the inclusion amount for you; just use our form to send us the information.
3. Fringe benefits to owners: If an S-corporation shareholder receives certain fringe benefits, such as health or disability insurance, the amount must be included on their W-2.
4. Group life insurance: If you provide more than $50,000 of group term life insurance to an employee (again, including owners), there's a small amount that should be added to the employee's W-2.
This is just intended to be a heads-up to help you remember these requirements. If you need help with any of these calculations, please give us a call!
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