Tax Pro Plus: Small Business Tax Tips - Commuter Benefit Program

Reward your employees with this unique tax-free benefit

Looking for a new benefit to give your employees? Consider offering a commuter benefit program. This program not only makes your business look more appealing, but it is environmentally friendly and a  tax-free benefit for your employees. Here’s how it works.

Your company can provide:

• $125 per employee per month for public transportation (car pool, bus, ferry, rail, etc.).

• $240 per employee per month for qualified parking.

• $365 per employee per month for both public transportation and qualified parking.

Alternatively, you can provide your employees $20 each month for regularly commuting to work via bicycle, as long as they don’t receive any other qualified transportation benefits.

Tax Pro Plus: Small Business Tax Tips - Accrued Bonuses

Deduct these expenses before they are paid

The IRS has ruled in favor of accrual-method businesses deducting unpaid bonuses at the end of the year. The company must pay the accrued bonuses within 2½ months of the end of its tax year.

There are other caveats with this deduction as well. The employee must be employed on the date the bonuses are paid and the company must be using an incentive-based bonus plan of which the employees are aware. The bonus plan must have an aggregate amount of the bonus payable fixed across a group of employees. However, the company does not need to know the identity of any particular bonus recipient and the amount payable to that employee until after the end of the taxable year.

If this sounds like a feasible option for your company, talk with your tax professional.

Tax Pro Plus: Small Business - Quick Tax Tips List

Quick tips list

1. The 2012 business standard mileage rate is 55.5 cents per mile.

2. The first year depreciation limit is $11,160 for passenger automobiles placed in service during 2012 for which 50% first year bonus depreciation applies. For trucks and vans with bonus depreciation, the first year depreciation limit is $11,360.

3. The first-year depreciation limit is $3,160 for passenger automobiles placed in service during 2012 for which bonus depreciation does not apply. For trucks and vans with no bonus depreciation, the first-year depreciation limit is $3,360.

4. Effective in 2012, the IRS began issuing only one employer identification number (EIN) per responsible party per day, a change from the previous limit of five per day.

5. Paper coupons may no longer be used for federal tax deposits.

6. Through 2013, the maximum Business Health Care Tax Credit for small business employers is 35%.

Tax Pro Plus: Small Business Tax Tips - Starting A Business

Plan ahead!

A business plan is an essential road map for business success. A well thought-out plan helps you to think objectively about the key elements of your business venture and prioritize your decision making. Following are some tax items you should consider when writing your business plan.

• Decide on a Business Structure. Are you starting this business by yourself or do you have a partnership? Should you be incorporated? Have you thought about becoming a limited liability company (LLC)? Your decision will affect the business’s future tax structure.

• Get a Tax ID. Not every business needs an employer identification number (EIN) from the IRS, but if you have employees, run a partnership or meet certain IRS criteria, you must obtain one. You also may be required to start paying estimated taxes.

• Register with Tax Authorities. Employment taxes, sales taxes and state income taxes are handled at the state-level. You’ll need to learn more about your state’s tax requirements and how to comply with them.

• Hiring Employees. When hiring employees, you’ll need to set up records for withholding taxes, reporting to federal and state governments, as well as verifying employee eligibility. You’ll also need to obtain workers’ compensation insurance and pay the required unemployment insurance taxes.

Meeting with your tax professional before developing a business plan is a great strategy on your part. A tax adviser can help you make the tough decisions that make the most sense for your business.

At Tax Pro Plus, we specialize in helping small businesses create a financial plan.  Call us if you have questions at 310-827-4829.  

Tax Pro Plus: Small Business Tax Tips - Personal Cell Phones

Do you know what's trackable?

When an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone are generally nontaxable to the employee as an excludable fringe benefit. Excludable fringe benefits are not included in wages. If the cost of an item is deductible by an employee as a business expense, it may be excludable from the employee’s wages as a working condition fringe benefit if provided by the employer. The IRS will not require record keeping of the phone’s business use from individuals who receive this tax free treatment.

When a business provides the employee with a cash allowance or reimbursement to pay for a personal cell phone used for business purposes, the amount is also considered an excludable fringe benefit and nontaxable. However, the employee must maintain the type of cell phone coverage that is reasonably related to the needs of the employer’s business. Plus, the reimbursement must be reasonably calculated so as not to exceed expenses the employee actually incurred in maintaining the cell phone. Additionally, the reimbursement for business use of the employee’s personal cell phone must not be a substitute for a portion of the employee’s regular wages.

Have questions?  Call us at Tax Pro Plus LA today: 310-827-4829

Tax Pro Plus: Business Tax Tips - 1099-K Reporting

Keep this form handy

Depending on your type of business, you may receive a 1099-K form in your mailbox. Don’t throw it out! Your tax professional will need it to prepare your taxes. The Form 1099-K, Merchant Card and Third-Party Network Payments, will arrive early in 2013, because it is due to merchants by January 31.

Merchant acquirers and third party settlement organizations, as payment settlement entities (PSE), must report the proceeds of payment card and third-party network transactions made to you on Form 1099-K. You’ll receive the form if you have either accepted credit cards for payments or received payments through a third-party network (like PayPal) that exceeded $20,000 and the total number of such transactions exceeded 200 for the calendar year.

Note: Starting in 2013 there will be a backup withholding requirement similar to other 1099 forms. Merchants and third parties will be required to withhold 28 percent of gross proceeds when a tax identification number has not been provided. Starting with the 2013 tax year, this backup withholding applies for sellers with more than 200 transactions at any income level.

Tax Pro Plus: Business Tax Tips - Fraudulent Mail

New scams target  business owners

The IRS has reported that businesses are being misled by individuals trying to collect money to settle bogus IRS tax liens. One of the latest scams comes through the postal mail and poses as an official IRS Notice of Tax Lien. The fake notice includes a toll-free telephone number that does not connect to the IRS. The scam requests money to settle unpaid back taxes to avoid IRS enforcement action. If you receive a notice from the IRS, or individuals posing as the IRS, be sure to consult with your tax professional before responding.

If you have any questions, please do not hesitate to contact Tax Pro Plus LA today: 310-827-4829

Tax Pro Plus: Business Tax Tips - Additional Medicare Tax Goes Into Effect in 2013

Some wealthier taxpayers will pay more

The Additional Medicare Tax goes into effect for taxable years beginning after December 31, 2012. An additional tax of 0.9 percent applies to individuals’ wages, other compensation and self-employment income over certain thresholds (see below table).

All wages that are currently subject to Medicare tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual’s filing status. There are no special rules for nonresident aliens and U.S. citizens living abroad for purposes of this provision.

Employers are responsible for withholding the tax on wages and other compensation in certain circumstances. The statute requires an employer to withhold Additional Medicare Tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the Additional Medicare Tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. There is no requirement that an employer notify its employee when the business begins withholding Additional Medicare Tax. The employer is required to withhold Additional Medicare Tax on total wages, including noncash fringe benefits, in excess of $200,000. There is no employer match for Additional Medicare Tax.

Tax Pro Plus: Tax Tips - Overseas Bank Accounts

Do you know what  special reporting is required?

If you have a bank account, brokerage account, mutual fund, trust or other type of foreign financial account, you may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

The IRS requires certain taxpayers to file an FBAR because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States tax law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

In general, you must file an FBAR when the total value of all foreign financial accounts that you own or have signature authority over exceeds $10,000 at any time during the calendar year. The FBAR is not filed with your federal income tax return; it is an annual report that the Department of the Treasury must receive on or before June 30 of the year following the calendar year being reported. Your tax professional can help you with this filing if required.

Tax Pro Plus: Tax Tips - The Affordable Care Act

How does the Supreme Court decision affect your taxes?

At the end of June, the Supreme Court upheld the Patient Protection and Affordable Care Act of 2010. The Supreme Court’s decision stated the government cannot force the public to have health insurance, but the government can tax the public if they don’t. What does this mean for you?

Beginning January 1, 2014, under the new law, most individuals who can afford it will be required to obtain basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans. If affordable coverage is not available to an individual, he or she will be eligible for an exemption. Those who can afford health care and are not covered will be assessed a penalty on their tax return. To help the government determine who has health care coverage, employers have been required to report the cost of coverage under an employer-sponsored group health plan on the employee’s Form W-2. Reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable.

This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.

Please call Tax Pro Plus today if you have any questions: 310-827-4829.  We take the stress out of taxes!

Tax Pro Plus: Quick Winter 2012 Tax Tips

1. In 2012, you can gift up to $13,000 to as many individuals as you wish without having to worry about any gift tax consequences to you or your gift recipients. Your spouse can also gift up to $13,000 to the same individuals with no additional tax consequences.

2. For calendar year 2013, the annual limitation on HSA contributions for an individual with family coverage under a high deductible health plan is $6,450, up from $6,250 in 2012. For an individual with self-only coverage under a high deductible health plan, the annual limit is $3,250, up from $3,100 for 2012.

3. An online version of the Social Security Statement is now available at socialsecurity.gov. The new online statement provides eligible workers with access to their social security earnings and benefit information.

4. The Additional Medicare Tax goes into effect for taxable years beginning after December 31, 2012. The statute requires an employer to withhold Additional Medicare Tax of 0.9 percent on wages or compensation it pays to an employee in excess of $200,000 in a calendar year.

If you have any questions, please call Tax Pro Plus LA today: 310-827-4829.

Tax Pro Plus: Tax Tips - Good News for Armed Services Personnel

Five special benefits that can help ease the burden

Military personnel face unique challenges that most other Americans don’t. The IRS allows active members of the U.S. Armed Forces certain tax benefits that may help, including:

1. Moving Expenses. If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you may be able to deduct some of your unreimbursed moving expenses.

2. Combat Pay. If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service during that month is nontaxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay  received. You can also elect to include your nontaxable combat pay in your earned income for purposes of claiming the Earned Income Tax Credit.

3. Deadline Extensions. The deadline for filing tax returns, paying taxes, filing claims for refund and taking other actions with the IRS is automatically extended for qualifying members of the military.

4. Uniform Cost and Upkeep. If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms. However, you must first reduce your expenses by any allowance or reimbursement you receive.

5. Travel to Reserve Duty. If you are a member of the U.S. Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

Call Tax Pro Plus today: 310-827-4829.  We take the stress out of taxes!

Tax Pro Plus: Tax Tips - Getting Ready to Retire?

Certain tax issues may affect your Social Security benefits

Many individuals start thinking about retirement at age 63 and wonder how social security will work once they are no longer working. Some people have to pay federal income taxes on their social security benefits. This usually happens only if they have other substantial income such as wages, self-employment, interest, dividends and other taxable income that must be reported on their tax return in addition to their benefits. Based on IRS rules, no one pays federal income tax on more than 85 percent of their social security benefits.

Each January retirees will receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of benefits they received in the previous year. If they do have to pay taxes on their social security benefits, they can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from their benefits. Your tax professional can help you determine how retirement will impact your tax situation.

If you have any questions, please call Tax Pro Plus LA today: 310-827-4829.

Tax Pro Plus: Tax Tips - Adjusting Your Payroll Withholding

Is this a good strategy for you?

Reevaluating your payroll withholding at the end of each year is a good practice that you should consider adopting. If you typically owe a large amount or have a large refund when filing your taxes, adjusting your withholdings is especially important. While you may like the idea of receiving a large  tax refund, in reality you’re giving the government an interest-free loan.

Work with your tax advisor and spouse to determine how much income you expect to have for the year and consequently how much tax you may owe. Your tax professional can help you fill out a new Form W-4, Employee’s Withholding Allowance Certificate, in which you will claim the number of allowances that correspond with the proper amount of withholding. Afterwards, you’ll need to give the W-4 to your payroll department. The Form W-4 can be filed at anytime that makes sense for you and your family.

Tax Pro Plus: Tax Tips - Did You Receive an IRS Notice?

Talk to your tax  professional right away

Every year the IRS sends millions of letters and notices to taxpayers. If one shows up in your mailbox, don’t panic! The IRS may simply be requesting payment of taxes, notifying you of a change to your account, or requesting additional information. Regardless, any notice you receive will normally cover a very specific issue about your account or tax return.

If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return. Call your tax professional right away! In most cases, the IRS will require a response within 30 or 60 days, and your tax professional will need time to review the notice and determine the appropriate response. Be sure to keep copies with your tax records of any

correspondence between you, your adviser and the IRS.

Tax Pro Plus: Tax Tips - New Flexible Spending Account Limit

What does this mean for your wallet?

A flexible spending account (FSA) allows an employee to set aside a portion of their paycheck to pay for qualified medical, health and dependent expenses. Money placed into an FSA is not subject to payroll taxes, resulting in savings to the employee. The money not used in an FSA at the end of the year is lost to the employee.

A new 2013 contribution limit only allows employees to deposit a maximum of $2,500 into their account per tax year. Employer contributions to employee FSA accounts are not included in the $2,500 limit. The $2,500 limit does not apply for plan years that begin before 2013; therefore, if your company’s plan year is July–June, the $2,500 limit will not begin until July 2013.

Some plans offer a grace period that gives you extra time to claim FSA money before losing it. The grace period might give you up to two months and 15 days after the end of the plan year. Unused contributions to the FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.