Winter Tax Tips for Business - 2014

12 Steeplebush Road

Essex Junction, VT 05452

802-878-0990

www.sheltratax.com

Sheltra Tax & Accounting, LLC is a full-service tax preparation, tax resolution, and full-service bookkeeping firm with offices in Essex Junction, Vermont. We are committed to providing our clients the highest level of professional services.

We emphasize quality service and personal attention. Since 2002 we have prepared income tax returns for individuals, corporations, partnerships, non-profits and provided full-service bookkeeping. We provide a variety of services to individuals, families, small and medium-sized businesses across various industries.

We enable businesses and individuals to streamline the often much-dreaded tasks of bookkeeping and tax services to one accounting solution.

If you hire Sheltra Tax & Accounting, LLC to represent you as your IRS tax consultant, you can rest easy knowing that you have a highly qualified and experienced Enrolled Agent working to solve your problems with the IRS.

Tax Tips Winter 2014 - Click on top to Download

Sheltra Tax & Accounting, LLC - It is Our Business to Know your Business

Sheltra Tax & Accounting, LLC is a full-service tax preparation, tax resolution, and full-service accounting firm with offices in Essex Junction, Vermont. We are committed to providing our clients the highest level of professional services.  

If you hire Sheltra Tax & Accounting, LLC to represent you as your IRS tax consultant, you can rest easy knowing that you have a highly qualified and experienced Enrolled Agent preparing your individual and business tax returns.  If you are delinquent with the IRS rest assured we will work to solve your problems.

No matter what your IRS Help needs are, whether it's personal or business taxes, you want a qualified, licensed representative that knows the appropriate procedures to help you. Gain the peace of mind you deserve. Let us handle your tax burdens.

• IRS Tax Appeal
• IRS Back Taxes Relief
• IRS Bank Levy Relief
• IRS Bankruptcy Tax Relief
• IRS Tax Returns Filing Services
• IRS Delinquent Tax Returns Help
• IRS Innocent Spouse Relief
• Installment Payment Plans
• IRS Offer In Compromise Help
• IRS Payroll Tax Problems
• IRS Penalty Abatement
• IRS Tax Lien Help
• IRS Wage Garnishment Relief
• IRS Tax Debt Collections

Whether you have a business or are just starting your business, Sheltra Tax & Accounting, LLC can help you achieve your goals.  Too often business owners do not have enough extra time to keep on top of their bookkeeping and tax preparation which is so vital to the success of their business. We understand how important accurate and confidential financial reporting is to your business.

We can make sure your payroll is processed correctly and the payroll taxes are paid timely.  We can monitor your business situation to make sure you are paying the correct amount of taxes.

We want you to feel confident that your accounting system accurately reflects your current situation.  The steps involved with basic bookkeeping can be overwhelming depending on the size of your business and the number of transactions.

Let us help you achieve your goal of operating a successful business!

 

Annual Filing Season Program Information from Joe McCarthy

Starting in 2016 a provision put into Revenue Procedure 2014-42 eliminates the limited representation rights that were granted to unenrolled preparers under Revenue Procedure 1981-38. See below.

Procedure 81-38 allows an unenrolled tax return preparer to represent a taxpayer during an examination if the tax return preparer prepared and signed the taxpayer’s return that is under examination (or prepared the taxpayer’s return that is under examination if there is no signature space on the form).

Revenue Procedure 81-38 is modified and superseded for tax returns and claims for refund prepared and signed (or prepared if there is no signature space on the form) after December 31, 2015. Unenrolled tax return preparers may not rely on Revenue Procedure 81-38 to represent taxpayers during an examination of a tax return or claim for refund prepared or signed after December 31, 2015. However, unenrolled tax return preparers may rely on Revenue Procedure 81-38 to represent taxpayers during an examination of a tax return or claim for refund prepared and signed (or prepared if there is no signature space on the form) on or before December 31, 2015.

http://www.irs.gov/pub/irs-drop/rp-14-42.pdf

What does this mean for unenrolled tax preparers? (Answer from Annual Filing Season Program FAQ page on the IRS website.)

10. Will I still be able to represent clients before the IRS if I don’t participate in the Annual Filing Season Program?

Yes, as a PTIN holder you will continue to have limited representation rights before limited offices of the IRS with respect to clients whose return you prepared and signed for calendar year 2015. However, beginning in 2016 only AFSP participants who obtain a Record of Completion will have those limited representation rights before the IRS for clients whose returns they prepared and signed. PTIN holders without an AFSP - Record of Completion or without other professional credentials will not be able to represent clients before the IRS in any matters.

Attorneys, CPAs, and enrolled agents will continue to have unlimited representation rights and can represent clients before any office of the IRS.

http://www.irs.gov/Tax-Professionals/Frequently-Asked-Questions-Annual-Filing-Season-Program

Are there any exceptions to the Annual Filing Season Program testing requirement? (Answer from Annual Filing Season Program FAQ page on the IRS website.)

6. Who is exempt from taking the AFTR course?

Some unenrolled preparers are exempt from the AFTR course requirement because of their completion of other recognized state or national competency tests. These exempt groups are still required to meet other program requirements, including 15 CE credits (10 Federal Tax Law, 3 Federal Tax Law Updates, and 2 Ethics).

• Return preparers who can obtain the AFTR – Record of Completion without taking the AFTR course are:
• Anyone who passed the Registered Tax Return Preparer test administered by the IRS between November 2011 and January 2013
• Established state-based return preparer program participants currently with testing requirements: Return preparers who are active members of the Oregon Board of Tax Practitioners and/or the California Tax Education Council
• SEE Part I Test-Passers: Tax practitioners who have passed the Special Enrollment Exam Part I within the past two years as of the first day of the upcoming filing season
• VITA volunteers: Quality reviewers and instructors with active PTINs
• Other accredited tax-focused credential-holders: The Accreditation Council for Accountancy and Taxation’s Accredited Business Accountant/Advisor (ABA) and Accredited Tax Preparer (ATP) programs

Four Things to Know about Net Investment Income Tax

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things from the IRS that you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:

• interest
• dividends
• capital gains
• rental and royalty income
• non-qualified annuities

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocable to this income. The result is your net investment income. Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3. Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

 Filing Status                            Threshold Amount
 Single or Head of household            $200,000
 Married filing jointly                        $250,000
 Married filing separately                  $125,000
 Qualifying widow(er) with a child       $250,000

4. How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enoughestimated taxes, you may have to pay an estimated tax penalty.

For more on this topic visit IRS.gov/aca. You can also get tax forms on IRS.gov or by mail by calling 800-TAX-FORM (800-829-3676).

Sheltra Passes the EA Exam

Press Release May 10, 2014 Diana Sheltra of Fairfax, VT  passed the Enrolled Agent Exam in February 2014. An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years. Sheltra is President of the Vermont Chapter of National Association of Tax Professionals (NATP). Sheltra has been a member of NATP since 2003.  She joined the Vermont board in August 2011 as Vice President and Education Chair. Sheltra owns and operates Double Entry Bookkeeping, LLC located in Essex Junction, specializing in accounting, payroll, and income tax preparation.  She has been in private practice for over eleven years in Essex Junction, is now an Enrolled Agent,  and has worked in the tax and accounting field for over twenty-five years. Sheltra is originally from New York City and relocated to Vermont in 1995. She lives in Fairfax with her husband, Tom. She has a bachelor's degree in management from St. John's University and an associate degree in accounting from Champlain College.

Sincerely,   Diana Sheltra, EA Enrolled to Represent Clients before the IRS QuickBooks Pro Advisor Double Entry Bookkeeping, LLC.

Boost Your Retirement Savings with a Tax Credit

If you contribute to a retirement plan, like a 401(k) or an IRA, you may be eligible for the Saver’s Credit. The Saver’s Credit can help you save for retirement and reduce the tax you

owe.

Here are five facts from the IRS that you should know about this credit:

1. The Saver’s Credit is the short name for the Retirement Savings Contribution Credit. It can be worth up to $2,000 for married couples filing a joint return. The credit is worth up to $1,000 for single taxpayers.

2. Eligibility depends on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2013 tax return if you’re:

• Married filing separately or a single taxpayer with income up to $29,500

• Head of household with income up to $44,250

• Married filing jointly with income up to $59,000

3. Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2013.

• You can’t be claimed as a dependent on another person’s tax return.

4. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2013. The due date for most people is April 15, 2014.

5. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software will do this for you if you e-file.

The Saver’s Credit is in addition to other tax savings you can get if you set aside money for retirement. For example, you may also be able to deduct your contributions to a traditional IRA.

Press Release - January 4, 2014

Diana Sheltra of Fairfax, VT has been elected as the President of the Vermont Chapter of National Association of Tax Professionals (NATP). Sheltra has been a member of NATP since 2003.  She joined the Vermont board in August 2011 as Vice President and Education Chair and is replacing Kim Loewer, EA who was recently elected to the NATP national board of directors.

Sheltra owns and operates Double Entry Bookkeeping, LLC located in Essex Junction, specializing in accounting, payroll, and income tax preparation.  She has been in private practice for over eleven years in Essex Junction, is a Registered Tax Return Preparer,  and has worked in the tax and accounting field for over twenty-five years.

Sheltra is originally from New York City and relocated to Vermont in 1995. She lives in Fairfax with her husband, Tom. She has a bachelor's degree in management from St. John's University and an associate degree in accounting from Champlain College.

Vermont Health Connect - Deadline for Notifying Employees - October 1st!

All employers must send an exchange notice to all employees on or before October 1^st, 2013.

 

U.S. Department of Labor (DOL) guidance issued under the Affordable Care Act (ACA) requires employers to provide employees with a notice regarding health care exchanges (now called "marketplaces").  This notification requirement applies whether or not employees are covered in the employer's health plan (if any), and whether they are full-time or part-time employees.

 

Employers must provide the notice to current employees, regardless of full or part-time status and regardless of enrollment in an employer's health plan, no later than October 1, 2013.  For employees hired after October 1, 2013, employers must provide the notice to new employees within 14 days of an employee's start date.  Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the health plan but who are not employees.  There are penalties for not doing so.

 

Please click on the link below to read more about the requirements.  You will see two sample notices.  One for employers who offer health insurance and one for employers who do not.

http://healthconnect.vermont.gov/notices

Questions and Answers for the Additional Medicare Tax

The Additional Medicare Tax, which went into effect January 1, 2013, applies to individuals’ wages, other compensation, and self-employment income over certain thresholds; employers are responsible for withholding the tax on wages and other compensation in certain circumstances.

FAQs

1. When does Additional Medicare Tax start?
   
   Additional Medicare Tax applies to wages and compensation above a threshold amount received after December 31, 2012 and to self-employment income above a threshold amount received in taxable years beginning after December 31, 2012.
    
2. What is the rate of Additional Medicare Tax?
   The rate is 0.9 percent.
    
3. When are individuals liable for Additional Medicare Tax?
   An individual is liable for Additional Medicare Tax if the individual’s wages, compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceed the threshold amount for the individual’s filing status:

   Filing Status	Threshold Amount
   Married filing jointly	$250,000
   Married filing separately	$125,000
   Single	$200,000
   Head of household (with qualifying person)	$200,000
   Qualifying widow(er) with dependent child	$200,000

    
4. What wages are subject to Additional Medicare Tax?
   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. For more information on what wages are subject to Medicare Tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15, (Circular E), Employer’s Tax Guide.
    
5. Additional Medicare Tax applies to wages, compensation, and self-employment income received in tax years beginning after December 31, 2012. Taxpayers must comply with the law as of that date. With regard to specific matters discussed in the proposed regulations, taxpayers may rely on the proposed regulations for tax periods beginning before the date that the final regulations are published in the Federal Register. If any requirements change in the final regulations, taxpayers will only be responsible for complying with the new requirements from the effective date of the final regulations.
6. Will Additional Medicare Tax be withheld from an individual's wages? An employer must withhold Additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual’s filing status or wages paid by another employer.  An individual may owe more than the amount withheld by the employer, depending on the individual’s filing status, wages, compensation, and self-employment income.  In that case, the individual should make estimated tax payments and/or request additional income tax withholding using Form W-4, Employee's Withholding Allowance Certificate.
7. Can I request additional withholding specifically for Additional Medicare Tax?No. However, if you anticipate liability for Additional Medicare Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. The additional income tax withholding will be applied against your taxes shown on your individual income tax return (Form 1040), including any Additional Medicare Tax liability. 
8. Will I need to make estimated tax payments for Additional Medicare Tax?
   If you anticipate that you will owe Additional Medicare Tax but will not satisfy the liability through Additional Medicare Tax withholding and did not request additional income tax withholding using Form W-4, you may need to make estimated tax payments. You should consider your estimated total tax liability in light of your wages, other compensation, and self-employment income, and the applicable threshold for your filing status when determining whether estimated tax payments are necessary.
    
9. Does an individual who makes estimated tax payments to pay an expected liability for Additional Medicare Tax need to identify the payments as specifically for this tax?
   No. An individual cannot designate any estimated payments specifically for Additional Medicare Tax. Any estimated tax payments that an individual makes will apply to any and all tax liabilities on the individual income tax return (Form 1040), including any Additional Medicare Tax liability.
    
10. Will individuals calculate Additional Medicare Tax liability on their income tax returns?
    Yes. Individuals liable for Additional Medicare Tax will calculate Additional Medicare Tax liability on their individual income tax returns (Form 1040).  Individuals will also report Additional Medicare Tax withheld by their employers on their individual tax returns.  Any Additional Medicare Tax withheld by an employer will be applied against all taxes shown on an individual’s income tax return, including any Additional Medicare Tax liability.
     
11. Will an individual owe Additional Medicare Tax on all wages, compensation, and/or self-employment income or just the wages, compensation, and/or self-employment income in excess of the threshold for the individual’s filing status?
    An individual will owe Additional Medicare Tax on wages, compensation, and/or self-employment income (and that of the individual’s spouse if married filing jointly) that exceed the applicable threshold for the individual’s filing status. For married persons filing jointly the threshold is $250,000, for married persons filing separately the threshold is $125,000, and for all others the threshold is $200,000.
     
12. If my employer withholds Additional Medicare Tax from my wages in excess of $200,000, but I won't owe the tax because my spouse and I file a joint return and we won't meet the $250,000 threshold for joint filers, can I ask my employer to stop withholding Additional Medicare Tax?
    No. Your employer must withhold Additional Medicare Tax on wages it pays to you in excess of $200,000 in a calendar year. Your employer cannot honor a request to cease withholding Additional Medicare Tax if it is required to withhold it. You will claim credit for any withheld Additional Medicare Tax against the total tax liability shown on your individual income tax return (Form 1040).
     
13. What should I do if I have two jobs and neither employer withholds Additional Medicare Tax, but the sum of my wages exceeds the threshold at which I will owe the tax?
    If you anticipate that you will owe Additional Medicare Tax but will not satisfy the liability through Additional Medicare Tax withholding (for example, because you will not be paid wages in excess of $200,000 in a calendar year by an employer), you should make estimated tax payments and/or request additional income tax withholding using Form W-4. For information on making estimated tax payments and requesting an additional amount be withheld from each paycheck, see Publication 505, Tax Withholding and Estimated Tax.
     
14. Are wages that are not paid in cash, such as fringe benefits, subject to Additional Medicare Tax?
    Yes, the value of taxable wages not paid in cash, such as noncash fringe benefits, are subject to Additional Medicare Tax, if, in combination with other wages, they exceed the individual’s applicable threshold.  Noncash wages are subject to Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold.
     
15. Are tips subject to Additional Medicare Tax?
    Yes, tips are subject to Additional Medicare Tax, if, in combination with other wages, they exceed the individual’s applicable threshold. Tips are subject to Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold.
     
16. How do individuals calculate Additional Medicare Tax if they have wages subject to Federal Insurance Contributions Act (FICA) tax and self-employment income subject to Self-Employment Contributions Act (SECA) tax? 
    Individuals with wages subject to FICA tax and self-employment income subject to SECA tax calculate their liabilities for Additional Medicare Tax in three steps:
     
    Step 1 Calculate Additional Medicare Tax on any wages in excess of the applicable threshold for the filing status, without regard to whether any tax was withheld.
     
    Step 2 Reduce the applicable threshold for the filing status by the total amount of Medicare wages received - but not below zero.
     
    Step 3 Calculate Additional Medicare Tax on any self-employment income in excess of the reduced threshold.

 

Home Office Deduction - Safe Harbor Method

Beginning January 1, 2013, taxpayers have the option of using the Safe Harbor Method for computing expenses for their home office deduction.

IRC Section 280A permits taxpayers to deduct expenses allocable to the business-use portion of a residence, including areas used for home office, for the storage of inventory or product samples, for providing day care to children or elderly or disabled individuals.

The home office deduction attributable to the dwelling unit are limited to the activity's gross income for the tax year reduced by deductions that are allowable regardless of the business use portion of the home.  Such deduction include qualified home mortgage interest, property taxes, casualty losses, and other allowable trade or business expenses not related to the dwelling unit.

In an attempt to reduce the administrative, recordkeeping, and compliance burdens of taxpayers, the IRS has offered a safe harbor method to compute the allowable deduction for the business-use portion of the home.  The safe  harbor  method is not in addition to the allocation of actual expenses of the home office, but rather serves as an alternative.

Under the safe harbor method, the taxpayer multiplies the allowable square footage of the home office by the prescribed rate of $5.00.  The allowable square footage cannot exceed 300 square feet, therefore, the maximum deduction is $1,500. The safe harbor deduction, similar to the actual expense allocation  method, cannot exceed the business income for the year reduced by business expenses unrelated to the dwelling unit.  Any taxpayer using the safe harbor method may not carry over any disallowed safe harbor deductions to the next year.  In addition, you cannot deduct any deprecation for the business-use portion of the home for that taxable year.  The depreciation deduction allowable for that portion of the home for the taxable year is deemed to be zero, and there is no reduction in the basis of the home for that year. The safe harbor method provides a technique to avoid recognizing un-recaptured Section 1250 gain upon a subsequent sale.  Because a taxpayer can claim the safe harbor method in one year and actual expenses in another, some years may reduce basis and contribute to un-recaptured section 1250 gain, while others will not.

The safe harbor method does not apply to any employee with a home office who received advances, allowances, or reimbursements for expenses related to the business use of a home.

Taxpayers using the safe harbor method may deduct 100% of mortgage interest and real estate taxes on Schedule A.

Contact me for further information!

Audry Rini of Double Entry Bookkeeping, LLC. Presented a "How-To" on Genealogy

Aficionado, sleuthhound., detective -terms that definitely describe VIC member Audry Rini, who gave a "how-to" presentation for Vermont Italian Club on tracing one's family roots. Motivated by the family stories her father always told, Audry has been successfully chasing her family names down rabbit holes for a good 35 years, long before the internet made it relatively easy and far more expansive.

 

The success of her adventures was made evident by a book she compiled on her family history -a book that definitely inspired the small group who came to learn from her experience at the Miller Center in May.

 

Research really does give evidence that a genealogist's study of his ancestral roots actually boosts his performance on intelligence tests! So get smart and follow Audry's recommendations for going on-line and beginning your own research: ancestry.com, Familysearch.org, rootsweb.com, italiangen.org, and cyndislist.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Tips on Making Estimated Tax Payments

 

Some taxpayers may need to make estimated tax payments during the year. The type of income you receive determines whether you must pay estimated taxes. Here are six tips from the IRS about making estimated tax payments.

1. If you do not have taxes withheld from your income, you may need to make estimated tax payments. This may apply if you have income such as self-employment, interest, dividends or capital gains. It could also apply if you do not have enough taxes withheld from your wages. If you are required to pay estimated taxes during the year, you should make these payments to avoid a penalty.

 

2. Generally, you may need to pay estimated taxes in 2013 if you expect to owe $1,000 or more in taxes when you file your federal tax return. Other rules apply, and special rules apply to farmers and fishermen.

 

3. When figuring the amount of your estimated taxes, you should estimate the amount of income you expect to receive for the year. You should also include any tax deductions and credits that you will be eligible to claim. Be aware that life changes, such as a change in marital status or a child born during the year can affect your taxes. Try to make your estimates as accurate as possible.

 

4. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 17 and Sept. 16 in 2013, and Jan. 15, 2014.

 

5. You should use Form 1040-ES, Estimated Tax for Individuals, to figure your estimated tax.

 

6. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. You’ll find more information about your payment options in the Form 1040-ES instructions. Also, check out the Electronic Payment Options Home Page at IRS.gov. If you mail your payments to the IRS, you should use the payment vouchers that come with Form 1040-ES.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.


2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.


3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.


4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).


5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify.

Four Things You Should Know if You Barter

Small businesses sometimes barter to get products or services they need. Bartering is the trading of one product or service for another. Usually there is no exchange of cash. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services.

The IRS reminds all taxpayers that the fair market value of property or services received through a barter is taxable income. Both parties must report as income the value of the goods and services received in the exchange.

Here are four facts about bartering:


1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually. The exchange must give a copy of the form to its members and file a copy with the IRS.

2. Bartering income. Barter and trade dollars are the same as real dollars for tax reporting purposes. If you barter, you must report on your tax return the fair market value of the products or services you received.


3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.


4. Reporting rules. How you report bartering varies depending on which form of bartering takes place. Generally, if you are in a trade or business you report bartering income on Form 1040, Schedule C, Profit or Loss from Business. You may be able to deduct certain costs you incurred to perform the bartering.

Ten Facts about Capital Gains and Losses

 

The term “capital asset” for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.

Here are 10 facts from the IRS on capital gains and losses:

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.

 

2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.

 

3. You must include all capital gains in your income.

 

4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.

 

5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.

 

6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a 'net capital gain.’

 

7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains.

 

8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.

 

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year.

 

10. Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses.

Take Credit for Your Retirement

 

Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.

Here are seven points the IRS would like you to know about the Saver’s Credit:

 

1. The Saver’s Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.

 

2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:

• Single, married filing separately or qualifying widow or widower, with income up to $28,750
• Head of Household with income up to $43,125
• Married Filing Jointly, with income up to $57,500

3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else’s tax return.

 

4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.

 

5. The Saver’s Credit reduces the tax you owe.

 

6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you use IRS e-file the software will do this for you.

 

7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.

Six Tips for Charitable Taxpayers

Contributing money and property are ways that you can support a charitable cause, but in order for your donation to be tax-deductible, certain conditions must be met. Read on for six things the IRS wants taxpayers to know about deductibility of donations.

1. Tax-exempt status. Contributions must be made to qualified charitable organizations to be deductible. Ask the charity about its tax-exempt status, or look for it on IRS.gov in the Exempt Organizations Select Check, an online search tool that allows users to select an exempt organization and check certain information about its federal tax status as well as information about tax forms an organization may file that are available for public review. This search tool can also be used to find which charities have had their exempt status automatically revoked.

2. Itemizing. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3. Fair market value. Cash contributions and the fair market value of most property you donate to a qualified organization are usually deductible. Special rules apply to several types of donated property, including cars, boats, clothing and household items. If you receive something in return for your donation, such as merchandise, goods, services, admission to a charity banquet or sporting event only the amount exceeding the fair market value of the benefit received can be deducted.

4. Records to keep. You should keep good records of any donation you make, regardless of the amount. All cash contributions must be documented to be deductible – even donations of small amounts. A cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity that includes the charity’s name, contribution date and amount usually fulfill this record-keeping requirement.

5. Large donations. All contributions valued at $250 and above require additional documentation to be deductible. For these, you should receive a written statement from the charity acknowledging your donation. The statement should specify the amount of cash donated and/or provide a description and fair market value of the property donated. It should also say whether the charity provided any goods or services in exchange for your donation. If you donate non-cash items valued at $500 or more, you must also complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a contribution of noncash property worth more than $5,000, you typically must obtain a property appraisal and attach it to your return along with Form 8283.

6. Timing. If you pledge to donate to a qualified charity, keep in mind that for most taxpayers contributions are only deductible in the tax year they are actually made. For example, if you pledged $500 in September but paid the charity just $200 by Dec. 31 of that same year, only $200 of the pledged amount may qualify as tax-deductible for that tax year. End-of-year donations by check or credit card usually qualify as tax-deductible for that tax year, even though you may not pay the credit card bill or have your bank account debited until after Dec. 31.

Your Blueprint for Personal and Business Success

• Who among us has not recently experienced great change in his or her life?
• Who isn’t affected on some level by the major changes occurring in our world today?

Chaos seems to be a theme with no sign of disappearing in the near future. It is so easy to internalize this confusion.

• What if there was a simple, effective tool to help us to navigate changes and maintain inner peace and confidence?
• What if this tool was sustainable, something that could be used again and again in the future?
• What if you had already created an approach in the past that had worked well for you that simply needs to be re-structured, updated, and applied to existing and future changes as well as challenging circumstances?

Join Connie as she provides the tools and support to help you successfully navigate transition and stress. She has developed a tool that she calls Your Blueprint For Personal and Professional Success. She has used this tool successfully in her own life for many years and it has helped her land on her feet successfully amid transition, challenge, and change. Connie will show you how to create your own Personal Blueprint so you can feel calm and confident through-out the day no matter what's going on around you.

Connie Livingston is a consultant, coach, facilitator, strategist, and speaker with a background in financial services and Community Economic Development. She has worked with individuals and groups for 20 years toward achieving their goals. She started her practice three years ago because she believes that as she helps clients improve their financial, personal, and economic lives, healthy, stable communities are created.

One of her specialties is helping people navigate successfully through transition. Change can be scary; she knows because she has been through so many transitions in her own life. She has started several businesses, left a career in order to raise children, re-entered the world of paid employment, and experienced a number of career changes. She did this using a positive, systematic approach and landed on her feet successfully through the changes as well as in the financial realm. She loves to show her clients how she did this.

July 27, 2012 at 8am - 9:30pm

Tegu Hall, Morrisville

Register:  www.lamoillecountybusinessnetwork.com