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.