Biz Owners: Should You Deduct Your Home Office?

by @BenitaTyler, TBS USA Accounting and Tax Advisory

If you use a portion of your home for business purposes, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses that you may be able to deduct include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting, and repairs.

You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively:

• as your principal place of business for any trade or business, or

  
  
• as a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business.

  
  

Generally, the amount you can deduct depends on the percentage of your home that you use for business. Your deduction will be limited if your gross income from your business is less than your total business expenses.

If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.

The rules vary depending on whether you're self-employed, a qualified daycare provider, or storing business inventory or product samples. If you are an employee, you have additional requirements to meet. The regular and exclusive business use must be for the convenience of your employer. 

Want more advice on your accounting and tax issues? TBS USA is a national tax, accounting and business consultancy available to answer your questions!  Visit www.tbsusa.com today!

Do you deduct your home office annually? How has it benefited you?

@DorethiaConner

www.connercoaching.com

Follow @MoneyChatLive and Join us for #MoneyChat every Monday night on Twitter from 8-9p ET!

Getting a Tax Credit for Your Honey Do List!

You have to do the work anyway - might as well get paid for it! Well kinda - @BenitaTyler of TBS USA Accounting and Tax Advisory, offers some insight on tax credits for items on that long summer home improvement list! Check it out!

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Summer is a great time to tackle home improvements - and, happily, it's not too late to receive a tax credit when making your home more energy efficient. Although significantly reduced from 2010 levels, energy-efficiency tax credits are still available in 2011.

The home energy credit applies to energy-related improvements, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air-conditioning systems to an existing home that is your primary residence. The tax credit is not available on rental properties or new construction.

The tax credit is 10% of the cost of the home improvement, up to a maximum of $500. There is a lifetime limit of $500, so if you took a $500 credit in 2010, you do not qualify in 2011. The tax credit expires December 31, 2011.

The credit on some items have been reduced below $500:

• Windows limited to $200; Energy Star qualification.
• Air conditioners, water heaters, and biomass stoves limited to $300.
• Furnace and boiler improvements limited to $150 and must meet certain standards.
• $50 credit for advanced main air circulating fans.

Further, the Residential Energy Efficient Property Credit is a nonrefundable energy tax credit that helps individual taxpayers pay for certain alternative-energy equipment, such as solar hot water heaters, geothermal heat pumps, and wind turbines. The maximum amounts for a credit equal 30% of the cost of qualified property, with no upper limit. This credit expires on December 31, 2016, and is available for new and existing homes, whether primary or second. Rentals do not qualify.

Want more advice on your accounting and tax issues? TBS USA is a national tax, accounting and business consultancy available to answer your questions!  Visit www.tbsusa.com today!

Tax Tips for Freelancers

Many freelancers and business owners have questions when it comes to their taxes. Who better to help you navigate the murky waters than Benita Tyler of TBSUSA Accounting? Check out Benita's tips below!

There is a lot of flexibility in business ownership. When to work, who to work with, and the type of work that you do are all great benefits. But even with the freedom to create the business of your dreams there is still a need for know-how. It is important to have insight in areas such as tax compliance and regulations to help you reduce your tax bill. Here's how E.S.P. helps you achieve great tax results in 3 simple steps!

E - Expense Classification

In addition to the opportunity to increase income you may have noticed another benefit of self-employment. If you are like others who start their own company then you likely realize the tax savings from writing off business expenses. This is an area that can be confusing when you do not understand where to draw the line. For example, if you work from home the Internal Revenue Service allows deductions for the business use of your home. In most cases there is only a certain percentage of the expense that qualify for the business deduction. Knowing what deductions are available to you makes the difference in how much you end up paying when you file your return. If you are unsure of what expenses to claim, speak with an accountant to get more advice.

S - Scheduling Payments

There are several types of taxes that may apply to you as a self-employed person. Examples include self-employment, income, sales, and payroll taxes. Depending on how your company is set up you may need to remit one or all of the taxes above. It is important that you understand the filing requirements from a federal, state, and local level. Get a tax calendar to track the schedule for filing forms and sending in payments. Failure to do so can lead to hefty tax penalties which means fewer tax savings for you.

P - Procedures and Payments

Another pitfall that is common to self-employment is overpaying income and self-employment taxes. Planning and good math are keys to successfully reducing taxes. A simple improvement that can make a big difference in how much tax you pay is putting the right financial procedures in place. The more thorough you are in tracking your financial activity the better off you will be when it comes time to file your taxes. This way you are not over reporting income or under reporting expenses.

It is important to be familiar with the tax rules that govern self-employment. Using this simple model will keep you in compliance and help you lower your tax bill

More questions? Contact:

Benita Tyler
Phone: (888) 380-1112

www.tbsusa.com

Nationwide Tax and Accounting Services Available

Taxes: Getting the Biggest BANG for your BUCK!

Every Monday as @DorethiaConner & with my co-host, @BenitaTyler, we interview experts during our weekly Twitter Online convo, #MoneyChat,  held from 8pm-9pm est.  This post pulls the highlights from our #MoneyChat topic on TAXES.    Who else to learn from on this subject other than our very own resident expert, @BenitaTyler, of TBSUSA Tax, Accounting and Small Business Consulting?  Here's to happy returns.... 

Q1: I only worked for a short time last year, do I have to file a tax return?

When it comes to filing your income taxes it’s not the length of time but the amount of taxable income you earn that matters. It also depends on your filing status, age, and the type of income you received. Check http://www.irs.gov/ to see if you are required to submit a tax return.  Keep in mind that even if you are not required to file, you could be missing out on refundable tax credits if you don’t. It’s worth it to run the return to see if you’re leaving money on the table.

Q2: Is it true that I cannot file my income tax return electronically if I itemize this year?

This year because of several changes that went into affect with tax rules, the IRS has to reprogram its computers to process taxes.  As of today, the IRS anticipates having systems ready to accept electronically filed returns by mid to late February.

Q3: I made a mistake on my tax return and have submitted it already. What do I do?

If you notice an error the best thing to do is file an amended return. Use Form 1040-X to report changes to income, expenses, dependent information, etc.

Q4: I filled out my W-4 Form incorrectly in 2010 causing me to owe the IRS. I’m making payments but there is still a balance. How will they handle my refund this year?

Kudos to you for taking action and making payment arrangements. The longer you take to pay off the balance, the more interest will apply. If you are due a refund this year, the IRS will apply it to the outstanding amount and issue a refund for the balance. You can also estimate income taxes using the 1040-Tax Withholding Calculator at http://tinyurl.com/2dwg8em

Q5: My spouse and I were recently married last year. Does that mean that we should file our taxes together?

Getting married doesn’t restrict the option for you to file separate from your spouse. For various reasons, many married couples find filing separate tax returns works out better for them. Generally, filing together results in lower tax but it may not always be the case.

As with most things related to taxes, the answer is, “it depends”.  It is a good idea to run the tax return both ways to see if joint or married filing separate provides the most tax savings.

Q6: Which filing status do I claim if my spouse and I were separated in 2010?

For tax purposes, you are still considered married unless you have a legal separation by a divorce or separate maintenance decree, temporary decree of divorce. If you do not meet either of these tests, you and your spouse can file as married filing joint or married filing separate tax returns.

Q7: My son moved into his own apartment last year but I helped with his living expenses. Can I still claim him as a dependent on my tax return?

Being able to claim your child will depend on whether they meet certain criteria outlined by IRS.

Four scenarios will qualify the child as a dependent.

 1) They must have lived with you for more than half the year, be under 19 years old;

2) If they are under 24 years and a full-time student at least five months of the year;

3) They can be any age if they are totally and permanently disabled.

4) If you can answer yes to at least one of these, you also must have provided more than half his support during the year.

Q8: 2010 was my lucky year. I had winnings from the slot machines but I was told the amount is taxable. Is that correct?

Hey, woo hoo to your luck of the wheel! But now it’s time to spread the wealth with Uncle Sam.  If you haven’t already, you’ll be getting a 1099-G which lists the amount of your winnings. There's good news though, if you had any losses from gambling such as lottery, slot machines, etc. you can deduct those amounts from the winnings.  The balance is the amount that will be taxable. 

One note here: your losses can reduce the winnings but can not be more than the amount you win. Go figure eh? So, if you won $10,000 and lost $14,000. You will only be able to write-off up to a maximum of $10,000.

Tax tip: Keep proof of your gambling losses to support write-offs for 6-years after submitting your tax return.

Q9: I received a 1099-C in the mail. What’s that about?

A 1099-C is issued for debt that you had in 2010 that was cancelled by the creditor.  It can result from a credit card balances that went into collections. Today, more creditors are issuing debt cancellation statements for credit card holders that negotiate for less than the full pay-off of their balance. Homeowners whose mortgage was foreclosed will receive this statement, as well. In either case, be sure to report the Cancellation of Debt amount on your taxes. Failure to file any cancellation of debt over $600 could cost you in penalties and interest.

Q10: There appeared to be a longer time for Congress to resolve tax issues in 2010. What are some of the changes that I can expect when filing my taxes?

The hold-up was due to negotiating the Bush tax cuts that were set to expire at the end of 2010. As a result of the 2010 Tax Relief Act, many of the tax cuts were given an extension but only for tax years 2011 and 2012. In its simplest form, what that means is there were no hikes in income tax rates this year. So many of the credits that you may have been used to in previous years still apply. Individuals can also look forward to the capital gains rate staying at 2010 levels for the next two years.  

Q11: You mentioned quite a few credits were extended. What are they and where can I go find out more about them?

Several credits that were extended include the Child Tax Credit, Earned Income Credit, Dependent and Child Care Credit, and Adoption Credit. There are many resources that explain the different types of tax deductions. When seeking info on tax issues you can go straight to the source by contacting your federal, state, and local tax agencies. And you can also consult a tax advisor, accountant, or an enrolled agent. Visit www.tbsusa.com for more information at our tax center!

Q12: Were there any major changes for clergy?

The biggest change deals with Social Security tax, it is down 2% from 6.2% in previous years. 

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Join us on #MoneyChat every Monday night from 8p.m. - 9p.m. - we welcome your input!

-Dorethia

Dorethia Conner, MBA: Personal Finance and Business Coach

www.connercoaching.com | dorethia@connercoaching | 800.962.2491 | 248.325.8016

What NOT To Do With Your Money in 2011

DO NOT:

Skip filing your tax return...

The IRS will get their money, you skipping a year just adds on to the penalty and fees you will have to pay in the end. Please believe me when I tell you that credit card interest has nothing on what the IRS charges for unpaid back taxes.

If you end up owing every year, increase the dollar amount taken out of your paycheck each month.

Ex:  Amount owed each year: $1,500/12 mos = $125 per mo. or $62.50 additional bi-weekly per pay

Entrepreneurs, authors, freelancers, etc. - immediately calculate at least 25% of your earnings from each job, sale, etc. for income taxes. Don't wait until the end of the month, set aside a separate account for your taxes. Talk to an accountant about setting up a tax payment schedule.

Go on vacation when you have no savings....

Okay, yes you work hard and everyone wants a vacation. But plan for the vacation throughout the year. Set some money aside, now is a great time to start because by summer you can have your $1,000 in an emergency fund and money for vacation. That is... if you are willing to sacrifice to do so. Emergency fund trumps vacation... I know.... bummer.

Tap into your 401k before you liquidate stock, sell valuables...

Many have lost their jobs or faced another financial hurdle - don't immediately liquidate your retirement accounts. First tap into any valuables you may have that can be sold, paintings, jewelry, etc. in addition to individual stock. Let your retirement fund be a very, very last resort. Even if you make a hardship withdrawal you still take a big hit and end up with no retirement savings.

Co-sign on anything for anyone.. nope.. not even your kids...

70% of people who co-sign on a loan for someone else end of paying for the loan themselves. Can you afford to pay for someone else's car, home, new windows... you get the picture.

Hide money from your mate....

The things money arguments are made of - dishonesty, distrust, selfishness. Learn to work together on your money or there will be trouble.  Decide how you will pay the monthly bills, save, invest and then separate what's left for miscellaneous individual purchases. 

Borrow more money.....

You can't win a race running in place. Adding more debt, while trying to get out of debt, makes no sense! Set your goals, develop a debt payoff plan and stop borrowing. You'll be happy you did.

Panic and get a payday loan.....

Everyone knows how much I dislike the cash advance and payday loan establishments. Don't let your financial situation scare you so much you run to one of these rip off shops!  Pay day loans often prey on low income neighborhoods and can cost $30 for every $100 borrowed. That's crazy! Stay away!

-Dorethia

connercoaching.com

Getting Married? Filing Status Considerations by Benita Tyler, TBSUSA.com

Check out this guest post by my friend Benita Tyler of http://tbsusa.com/ Tax and Accounting Services. Following my wedding theme these past couple of months, Benita offers some practical tax advice for engaged or newlywed couples. Please visit the TBS website for an extensive outline of the tax and accounting services available to you!

__________________________________________________________

Summer is wedding season. If you are getting married this summer, remember to give some attention to your 2010 tax filing status. You have two filing status options: married filing jointly, or married filing separately.

Married Filing Jointly

You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.

According to the IRS, if you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.

We recommend that if you and your spouse each have income, you figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). You can choose the method that gives you the lower combined tax.

Joint Responsibility. Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.

Married Filing Separately

You can also choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.

We understand that knowing which filing status to choose can be confusing. If you want easy to understand explanations for your tax questions contact us!

Benita Tyler, President
http://www.tbsusa.com/
info@tbsusa.com
313-377-1080

Last Minute Tax Advice by Cann Accounting, LLC

I know many will find this post by my own personal accountant helpful. Cann Accounting is owned by my good friend LaTeama Cann and her husband Nate. They are experienced and knowledgeable and will definitely be able to answer your personal or business tax and accounting questions!  - Dorethia


It is April 13th already and your taxes are not yet done. Here are some stress relieving ideas to help you.

Don't Panic if You Can't Pay - If you can't immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can file early and authorize the government's financial agent to take the money directly from their checking or savings account on the April due date, with no fee.

Request an Extension of Time to File - But Pay on Time - If the clock runs out, you can get an automatic six month extension bringing the filing date to October 15, 2010. The extension itself does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. Call us for a variety of easy ways to apply for an extension.

If you have any unanswered tax or accounting questions, call Cann Accounting!!!. There are five easy ways to contact us. Simply call, email, fax, write or just stop by!!

LaTeama Cann
Cann Accounting Service LLC
21848 Van Born Rd
Dearborn Heights, MI, 48125
contact@cannllc.com
Phone: (313) 278-2188
Fax: (313) 278-2206

The Stimulus Plan in Plain English

Are you finding it difficult to make heads or tails of all this Stimulus Plan talk? Here is a simple explanation of what it means to you.

More Money in Your Paycheck

There has been a reduction in the amount withheld from your paycheck for Federal income taxes.

Individuals: $400/year if Adjusted Gross Income (AGI) is less than $75,000
Couples: $800/year if Adjusted Gross Income is less than $150,000
On average this amounts to about $13 additional in your paycheck each week.

Retiree Benefits

Do you collect...

Social Security?
Supplemental Security Income?
Veterans Disability?
Retirement Benefits?

You may qualify to receive an extra $250 check this summer.
Go to -http://www.socialsecurity.gov/payment


AMT Tax (Alternative Minimum Tax)

What exactly is the AMT? Click here for a detailed explanation http://www.fairmark.com/amt/amt101.htm

$500 increase in AMT exemptions for individuals with income less than $46,700 and $1,000 increase in AMT exemptions for couples with income less than $70,950.

With this change 26 million Americans won’t have to pay an AMT Tax this year!

New Vehicle Purchases

Car
Light Truck
Motor Cycle
Motor Home

Spend up to $49,500 and you can deduct State and Local Sales Taxes which in most states is 6% of the purchase price.

Who qualifies?
- Individuals who earn less than $125,000
- Couples who earn less than $250,000

You will qualify for the deduction whether you itemize or not.

(Okay, I’ve posted this for information’s sake, but the best way to buy a car for personal or business use is to buy used and pay cash)

Home Buyers

$8,000 credit for first time home buyers who purchase a home between January 1, 2009 and November 30, 2009.

Stipulations:
- The home must be your primary residence
- You must stay in the home 3 years
- If you fail to meet these requirements you will have to repay the money.

Did you buy a home between April 8, 2008 and December 31, 2008?

You may be able to qualify for 2008 earlier version of this credit. The 2008 credit maxes out at $7,500, however, and you have to repay the credit over 15 years - even if you stay in the home three or more years.
Check out this link for more info: http://www.federalhousingtaxcredit.com/home.html

Energy Efficient Home Improvements

Are you buying new windows this year or home insulation? The credit for energy efficient home improvements has been raised from $500 to $1,500.

The improvements include everything from new windows or water heater to a new central air-conditioning system for your home.

College Tuition

The Hope Credit: Increased to $2,500 (was $1,800)
Income Restrictions:
- Single: $80,000
- Couples: $160,000

The 529 College Savings Plan: The money in these accounts can now be used to purchase PCs/Laptops or Internet Access for students.

Unemployed?

If you were laid off between September 1, 2008 and December 31, 2009 and remain on your previous employer’s health insurance (COBRA benefits) – you will receive a 65% discount
on the premium for up to 9 months.

You also don’t have to pay taxes on the first $2,400 of unemployment benefits

Information on the 2008 Stimulus Payment:
If you didn’t file for the Economic Stimulus Payment for 2008 it may not be too late!

http://www.irs.gov/newsroom/article/0,,id=177937,00.html

Contact Dorethia:

www.connercoaching.com

800.962.2491

What's in the Stimulus for YOU?

From The Wall Street Journal @ WSJ.COM
By ARDEN DALE, VICTORIA E. KNIGHT and JILIAN MINCER

Consumers get spending money and a helping hand with some key expenses under President Obama's stimulus plan.

By far the biggest tax piece in the plan is the Making Work Pay tax credit. It would put a bit of cash into pockets, probably by having employers withhold less tax. Each eligible worker would get 6.2% of earned income up to a maximum credit of $400 ($800 for two-earner couples). So folks would see an extra $12 to $20 per weekly paycheck, depending on whether the government pays it out over six months or more.

Many taxpayers will get the Making Work Pay credit, though it isn't open to anyone who earns more than $95,000 ($190,000 for couples). Its slow-drip approach is likely to stimulate spending, according to some tax experts. In hard times, people tend to stash a larger windfall in a savings account, says Roberton Williams, senior fellow at the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. An extra $20 each week, however, is more likely to get spent at the movies or on a piece of clothing.

First-time homebuyers also get a tax break under the plan.... Click title for rest of story -


~Dorethia
http://www.connercoaching.com
money management for real people!