NEW 2014
Standard Mileage Rates:  

Per Mile

Business: 56¢

Medical / Moving: 23.5¢

Service of Charitable Organizations: 14¢

Did you move or

change your email address in 2013?

Call or email the office and let us know!

Greetings! 

We are pleased to announce the following additions:

• Paul Cloud will be joining the practice as an Enrolled Agent after passing three comprehensive IRS tax exams last year. Enrolled agents, like attorneys and CPAs, have unlimited practice rights before the IRS.
• Leszlie Nedelka has joined the practice on a part-time basis as a general bookkeeping, payroll and tax support person.

On taxable income over these amounts:

1. Did you know that Tax Return Identity Theft has reached epidemic proportions? It was the number one tax scam for years 2011 through 2013. There were an estimated 860,000 problematic (suspected identity theft) tax returns from the 2013 filing season totaling $4.2 billion as reported by the Treasury Deputy Inspector General.

2. The process works as follows: a thief files a fake / fraudulent tax return using your name and SSN (purchased in the marketplace by someone who has stolen your identity or sold your identity). The thief reports bogus wages and tax withholding that leads to a nice refund. When you file your tax return later in the season, the IRS will reject your legitimate return stating that it is a duplicate return. Once this happens, the legitimate taxpayer has to begin the process of claiming identity theft and their tax return processing is delayed by up to 6 months. If a refund is expected, that will also be delayed.

3. Understanding that many of you wait on K-1 statements or corrected broker statements, it is in your best interest to file your tax return as early as possible.

    

1. If you are a business owner (small or large), the IRS says you can deduct "ordinary & necessary" expenses. Ordinary is defined as common and accepted in the particular business activity and necessary is defined as appropriate and helpful to the taxpayer's business. This helps distinguish nuances that occur in certain industries (i.e., travel industry would normally have higher travel expenses).

2. Here are a few guidelines that help demonstrate to the IRS a bona fide business exists even in years when there are business losses: a) have a business plan, b) have a separate bank account and credit card than your personal accounts, c) join an industry association, d) have a website, business cards, letterhead, etc.

3. You can choose any recordkeeping system that clearly reports deductible expenses. Supporting documents such as invoices or cancelled checks are required to substantiate your deduction.

4. If you deduct mileage or auto expenses, mileage logs are required and should include the date, number of miles, and where travelled. You will also need to note the total miles driven for the year which will include personal miles as well as business miles. NOW'S A GOOD TIME TO DOCUMENT YOUR ODOMETER READING.

5. If there are losses in 3 of 5 years, the IRS will take the position that the business is a HOBBY and the burden of proof to show otherwise falls to you as the taxpayer. 

• If you have a  particular loss in your investment portfolio, you may have considered selling the investment to take advantage of the loss, but then buying it back  because you still like the long term prospects of the investment. Be careful of wash sale rules.
• Wash sale rules prohibit a taxpayer from claiming a loss on the sale or trade of a security if the security is repurchased. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a "substantially identical" stock or security, or acquires a contract or option to do so. A wash sale also results if an individual sells a security, and the spouse or a company controlled by the individual buys a substantially equivalent security, or when the security or call option is purchased in a different account, such as an IRA.

If you currently have Home Office, there is now a optional simplified approach to consider!

• In this simplified method, you can deduct a flat $5 per square foot on up to 300 square feet without having to gather and add up water, electric and gas bills to name a few.
• Mortgage interest and property taxes are deducted in full on Schedule A (form for itemized deductions).
• No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.
• This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction.
• We can discuss the best option when I prepare your tax return later this season.

• If you own a business or have rental property, be prepared to answer the following questions on your tax return:
• Did you make any payments in 2013 that would require you to file Form(s) 1099?
• If "Yes", did you or will you file all required Forms 1099?
• What this means is the IRS is cracking down on those who should be reporting payments on 1099s and are not.
• As a reminder, 1099s should be issued to non-corporations / individuals who provide $600 or more in services to your business. For example, payments for services performed for a trade or business by people not treated as its employees such as a plumber, lawn service or an interior decorator.
• You can file these 1099s on your own or my office can help.
• Also, you may receive a Form 1099-K from your credit card processing company. The purpose of this form is to facilitate tax return reporting of both credit card and cash receipts for all businesses.This includes rental businesses.

 
Doris Cloud 

This newsletter is for general guidance only, and does not constitute tax advice or professional consulting. Before any action, consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information.