Over the past couple of months we have provided tips about tax deductions. Whether you are familiar with taxes and accounting or not, we hope you have learned more about what is deductible and what is not. In case you haven’t read this information, you can download it as a FREE eBook by clicking the picture above. Or simply read on and we’ll give you a summation of our posts on what you need to know about tax deductions.
This is the fourth installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.
Although most people understand that mortgage interest is deductible, many people may not be aware that there are certain situations in which it actually creates a greater savings not to claim a deduction as mortgage interest.
Under Treasury Regulation 1.163-10T(o) a taxpayer may elect to treat mortgage debt as not secured by a qualified residence.
Once this election is made, it is effective for all subsequent years and can only be revoked with IRS permission. The advantage of this election is if a taxpayer has allowable mortgage interest that is limited by the $1,000,000 or $100,000 rules on indebtedness.
Let’s say you have a home equity loan that is used for a business. The interest deducted on a business return or “Schedule C”, in most cases, will create a greater tax savings than if the interest was deducted as mortgage interest.
Here’s an example:
Starting in 2011, credit and debit card companies will begin reporting payments made to merchants on a new IRS form 1099-K to payees with over 200 sales transactions and over $20,000 in annual sales. This amount will be reported on a separate line on a taxpayer’s applicable tax return, this will leave cash and check sales reported net of credit card sales on a separate line.
This change is an attempt to reduce underreporting of gross receipts by sellers of goods and services. If a taxpayer takes cash sales out of the drawer to purchase merchandise and does not record the purchase and sale in its books and records, this change could trip up the IRS for underreporting of income, something to consider as you complete your 2011 tax return.
If your business needs a controller manager, please give me a call at (239) 384-9688 or contact me online.
-Mark
Naples & Fort Myers Accounting
This is the third installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.
A student loan is designed to help students pay for university or college. It is a calculated amount that should assist with the cost of tuition, books, and living expenses. This loan may differ from other types of loans in that the interest rate may be substantially lower. In addition, the repayment schedule may be deferred while the student is still in education.
Student loan interest is another form of interest that is deductible, but with limitations. These limitations are as follows:
This is the second installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.
Any loans that fall under the nondeductible category need to be reviewed along with your cash or equity availability. If possible, they also need to be re-characterized to a deductible form of interest.
An example of this would be having availability on a home equity loan (balance after transfer must be below $100,000) and paying off an auto loan or credit card. This will increase cash flow two fold:
This is the first installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.
When tax time roles around, you will need to take a look at the various types of loans and credit lines to see which are tax deductible and which are not. These may include:
If so, you have until October 17, 2011 to undo the conversion and recover any tax paid. You should review your converted ROTH account and compare the balance with the converted amount, if the balance has declined, returning the dollars back to your IRA can save tax dollars. If your 2010 return has already been filed, use form 1040X to file for a refund.
For more helpful information, download my free ebook Roth IRA – 8 Quick Helpful Tips or contact me online.
-Mark
Fort Myers & Naples Accountant
No one likes being audited by the IRS. In fact, last year, approximately 1.4 million taxpayers were audited, and I can’t imagine a single person enjoyed the experience. But when you learn how to properly take advantage of itemized deductions on your tax returns, suddenly tax accounting isn’t quite so stressful.
I don’t want any of you to face the stresses that come along with being audited which is why I wrote a new eBook that you can download for free, called…
According to the DC district court the answer is no. The court’s decision was based on the facts that the plan administrator didn’t intentionally misclassify the workers and the 401(k) and cafeteria plan documents specified that anyone reclassified as an employee by a court or the IRS wouldn’t receive benefits. Based on the case it would be wise to review your plan documents with legal counsel to insure being tripped up by this in the future.
Here are 3 more tips to help you sit pretty in retirement. If you need additional assistance with your retirement planning please contact me online or call (239) 384-9688.
-Mark
Naples & Fort Myers CPA
If you own a restaurant and your employees are tipped, listen up! This post specifically applies to you as it pertains to the new tipped employee laws set forth by the Fair Labor Standards Act.
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