Category Archives: General Topics

For Child Care Providers: How To Calculate Time-Percent

Child Care Tax Specialists Website

What do we mean by Time Percent?

This percent is determined by adding up the number of hours you are using your home for business purposes and dividing this number by the total number of hours in the year (8,760). There are two types of hours to include: hours when day care children are present in your home and hours when children are not present but you are engaged in business activities.

For more information, read full post on How To calculate Time-Percentage

Interest Rates Remain the Same for the First Quarter of 2014

For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Larger IRS

 

IR-2013-96, Dec. 9, 2013

WASHINGTON ― The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2014.  The rates will be:

  • three (3) percent for overpayments [two (2) percent in the case of a corporation];
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2013 to take effect Nov. 1, 2013, based on daily compounding.

Revenue Ruling 2013-25 announcing the quarterly rates will be published  in Internal Revenue Bulletin 2013-52, dated Dec. 23, 2013.

Troubled or Modified Loans?

If you had a loan modified, or lost a property in foreclosure or short sale in 2013, I will need to have all the details.  You can’t put behind you until we deal with the tax issues.

For instance, you might have income from cancellation of part of the mortgage.  Look for Forms 1099-A and/or 1099-C in the mail.  I must see these.

What I also need from you are all the details surrounding what happened.  I need the history of all the loans associated with the property.  It will help to see mortgage statements.  Many times these cases involve more than simply tax law, so please be as thorough as possible.

If you have any questions – don’t hesitate to call.  The number is 619-589-8680.

Family member in College? Need Tax Breaks?

There are three different tax breaks that might help you.

  • Tuition and Fees.  Required document is 1098-T.  In addition to the tuition and fees, I will need the name, address and Tax ID number of the school.  Unfortunately, the student is the one who gets the 1098-T – not the parent!  If they lost it – they will need to go to www.1098T.com.
  • Other expenses.  If your student doesn’t already have a degree you can deduct books, supplies, special software, maybe even their computer.  Be sure to get all related costs from your student. 
  • College Saving Plans.  Did you use a Section 529 Plan or a “Coverdell Savings Accounts” to help pay for the costs?  If so, you will be receiving IRS Form 1099-Q.  Your money grew – tax free.  We will need to show that the funds were used for “qualified expenses” otherwise you will be taxed now.  You also might subject to a penalty – so your tax preparer will need records of any and all costs.
  • Youngster’s Tax Returns.  If the student is your child, I can run what is called a “Kiddie Tax”.  Make sure your child does not file their own return until we’ve gone over the rules. 

 

Source: Tax News & Tips, Year End 2013

Tax Benefit If You Rent to Relatives

For Rent signDid you know you can save taxes when you rent to relatives?

Want renters you know, trust, like and just happen to be related?  No problem.  In fact, it is actually a pretty good idea.

According to the Bradford Tax Institute, renting is still a business agreement – even if your tenant is your college-age child or your retired in-laws.  As with every business agreement, this rental requires a clear understanding of what is and isn’t permitted by law. So set down the ground rules, then you can relax.

The Core to a Safe Rental Strategy

Here’s a good tip to remember when renting to relatives (it will help you escape the rental triple whammy): Charge a well-documented and market-supported fair rent to your relatives.

That way, your rental property will not get misconstrued as a second home.

Here are a few ways to prove the rent you charge is fair:

  • Print listings for similar rentals in the same neighborhood from craigslist.com
  • Cut out comparable rental ads from local newspaper want ads
  • Get letters from property managers
  • Obtain an independent appraisal

To recap: Be sure to charge your relatives fair rent. Keep your relationship in good standing and your tax deductions on solid ground

Source: Tax Reduction Letter.

 

IRS Provides Answers to FAQ on Itemized Deductions for Medical Expenses

Larger IRSQuestions and Answers: 2013 Changes to the Itemized Deduction for Medical Expenses

1. When do changes to the itemized deduction for medical expenses take effect?

The rules are changing if you plan to itemize medical deductions on your 2013 federal tax return that you will file in 2014. The change will not affect income tax returns for the 2012 taxable year that will be filed in 2013. Continue reading →

HOW ARE YOU AFFECTED BY THE 2014 INFLATION ADJUSTMENTS

Larger IRS2014 Inflation Adjustments

IR-2013-87, Oct. 31, 2013

WASHINGTON — For tax year 2014, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

  • The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
  • The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
  • The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
  • The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
  • Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
  • The annual exclusion for gifts remains at $14,000 for 2014.
  • The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
  • The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
  • The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.

Details on these inflation adjustments and others not listed in this release can be found in Revenue Procedure 2013-35, which will be published in Internal Revenue Bulletin 2013-47 on Nov. 18, 2013.

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Page Last Reviewed or Updated: 31-Oct-2013

Starting Social Security?

ARE YOU REALLY OLD ENOUGH TO START RECEIVING SOCIAL SECURITY?  

I’m sure you know that the earlier you start Social Security, the amount you receive differs greatly across 62-66-70, considered the “key ages”.

  • Early Benefit.  Start receiving at age 62.  If you start at age 62 your benefit is reduced by 25% (from what your earnings history makes you eligible for). On top of that, if you start between 62 and 66 – the deduction is prorated over the 48 months.  THIS IS YOUR BENEFIT FOR LIFE.  There is an earnings limit until you turn 66.  Then it stops.
  • Normal Benefit.  Age age 66, you receive the “normal amount, with yearly inflation adjustments.  No earnings limits apply.  In fact, earnings will now increase your benefit slightly.
  • Delayed Benefit.  For every month you delay after age 66, your benefit increase – but – NOT AFTER AGE 70.  The annual figure is about 8%.  No earnings limit apply.

May I Refuse to Care for a Child Who is Not Immunized?

A parent who wants to enroll in your family child care program tells you she refuses to immunize her child. What do you do?

Child Care Tax Specialists takes a look at the issues surrounding refusing a child into a Child Care program.  It is complicated, and there are a lot of exemptions.  Child Care Professionals have to know how to handle this kind of situation.

Read the full post at http://childcaretaxspecialists.com/may-i-refuse-to-care-for-a-child-who-is-not-immunized/

8 Facts to Know if You Receive an IRS Letter or Notice

What to do if you receive an IRS Notice or Letter

While it may be tempting to navigate the new tax laws and changes on your own, it is always better to consult a tax professional – specifically – Enrolled Agents (EA) who are recognized as the tax experts.  Your EA will know what to do, why you received the notice or letter, and the immediate steps to take.  However, if you want to do this on your own – here are some facts you need to know.     Continue reading →

Family Child Care Guide to Visits, Inspections and Interviews

Family Child Care Guide to Visits, Inspections and InterviewsRedleaf Press has a new “how to” guide by Donna C. Hurley and Sharon Woodward.

“Case studies featuring more than twenty common challenges that can occur during visits and skill-based solutions and successful strategies you can use to prepare for those situations
Checklists and self-examination activities to help you welcome and connect with potential families, specialists, and inspectors in positive ways
Support, guidance, and techniques to enhance your program”
Softbound, 144 pgs.

 

Read the full post at http://childcaretaxspecialists.com/guide-to-visits-inspections-and-interviews/

Retirement planning using IRAs

Using IRAs in tax planning during retirement

TAX: Because of the flexibility of IRA distributions, it’s easy to move income among years

By Richard Malamud, CPA, J.D., LL.M., and Tim Hilger, CPA

Those of us who are age 59½ and older and still working face some interesting decisions. After decades of hearing the mantra, “Defer, Defer, and then Defer” maybe it is time to change that to “Accelerate” — at least sometimes. It is the thing to do if you assume tax rates will not be going down and the future may bring us large capital gains or other income that could cause us to owe the new Medicare tax. Continue reading →

Tax Benefits for Military

Special Tax Benefits for Armed Forces Personnel

IRS Summertime Tax Tip 2013-06, July 15, 2013

If you’re a member of the U.S. Armed Forces, the IRS wants you to know about the many tax benefits that may apply to you. Special tax rules apply to military members on active duty, including those serving in combat zones. These rules can help lower your federal taxes and make it easier to file your tax return. Continue reading →

Personal Home? Tax Home? What’s the Difference?

Did you know that your personal home is not your tax home? 

“Your tax deductions, tax strategies, and tax records hinge on the following federal income tax defined terms: Personal Home, Tax Home, Business Travel, Business Transportation.”¹

Do you know the definition and differences?   Continue reading →

Attention California Business and Schedule C Taxpayers

Do you know about California’s City Business Tax Program?You may be getting a notice from your city.  The FTB and cities are looking for revenue and the newest participants are Downey, Escondido, Fresno, Salinas, Santa Maria, and Tustin.

According to Spidell’s “…in June, cities were reminded to transmit 2012 business license information to the FTB on or before June 30.”  For more information on the City Business Tax Program, click here.

“From this information, the FTB will send filing enforcement notices to self-employed individuals and other businesses that have failed to file a return.

Cities happily send this information in exchange for a list of businesses that have filed tax returns. The cities use this information to contact the business and assess fees, penalties, and interest for failing to file and pay for a city business license. The FTB sends the data to the cities in December of each year.”

Each city has different requirements as to who must have a license.

For a pdf of participating cities, click here

 

Source:  Spidell’s July 2013 California Taxletter

 

UPDATE: Fire Fee & State Responsibility Area Map Changes

Are You Affected by the State Responsibility Area Maps Update? Homeowners statewide will no longer receive refunds.

Back on May 28, we wrote that the Court ruled the $150 Fire Prevention Fee assessed by the California State Board of Equalization (BOE) against each structure in a “state responsibility area” is no longer deductible as a tax under IRC §164. Continue reading →