Posted by Yakima CPA on February 21, 2012 · Leave a Comment
Tax Deductions Charitable Donations and the Small Business
(Another piece to our Self Employed Tax Guide)
Through charitable contributions, your company may benefit through getting tax breaks and also earning favorable publicity. Let’s take a look at this a bit further.
Products and ServicesA contribution to a second-hand store like Value Village exceeding $250, will qualify as a substantial contribution. By obtaining a receipt from the charity organization you will have the supporting paperwork to acknowledge the receipt of goods and therefore merit a tax deduction. In the event that your business has an excess of a product, you might opt to donate the surplus ware. In doing so, you’ll acquire a tax benefit, you are going to open up space for different products, and display (that is if you publicize) that you are a compassionate organization that gives to those that are in need.
Donating time and services to a charitable cause will also qualify you for tax breaks and afford you a opportunity for promotion. Charity jogs and other similar events can pull large crowds. Your small business could become more prominent. You can qualify for a tax deductions. And you can feel very good for aiding people in need. Donating scrap materials left over from manufacturing finished goods product is another working for instance. This might be unused foodstuffs. Fair market value rules apply. To assess the FMV, consider at what price an item might gain in a garage sale.
Cash Contributions
In agreement with Irs policies, a receipt is required for any one contribution more than $250 in order to claim the deduction. This sort of contribution is not uncommon and is easy to maintain. One employed way is planned giving. This can be established monthly, quarterly, or annually depending upon your preference. As a self-employed person, this is a smart way to plan your annual charitable deduction and maintain your cash flow reserves, arriving a predictable outcomes. Keep in mind to refer your accountant for tips on the Schedule C form. Your business can certainly broaden its marketing reach, profit the community, and acquire a tax break in one single play. The above specifics can be discovered in Publication 526 and the guidelines for disclosure in PUB 1771. Or you could just place a call to your certified public accountant.
Posted by Yakima CPA on February 8, 2012 · Leave a Comment
Preparing Form 433-A
At the time you initially put in your Offer in Compromise request, you should also present form 433-A. This form is what the Internal Revenue Service will use in ascertaining whether or not you really qualify for an Offer in compromise. The 433-A form accounts for disposable income and equity in assets. If it is discovered that you would not be able to repay your tax debt in full, you might be able to go forward with the OIC process.
Personal Information and Employment Information
In Section 1, you need to supply personal information about your family and yourself. If you’re wedded, details pertaining to your partener should additionally need to be written.
In Section 2: you will furnish employer information for self (and spouse). If you are self-employed, you’ll write “self” (and similarily for your partner) in Line 4a, Section 2 and then you’ll indicate the amount of time you’ve been self-employeed. Other information about self-employment will be addressed in a different part of the 433-A form.
Other Financial Information: Section 3
This is where you reveal details pertaining to almost any legal proceedings or potential decreases-increases to income.
In line 6, reveal legal information surrounding every lawsuit, no matter if you are defendant or plaintiff, list docket details in this line. Write details just for proceedings that have been legally filed with the courts.
Line 8: Line 8 asks if you anticipate any rise or decrease in income. In general, it is benificial not to account for any envisioned increases unless you are assuredly certain of the increase in earning. Instances of appropriate increases to disclose may be the consequence of new income contracts, notice of lawsuit awards or written notice of a salary increases. The Irs reasonably could regard your expected earnings increase when establishing an Offer amount, so do not include things like any factors that are speculation.
Personal Asset Information: Section Number 4
Section 4 calls for information regarding personal cash and the equity property for which you stake claim. This includes checking/savings account details, credit card and real estate information, and life insurance policy information.
Line 11 is a prompt for the amount of cash that you have on your person. Set down an average of what you’ll typically have on person, as the amount will vary on a daily basis.
Lines 12a and 12b: Utilize this space to note any checking or savings account(s) you own. Now if you run out of room, give all accounts in addition on a separate page of paper and fix it to your Form 433-A. You have to provide bank statements to the Irs for each one of the accounts In line 12a & 12b: you will use these lines to disclose savings and checking account information. If you have over two accounts, provide the details regarding the remaining banking accounts on a separate sheet . You will also provide hard copy bank statements for the accounts.The Irs can verify that your Form entries correlate your attached documents.
Lines 13a through 13d: Use these lines to report investments, such as stocks, bonds and retirement accounts. Include 401k accounts even if you are not fully vested in the plan.
Lines 14a and 14b: List any credit cards that you do own with readily available credit on these lines.
Lines 15a through 15g: Life insurance policies with a money value are documented on line number 15. However, never record any term life policy particulars. The Internal Revenue Service is solely thinking of whole life plans you’ll have. Whole life policies have cash value and you may be able to borrow cash against the value, while term life policies have no cash value or borrowing possibilites.
Line 16 requests that you review assets transferred, sold or distributed for less than full value within ten years from the present. This data is to enable them assess whether or not you might have eliminated assets to free yourself of liquid equity that could possibly help pay back your debt. In order to establish if you have just eliminated assets to avoid paying your debts, the IRS asks these questions.
Line 17a — 17c: you are prompted to account for any held real estate. If you do not own real estate, list the address where you live, and give the name and address of your property owner. Lines 18a through 18: Report all transportation assets you currently have on these lines. Count motor vehicles, motorbikes, boats, trailers and campers in this category. If any one of these vehicle assets is secured as a result of a loan, record the note details in this section, which includes your monthly payment and balance data. You must also make note of the honest market value for each asset. You could obtain fair market values by having a look at webpages for example Kelley Blue Book (kbb.com) or NADA Guides (nada.com)
Line 19a and 19b: List the type and worth of your personal assets you own. Personal assets include home furnishings, domestic goods, collectors items and fine jewelry. When you mark the worth of the effects, identify the projected liquidation value. An easy approach to think of the liquidation value for these effects is to estimate just what the objects might go for in a quick-sell platform, which includes a yard sale or marketplace. You should not mark the original purchase expense as the actual value. The IRS will not typically petition that you liquidate your personal items that is unless you currently have a lot of luxury effects. The IRS likewise allows a individual exemption amount of $7,900 for the worth of items in this category.
Expense Statement and Monthly Income
This statement is situated on page 4 of the form. Inside this section, you must report your month-to-month income and expenses from all sources. If you’re self-employed as a sole proprietor, you will have to finish pages number 5 and 6 of the form prior to completing the statement on page 4.
In the Income section: If you are self employed or receive rental income, provide your net earningsOtherwise, report gross wages (your earnings before deductions and taxes are subtracted.) There is a guide in the footnotes to help you get this number.
In the Expenses Section, you’ll record monthly, regular costs, this includes taxes and deductions.
Pages 5 & 6: Self-Employed Section
If you’re self-employed, you’re going to have to provide basically the same kind of data for all of your business activities you report for yourself as an individual. That includes business asset information, this includes tools, revenue streams and accounts receivable information. You must likewise recount the number of workers that you employ and the frequency of payroll. Submitting Form 433-A
Don’t forget to attach supporting documents, for instance bank statements, paystubs, and whatever other docs furnish support to your for.
There is a good deal more of the Offer in Compromise Guide:Seattle Offer in Compromise IRS Taxes
Posted by Yakima CPA on January 31, 2012 · Leave a Comment
getting a rejection letter from the Internal Revenue Service on an OIC application previously submitted very well could lend you with anxiety, nonetheless don’t fear — you may still be eligible the choice of making payments towards your full balance in payments.
The Irs allows for a few diffferent installment agreement payment options like a partial-pay installment plan or a full-payment installment plan. Full-pay plans could be the financially verified installment agreement, the streamlined installment agreement, and the guaranteed installment agreement. The option you qualify for is dependent upon financial facts you relay to the Irs, but monthly payment installments for the different plans are assessed a bit differently than OIC settlement amounts.
So now we will examine the payment options and assist you define which settlement option is most advantageous for you.
The Guaranteed Installment Agreeement Option
The guaranteed installment agreement is available only if your balance is not exceeding $10,000 and your payments will full-pay your total Internal Revenue Service owed balance within three years. The Irs must agree to this purposed option if you conform with the requirements.
Streamlined Installment Agreement Option
A streamlined installment agreement option is available if your balance due is $25,000 or less and you promise to full-pay your full debt balance in the period of five years. Your full balance takes into account your principal tax liability, plus penalty accruals and interest for each tax year you have a balance on.
Calculating Your Monthly Payment Installments
In order to calculate the lowest possible amount the Internal Revenue Service will agree to per month, divide the total amount owed, including the interest and the penalties, by fifty. The end result will reflect the minimum amount that will have to be paid. The last 10 months of the 60-month payment plan is set aside for interest. If you do not have sufficient disposable monthly income to allow for a 60-month payment plan, you could meet the criteria for a partial pay plan instead.
Installment Agreement Partial Payment Plans
A partial payment installment agreement plan is a repayment plan that will permit you to make payments of only what you are able to pay on a monthly basis, even if the amount is less than what the Irs normally accepts on an installment plan. You must make payments for the remainder of the period in which the Irs can legally collect debt, this could be for a period than 5 years. And when the collection statute of limitations comes to its expiration date, any remaining balance is essentially written off by the Irs. The payment plan is called a partial pay installment agreement plan because you will never pay the full of the debt that you owe.
Collection Statute of Limitations
A collection statute exists for each tax year you have a balance. The collection statute begins the date your tax return is filed, or the date a principal tax balance is assessed to your account, whichever has occurred most recently. In general, the statute ends 10 years after it begins, but certain processes can cause the collection statute to be longer than 10 years. Either you, or your Power of Attorney, may contact the IRS and request the Collection Statute Expiration Date (CSED) for each balance-due period.
How to Calculate Payments
The partial pay installment agreement is based on your disposable monthly income, this is the amount left each month after your expenses are paid. Figure out your monthly disposable income by the number of months you have remaining on your collection statute in order to calculate the absolute amount you are going to have to pay the Irs over a period of time. For example, if your disposable income is $100 and the duration of time left on the collection statute is 2 years, or 24 months, you pay $2,400 toward your tax liability. The rest is not collectable by the Irs. Though, you must make the payments in set installments – you can’t offer the amount in a single payment.
Financial Verified Installment Agreements or Non-Streamlined Installment Agreements
The financially verified or “Non-Streamlined” installment agreement is available if your owed balance is over $25,000 or when the repayment period exceeds 60 months. This agreement needs to be negotiated with the Irs. Full financial disclosures are to be provided to the Internal Revenue Service. Your monthly payment amount is determined after a review of your complete financial situation, and the Internal Revenue Service could likely require you to liquidate assets in order to reduce the debt balance due.
Rules that Apply to the Installment Agreement Plan Options
Whatever type of payment plan you request, some base rules are applied for retaining and obtaining your installment agreement.
Offer In Compromise Rejection Period
In most instances, you will wait at least a period of sixty days from the date marked on your OIC rejection letter to request an installment agreement. During this sixty-day period, your file is marked as an “Offer” case in the Irs system to allow for your right to repeal the OIC rejection. Internal Revenue Service agents are not able to pull your case out of this status to establish an installment agreement contract.
Staying Current and Compliant
When you are locked into an installment contract, you need to remain compliant and current with the set payment arrangements and future tax commitments. Meaning that if you are bound by the installment contract, then you will have to meet all installment pay dates in full and on time, file all future tax returns on time, and pay any new tax balances in full and on time.
Failure to comply with these stipulations will cause your payment plan to default and open you up to additional IRS collection measures.
Change in Financial Circumstance
If your financial circumstances change and this change thwarts you from keeping the installment payments. Appeal for a corresponding adjustment to your monthly installment amount.
If this change to your finances is expected to last over a months time, you may proceed. Examples of qualifying financial changes are: divorce, a reduction in income, loss of income, the new addition of a dependent, or an increase in your regular living expenses. The Internal Revenue Service requires documented proof of this change in your financial statements.
modifications to your financial statements could warrant a change from a full-payment plan to a partial-payment plan, depending. Installment agreements are typically easier to set up with the Irs and demand less paper work than an Offer In Compromise application. This installment agreement plan is a an alternative to your OIC rejection.
Check out the guide to offer in compromise at Accountants and Tax PreparersInternal Revenue Service Rejection of Offer In Compromise, (OIC): Requesting an Installment Agreement
getting a rejection letter from the Internal Revenue Service on an OIC application previously submitted very well could lend you with anxiety, nonetheless don’t fear — you may still be eligible the choice of making payments towards your full balance in payments.
The Irs allows for a few diffferent installment agreement payment options like a partial-pay installment plan or a full-payment installment plan. Full-pay plans could be the financially verified installment agreement, the streamlined installment agreement, and the guaranteed installment agreement. The option you qualify for is dependent upon financial facts you relay to the Irs, but monthly payment installments for the different plans are assessed a bit differently than OIC settlement amounts.
So now we will examine the payment options and assist you define which settlement option is most advantageous for you.
The Guaranteed Installment Agreeement Option
The guaranteed installment agreement is available only if your balance is not exceeding $10,000 and your payments will full-pay your total Internal Revenue Service owed balance within three years. The Irs must agree to this purposed option if you conform with the requirements.
Streamlined Installment Agreement Option
A streamlined installment agreement option is available if your balance due is $25,000 or less and you promise to full-pay your full debt balance in the period of five years. Your full balance takes into account your principal tax liability, plus penalty accruals and interest for each tax year you have a balance on.
Calculating Your Monthly Payment Installments
In order to calculate the lowest possible amount the Internal Revenue Service will agree to per month, divide the total amount owed, including the interest and the penalties, by fifty. The end result will reflect the minimum amount that will have to be paid. The last 10 months of the 60-month payment plan is set aside for interest. If you do not have sufficient disposable monthly income to allow for a 60-month payment plan, you could meet the criteria for a partial pay plan instead.
Installment Agreement Partial Payment Plans
A partial payment installment agreement plan is a repayment plan that will permit you to make payments of only what you are able to pay on a monthly basis, even if the amount is less than what the Irs normally accepts on an installment plan. You must make payments for the remainder of the period in which the Irs can legally collect debt, this could be for a period than 5 years. And when the collection statute of limitations comes to its expiration date, any remaining balance is essentially written off by the Irs. The payment plan is called a partial pay installment agreement plan because you will never pay the full of the debt that you owe.
Collection Statute of Limitations
A collection statute exists for each tax year you have a balance. The collection statute begins the date your tax return is filed, or the date a principal tax balance is assessed to your account, whichever has occurred most recently. In general, the statute ends 10 years after it begins, but certain processes can cause the collection statute to be longer than 10 years. Either you, or your Power of Attorney, may contact the IRS and request the Collection Statute Expiration Date (CSED) for each balance-due period.
How to Calculate Payments
The partial pay installment agreement is based on your disposable monthly income, this is the amount left each month after your expenses are paid. Figure out your monthly disposable income by the number of months you have remaining on your collection statute in order to calculate the absolute amount you are going to have to pay the Irs over a period of time. For example, if your disposable income is $100 and the duration of time left on the collection statute is 2 years, or 24 months, you pay $2,400 toward your tax liability. The rest is not collectable by the Irs. Though, you must make the payments in set installments – you can’t offer the amount in a single payment.
Financial Verified Installment Agreements or Non-Streamlined Installment Agreements
The financially verified or “Non-Streamlined” installment agreement is available if your owed balance is over $25,000 or when the repayment period exceeds 60 months. This agreement needs to be negotiated with the Irs. Full financial disclosures are to be provided to the Internal Revenue Service. Your monthly payment amount is determined after a review of your complete financial situation, and the Internal Revenue Service could likely require you to liquidate assets in order to reduce the debt balance due.
Rules that Apply to the Installment Agreement Plan Options
Whatever type of payment plan you request, some base rules are applied for retaining and obtaining your installment agreement.
Offer In Compromise Rejection Period
In most instances, you will wait at least a period of sixty days from the date marked on your OIC rejection letter to request an installment agreement. During this sixty-day period, your file is marked as an “Offer” case in the Irs system to allow for your right to repeal the OIC rejection. Internal Revenue Service agents are not able to pull your case out of this status to establish an installment agreement contract.
Staying Current and Compliant
When you are locked into an installment contract, you need to remain compliant and current with the set payment arrangements and future tax commitments. Meaning that if you are bound by the installment contract, then you will have to meet all installment pay dates in full and on time, file all future tax returns on time, and pay any new tax balances in full and on time.
Failure to comply with these stipulations will cause your payment plan to default and open you up to additional IRS collection measures.
Change in Financial Circumstance
If your financial circumstances change and this change thwarts you from keeping the installment payments. Appeal for a corresponding adjustment to your monthly installment amount.
If this change to your finances is expected to last over a months time, you may proceed. Examples of qualifying financial changes are: divorce, a reduction in income, loss of income, the new addition of a dependent, or an increase in your regular living expenses. The Internal Revenue Service requires documented proof of this change in your financial statements.
modifications to your financial statements could warrant a change from a full-payment plan to a partial-payment plan, depending. Installment agreements are typically easier to set up with the Irs and demand less paper work than an Offer In Compromise application. This installment agreement plan is a an alternative to your OIC rejection.
Check out the guide to offer in compromise at Accountants and Tax Preparers
Posted by adminjian on December 7, 2011 · Leave a Comment
At the end of July of 2009, Rep Thaddeus McCotter brought out the Humanity and Pets Partnered Through the Years (or HAPPY Act) bill. This bill pushed for permitting a tax deduction up to $3,500 for each year for animal and pet care-related costs. The current standing of the bill at the date of this posting: Referred to the House Committee on Ways and Means. It would appear, this just isn’t the very top priority , you may well have a different view on this.
So what type of animal- and pet-related expenses are eligible for tax deduction?
The family pet is dear to us. Some may claim our cat or dog worth its weight in goldunmeasurable). But, pet-related expenses are, in some circumstances, tax deductable. For example, when relocating, a pet owner could file for a tax deduction for the expenditures incurred in moving a family companion, in tax law in this circumstance, a pet can certainly be viewed as a personal effect, and therein Spot or Mittens is counted in such a manner.
A business could be permitted to write off for the expenses of keeping a guard dog. Also a voluntary host of an animal that provides a theraputic service, for example a guide dog, could possibly be able to deduct vet expenses, and other such unreimbursed expenses (thought of as charitable donations). And there have also been court room rulings that have favored tax write-offs for costs directly related to caring for animals serving physically-, visually-, and hearing-impaired individuals. And there are also tax deductions in costs related to keeping animals in an animal-breeding enterprise.
TheCat Lady Case–Van Dunsen vs Commissioner
In 2004, Ms. Van Dusen cohabitated with 70 – 80 kittens and cats (7 of them she called personal pets). She volunteered for a charity “Fix our Ferals” with the primary aim of neutering feral cats. This volunteer deducted a little over twelve-thousand dollars on her tax return. The Irs argued that Ms. Van Dusen was rescuing cats of her own volition rather than as a volunteer of a charity. The court refused this coloring. The court agreed with the IRS, however, that a lot of these expenses ( wet/dry vacuum repair cost, DMV fees, Costco membership dues, and State Bar Dues) could not fit as exclusively charitable expenses.
Finally, all of the individual expenses exceeding $250 were disallowed because Van Dusen failed to keep the required documentation for such charitable donations (like a simultaneous or contemporaneous acknowledgment from the donee.) For this deduction to be allowable, the donee must also file a return with the Internal revenue service reporting the equivalent info comprising the written acknowledgment, including: 1) the amount of cash contributed; 2) a good-faith estimate and description of any services or goods obtained in exchange; and 3) if the donee provides any immaterial, intangible or religiousbenefits, a statement to that effect). So if you desire to deduct the expenses for your fifty cats, be certain you are acting on the part of an adequate charity and be sure you receive the necessary documentation.
How do I identify between tax deductable and non-tax deductable animal care expenses?
So now you know there are potential for tax write offs associated with the expenses borne by the care of animals and pets. And there can be instances when these expenses are not tax deductable. If you happen to be serious about a tax deduction related to the costs of taking care of animals or pets, seek out the advice of a certified public accountant. Don’t imagine that because your neighbor owns 15 cats, she or he will be able to render you with intelligent pet-related tax deduction information and advice.
In a weird instance, a landscaper and gardener attempted to deduct for the expenses of caring for a dog that assisted him in pulling a cart while at work, presumably without the counsel of a CPA. This granted the lawn specialist an audit. We might assume this caused working-relations issues, however we are unable to confirm this. Nor is it likely that either the boss or dog will provide testimony anytime soon.