Friday, February 28, 2014

2014 car, truck depreciation limits issued [feedly]




2014 car, truck depreciation limits issued
// Journal of Accountancy
On Tuesday, the IRS issued the 2014 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F (Rev. Proc. 2014-21). Prior-year versions of this annual guidance had included figures for first-year bonus depreciation, but because bonus


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How can I learn bookkeeping at a low cost? [feedly]




How can I learn bookkeeping at a low cost?
// AccountingCoach
You can use the Internet to learn bookkeeping at a low cost. For example, you can read clear explanations of debits and credits, adjusting entries, financial statements, bank reconciliation, payroll accounting and more at no cost on AccountingCoach.com. You will also find quizzes and Q&A for each topic as well as a huge dictionary. (Visual tutorials, videos, exam questions with answers are also available at a very low cost.) After you learn the bookkeeping and accounting rules from AccountingCoach.com I recommend that you learn QuickBooks. QuickBooks (from Intuit Inc.) is the leading software for small businesses in the United States. The website Lynda.com offers training videos on QuickBooks and other software (and more) starting at $25 per month. (We do not receive any affiliate revenue from Lynda.com, Intuit, or any other company.) After you have mastered the material on AccountingCoach and have learned QuickBooks, strive to find a business, bookkeeping service or not-for-profit organization that will provide you with real-world, hands-on experience. Don't be too concerned about the starting pay since your value will come after you demonstrate your proficiency as a skilled bookkeeper.

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Wednesday, February 26, 2014

One Visit to Washington Leads to $180,000 Tax Bill


 

TaxFoundation.org State Taxes Blog Donate

Subscriber,

In three hours, I'll be testifying to the U.S. House Judiciary Committee's Subcommittee on Regulatory Reform, Commercial and Administrative Law. The subject of the hearing is the Business Activity Tax Simplification Act (BATSA) of 2013, H.R. 2992, co-sponsored by Rep. Bob Goodlatte (R-VA) and Rep. Bobby Scott (D-VA).

What is BATSA? BATSA re-affirms the physical presence rule - the rule that states can impose corporate income taxes and other business activity taxes only on companies that have phyiscal presence in a state.

States are unfortunately becoming more aggressive about reaching beyond their borders to impose taxes on out-of-state companies with neither property nor employees in the state. Not only do these parochial actions harm the national economy, they're bad tax policy because they violate the benefit principle that people should pay taxes where they receive benefits from government services.

You'll hear more on my testimony later. But I wanted to share the story of a fellow witness at today's hearing, Pete Vegas. We've tried to get the word out about Pete's story since he first reached out to us in 2011. Pete runs a food manufacturing company, with facilities in California, Arkansas, and Texas, and they sell their products all over the country. While in Washington State on a personal trip, he stopped by an existing customer to say hi and introduce himself.

Later, revenue officials learned that Pete's trucks were going into the state, so they sent what they call a nexus questionnaire (what I would call a fishing expedition) to Pete's company, asking "How many times per year" did he visit Washington? Pete answered "once." Big mistake. Washington then sent Pete an invoice for seven years of back taxes of their gross reciepts tax, the Business & Occupation Tax, plus interest and penalties -- $180,000 in total. 

Pete's a fighter and he appealed and ultimately won. (Hear his story in your own words here.) But for every Pete Vegas who fights overly aggressive state tax actions, lots of businesses get trampled. Today, I'll be explaining the physical presence rule and why it's important, and why it's constitutional and appropriate for Congress to set rules on the limits of state authority to tax multistate companies that have all their property and employees in other states. Stay tuned.

 

Best regards,


Joseph Henchman
Vice President, Legal & State Projects
Tax Foundation


 

The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.
 
 

 



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Sunday, February 23, 2014

Report Says U.S. Capital Gains Tax Rate Creates Tax Bias Against Savings [feedly]




Report Says U.S. Capital Gains Tax Rate Creates Tax Bias Against Savings
//

The U.S. places a heavy tax burden on saving and investment with its capital gains tax, which harms the competitiveness of U.S. corporations by raising the cost of capital. This nonneutral tax essentially creates a bias against savings and slows economic growth, according to a February 11 report by the Tax Foundation, entitled the High Burden of State and Federal Capital Gains Tax Rates.

Currently, the United States' top marginal tax rate on long-term capital gains income is 23.8 percent. In addition, taxpayers face state-level capital gains tax rates as low as zero and as high as 13.3 percent, according to the Tax Foundation. As a result, the average combined top marginal rate in the United States is 28.7 percent. This rate exceeds the average top capital gains tax rate of 18.2 percent paid by other taxpayers in the industrialized world.

The report emphasizes that capital gains taxes represent an additional tax on a dollar of income that has already been taxed multiple times and multiple layers of taxation encourage present consumption over savings. "As an individual, to avoid the multiple layers of taxation on the same dollar, it makes more sense to spend it all now rather than spend it later and pay multiple taxes," states the report.

The Tax Foundation believes that the U. S. high tax burden on capital gains also has long-term negative implications for the economy. "As people prefer consumption today due to the tax bias against savings, there will be less available capital in the future. For investors, this represents less available capital for factories, machines, and other investment opportunities," states the report. For corporations seeking higher returns, corporate investment will move to countries that have lower capital gains tax rates.

In addition, the report points out that capital gains taxes create a lock-in effect that reduces the mobility of capital. "People are less willing to realize capital gains from one investment in order to move to another when they face a tax on their returns," states the report. "Funds will be slower to move to better investments, further slowing economic growth."

The Tax Foundation concludes that the U.S. top marginal tax rate on capital gains, combined with state rates, "far exceeds rates faced throughout the industrialized world" and increasing taxes on capital income furthers the bias against savings, leading to lower levels of investment, and slower economic growth. Lowering taxes on capital gains, however, would reverse the effect, leading to increased investment and economic growth.

The full report can be found at: http://taxfoundation.org/article/high-burden-state-and-federal-capital-gains-tax-rates .

By Jeff Carlson, CCH News Staff

 



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If you make money in the sharing economy, the IRS will know - SFGate [feedly]




If you make money in the sharing economy, the IRS will know - SFGate
http://m.sfgate.com/business/networth/article/If-you-make-money-in-the-sharing-economy-the-IRS-5258941.php

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7 steps to a pain-free tax season | Business Newsletter | The News Tribune [feedly]




7 steps to a pain-free tax season | Business Newsletter | The News Tribune
http://www.thenewstribune.com/2014/02/23/3063242/7-steps-to-a-pain-free-tax-season.html

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An Updated Marriage Bonus and Penalty Calculator [feedly]




An Updated Marriage Bonus and Penalty Calculator
// TaxVox

MPCJust in time for this year's tax filing season (but a bit late for St. Valentine's Day), the Tax Policy Center has updated its marriage bonus and penalty calculator. The new version lets you compare a couple's income tax liability when they file as singles or as married for either the 2013 or 2014 tax year.

Some couples may pay a marriage penalty—a higher federal income tax bill than they would if they were single. But for most couples, marriage means a lower tax bill—a marriage bonus in tax-speak.

My August 21, 2012, TaxVox post about TPC's original marriage bonus and penalty calculator explained why the tax code rewards some married couples and penalizes others. The American Taxpayer Relief Act of 2012 (ATRA) increased marriage penalties a lot for many high-income couples for their 2013 returns but there are no big changes in store for tax year 2014.

The calculator makes it easy to determine the tax consequences of marriage in 2013 or 2014. Just don't use it to decide whether or not to marry—there's more to life than taxes.



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Taking time for a literary tax break [feedly]




Taking time for a literary tax break
// Don't Mess With Taxes

There's more to us tax geeks than just the Internal Revenue Code. When we tire of thumbing through Title 26, we go to movies, watch television and even read books.

The_Pale_King_Wallace_IRS_bookIn recognition of how well-rounded tax folks are, I want to recommend for your reading pleasure David Foster Wallace's posthumous novel "The Pale King."

Today is a particularly fitting time to note this book. Feb. 21 would have been Wallace's 52nd birthday.

So what's the book about, you ask. Boredom. The tedium theme is understandable thanks to Wallace setting much of the book in an IRS office.

Other tax tomes: If that doesn't sound like your cup of tax-time tea, how about "Innocent Spouse." In the memoir, Carol Ross Joynt recounts how after the death of her husband, she discovered she was on the hook for his $3 million tax problem.

Or if you're a fan of crime stories, check out "Uncle Al Capone." Scarface's niece Deirdre Marie Capone argues that her infamous relative was railroaded by the IRS.

OK, insert your tax geek reading list joke here.

Still, these three books show that we who focus on taxes can venture outside our world, albeit not very far.

So if you have time now, give the books a glance. I must admit that I have a copy of "The Pale King," but have yet to read it. Maybe after April 15.

Tax tips for writers: OK, fellow authors. I know what you're thinking.

You didn't click here for Kay's Tax Book Club (although now that you've given me that idea, watch out Oprah!). You came over because the headline implied tax-saving tips for literary leaning occupations.

Well, I don't want to disappoint.

In most cases, writers will have the same tax concerns as any sole proprietorship or small business.

And we claim essentially the same tax write-offs as producers of more tangible products do on Form 1040 Schedule C filings. For an idea of what's available, check out these 10 easy tax deductions for bloggers and other online businesses

There are, however, some special considerations for writers and our ilk. To address them, I recommend my online tax pal Peter Jason Reilly, aka @rileytaxtweets on Twitter.

He's a CPA whose Massachusetts' firm specializes in tax matters that apply to and affect creative people, such as artists, performers, musicians and, yes, writers (and more).

Reilly, himself an author, has developed a handy expense checklist for writers. His website has even more info for those of us who scribble for a living. If you're in one of the creative fields that's always befuddled your parents, give it look.

And with that, I must get back to work on the writing that pays my bills.

You also might find these items of interest:



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» New Clues in Suicide of JP Morgan Banker Add to Mystery Alex Jones' Infowars: There's a war on for your mind! [feedly]




» New Clues in Suicide of JP Morgan Banker Add to Mystery Alex Jones' Infowars: There's a war on for your mind!
http://www.infowars.com/new-clues-in-suicide-of-jp-morgan-banker-add-to-mystery/

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Accurate tax returns can keep away IRS auditors, experts say | Northwest Herald [feedly]




Accurate tax returns can keep away IRS auditors, experts say | Northwest Herald
http://www.nwherald.com/2014/02/21/accurate-tax-returns-can-keep-away-irs-auditors-experts-say/axd5ovn/

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IRS chief bemoans phone waits, budget cuts : Business [feedly]

Friday, February 21, 2014

Egg Donor’s IRS Challenge Offers Path to Sperm Certainty: Taxes - Businessweek

IRS wants to tax your unborn children:  I say she deserves to treat this as a long-term capital loss and her basis includes medical costs her parents spent to birth her, the cost of every menstrual pad and tampon ever used, the cost of any clothes she's ever ruined when those didn't work well, the cost of all the food she's ever eaten to keep herself alive, lost wages because of those "personal days" when she couldn't stop crying, and certainly every gynecological visit!  Ha!


Egg Donor's IRS Challenge Offers Path to Sperm Certainty: Taxes - Businessweek
http://mobile.businessweek.com/news/2014-02-20/egg-donor-s-irs-challenge-offers-path-to-sperm-certainty-taxes

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Wednesday, February 19, 2014

No sloth here


My sister is a biology teacher, spending her winter break (my tax season) in the rain forest of Coasta Rica.  She sent me this today.  Did I pick the wrong profession?!?!!

Monday, February 17, 2014

How are the balance sheet and income statement connected? [feedly]




How are the balance sheet and income statement connected?
// AccountingCoach
The balance sheet reports a company's assets, liabilities, and owner's equity as of the last instant of an accounting year. Generally, the amount of the owner's equity will have changed from the previous balance sheet amount due to
  • the company's net income
  • the owner's additional investments in the business
  • the owner's withdrawals of business assets
If the owner did not invest or withdraw, the change in owner's equity is likely to be the amount of net income earned by the business. The revenues, expenses, gains, and losses that make up the net income are reported on the company's income statement. To illustrate, let's assume that a company's balance sheets had reported owner's equity of $40,000 as of December 31, 2012 and $65,000 as of December 31, 2013. If during the year 2013 the owner did not invest or withdraw business assets, the $25,000 increase in owner's equity is likely to be the net income earned by the business. The details for the $25,000 of net income will appear on the company's income statement for the year 2013. (If the owner had withdrawn $12,000 of business assets for personal use, the net income must have been $37,000 since the net increase in owner's equity was $25,000.) The connection between the balance sheet and the income statement results from the use of double-entry accounting or bookkeeping and the accounting equation Assets = Liabilities + Owner's Equity.

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Poor IRS customer service hurts taxpayers [feedly]


I wish they could at least afford to get some new elevator music for when I am on hold.

Poor IRS customer service hurts taxpayers
http://www.usatoday.com/story/money/personalfinance/2014/02/16/irs-customer-service/5435961/

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Friday, February 14, 2014

Have a Very Going Concern Valentine's With These Special eCards [feedly]




Have a Very Going Concern Valentine's With These Special eCards
//

How awful is this day? I mean, not just for you guys, for everyone. So many expectations, so much disappointment, so many reasons to swear this is the last year you'll actually acknowledge this as a holiday. If it weren't for the picked clean shelves of pathetic I LOVE YOU teddy bears and tiny Dove chocolates at CVS, you wouldn't even know it's a holiday. Except for that special someone nagging about how you never make time for them.

Since many of you are probably up to your necks in busy season and love is the last thing on your mind, we made some eCards just for you. We sincerely hope you enjoy them because while this holiday may be a joke and while it may not appear that way most of the time, we really do love you.



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How do the income statements of a sole proprietorship and a regular corporation differ? [feedly]




How do the income statements of a sole proprietorship and a regular corporation differ?
// AccountingCoach
The income statement of a sole proprietorship will not report any salary expense for the sole proprietor who works in the business. However, if the business is a regular corporation, the income statement will report as salary expense the amount that the stockholder earned by working in the business. Another difference involves income tax expense. The income statement of a sole proprietorship will not report income tax expense, since the owner (and not the business) is responsible for U.S. income taxes. On the other hand, a regular corporation is a taxpaying entity and it is responsible for U.S. income taxes. As a result of these two differences, the net income (which is the bottom line of the income statements) will be different. In the case of the sole proprietorship, the net income is the total amount that the owner has earned before income taxes for 1) the capital invested in the business and 2) the owner's compensation for working in the business. In the case of a regular corporation owned by one person, the owner has earned the salary (which was included in salary expense on the income statement) and has also earned the reported amount of net income or net loss. Neither the draws made by the sole proprietor nor the dividends distributed by a regular corporation are reported on the income statement.

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IRS Asks Taxpayers to Resist Calling Next Week

Tuesday, February 11, 2014

Obamacare stuck in government 'abyss': Health CEO - CNBC [feedly]

What? Get the evil, greedy Capitalists involved?!?!?


Obamacare stuck in government 'abyss': Health CEO - CNBC
http://www.cnbc.com/id/101406449

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Facebook's Zuckerberg tops list of America's 50 biggest donors - Feb. 10, 2014 [feedly]


Alternative title suggestion: Mean, Greedy Capitalists Give Billions to Charity 

Facebook's Zuckerberg tops list of America's 50 biggest donors - Feb. 10, 2014
http://money.cnn.com/2014/02/10/pf/biggest-donors/index.html?section=money_topstories

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Monday, February 10, 2014

Affordable Care Act Options for Small Employers [feedly]




Affordable Care Act Options for Small Employers
// Intuit News Central

ACAIf a medical expense reimbursement plan isn't appropriate, either because you don't have a spouse to hire, or you have non-family employees you would have to cover, consider establishing a Health Savings Account. These arrangements combine a high-deductible health plan with a tax-free savings account to cover unreimbursed costs.

To qualify, you'll need to be covered by a "high deductible health plan." This means the deductible is at least $1,250 for single coverage or $2,500 for family coverage. Neither you nor your spouse can be covered by a "non-high deductible health plan" or Medicare. The plan can't cover any expense, other than certain preventive care benefits, until you satisfy the annual deductible. You're not eligible if you're covered by a separate plan or rider offering prescription drug benefits before the minimum annual deductible is satisfied.

Once you've established your eligibility, you can open a deductible "health savings account" to cover out-of-pocket expenses not covered by your insurance. For 2013, you can contribute up to $3,250 if you have individual coverage or $6,450 if you have family coverage. (If you're 55 or older, you can save an extra $1,000 per year.)

HSAs are easy to open. Most banks, brokerage firms, and insurance companies offer them. Many times you can even get a debit card to charge expenses directly to the account.

Once you're up and running, you can use your account for most kinds of health insurance, including COBRA continuation and long-term care (but not "Medigap" coverage). You can also use it for most of the same expenses as a MERP – copays, deductibles, prescriptions, and other out-of-pocket costs.

Withdrawals are tax-free so long as you use them for "qualified medical costs." Withdrawals not used for qualified medical costs are subject to regular income tax plus a 20% penalty.

After your death, your account passes to your specified beneficiary. If your beneficiary is your spouse, they can treat it as their own HSA. If not, your beneficiary will pay ordinary tax on the account proceeds (but not the 20% penalty).

The Health Savings Account isn't quite as powerful or flexible as the MERP. You've got specific dollar limits on what you can contribute to the account, which might not match your out-of- pocket costs. And there's no self-employment tax advantage as there is with a MERP. But Health Savings Accounts can still help cut your overall health-care costs by giving you bigger tax deductions.

Flexible Spending Accounts

Flexible spending accounts ("FSAs") let you set aside pre-tax dollars for a variety of nontaxable fringe benefits, including health and disability insurance and medical expense reimbursement. (Some employers also offer FSAs for daycare costs, but we'll skip those in the interest of sticking to Obamacare.) Plan contributions avoid federal income and FICA tax.

The new rules let you contribute up to $2,500 per year to your account. Before Obamacare, there were no contribution limits at all. Many observers have called the new $2,500 limit a tax in disguise, especially for older workers with expensive prescriptions who tend to contribute more to their accounts.

Once the money is in the account, you can use it for most medical expenses. However, nonprescription drugs and supplies, long-term care coverage associated and expenses are not eligible FSA expenses.

Your employer deducts plan contributions from your paycheck and deposits them into your account until you claim your reimbursements.

When you enroll, you have to choose how much to contribute each pay period. You generally can't change your contribution amount in the middle of the plan year unless there's a change in your "family status." Eligible changes include marriage or divorce; birth, adoption, or death of a child; spousal employment; change in a dependent's student status; and the like.

You can claim your full year's reimbursement as soon as you incur qualifying expenses, whether you've fully funded your account for that amount or not.

Historically, FSA rules have required you to use your account balance by the end of the year or forfeit it. However, many employers' plans have taken advantage of a subsequent ruling that lets them amend their plans to provide a 2½ month grace period immediately following the end of the year.

Resources: There are also several related stories written by Intuit's Mike D'Avolio about the Affordable Care Act. In addition to the stories below, be sure to review Intuit's own webpage on the Affordable Care Act.

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Handling Client Funds Transactions in QuickBooks - Part 1 [feedly]




Handling Client Funds Transactions in QuickBooks - Part 1
// General Ledger

This article illustrates the procedures many different businesses should follow for segregating and recording client funds (held in trust). In the next article, Caren will illustrate various reports for tracking and administration of those funds.



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Tax Breaks for Same-Sex Couples [feedly]




Tax Breaks for Same-Sex Couples
// Intuit News Central

On June 26, 2013, the United States Supreme Court held the Defense of Marriage Act (DOMA) was unconstitutional in U.S. v. Windsor. Prior to the ruling, DOMA required same-sex spouses to be treated as unmarried for federal law purposes.

Now, many tax breaks are available to legally married same-sex couples, such as the right to file a joint return, the ability for either spouse to utilize the marital deduction and exclusion for estate and gift tax purposes, the ability to get tax-free employer health coverage, the alimony deduction, and innocent spouse relief.

Following the ruling, the IRS issued guidance to assist tax preparers and taxpayers. Same-sex couples who are legally married in jurisdictions that recognize their marriages are treated as married for federal tax purposes, regardless of whether the resident state recognizes same-sex marriage. This applies for all federal tax purposes, such as income, gift and estate taxes, and to all federal tax provisions where marriage is a factor, such as filing status, personal and dependency exemptions, and standard deduction.

The filing status change to either married filing joint or married filing separate is mandatory going forward.  Any original 2013 return or 2012 return filed after September 15, 2013 must be filed with these filing statuses. Amended returns can be, but are not required to be, filed with these filing statuses within the statute of limitations period. Generally, this is 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later

Gender neutral terms in the Internal Revenue Code referring to marital status, such as spouse or marriage, include lawful same-sex individuals and marriages. The term "marriage" does not include registered domestic partnerships and civil unions, even for opposite sex couples.

IRS guidance: IR-2013-72

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