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Archive for the ‘Uncategorized’ Category
Wednesday, September 1st, 2010
What are the Tax Requirements for Barter Exchanges?
Barter exchanges, whether Internet based or with a physical location, are required to file Form 1099-B for all transactions unless certain exceptions are met. Barter exchanges are not required to file Form 1099-B for:
Exchanges through a barter exchange having fewer than 100 transactions during the year
Exempt foreign persons as defined in Regulations section 1.6045-1(g)(1)
Exchanges involving property or services with a fair market value of less than $1.00
For calendar year 2008, Copy B of Form 1099-B is due to barter exchange participants by February 2, 2009. Copy A of the form is required to be filed with the IRS by March 2, 2009. If filing electronically, the due date is March 31, 2009. Software that generates a file according to the specifications in Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Electronically (PDF) must be used by barter exchanges. The IRS does not provide a fill-in form option.
Caution: Paper forms are scanned during processing by the IRS. Forms 1096, 1098, 1099, or 5498 that are printed from IRS.gov will not be accepted.
Non-corporate client or member bartering is reported on a transactional basis on Form 1099-B, but additional information is to be added to the form by the barter exchange. Under Regulation 1.6045-1(f)(i), barter exchanges are required to make a return of information reporting the name, address, and taxpayer identification number of each member or client providing property or services in the exchange, the property or services provided, the amount received by the member or client for such property or services, the date on which the exchange occurred and other information required on Form 1099-B. This means that multiple Forms 1099-B may be required for member clients with multiple bartering transactions during the year. To learn more about 1.6045-a(f)(i), Returns of Information of Broker and Barter Exchanges, visit the Electronic Code of Federal Regulations site, click on “Simple Search” and enter 26 in the Title and “Returns of information of brokers and barter exchanges.” in the “Search for” field.
Corporate client or member bartering is reported on the aggregate for the year, rather than on a transactional basis. Under Regulation 1.6045-1(f)(ii), barter exchanges are required to file annual Forms 1099-B including the aggregate or total amount received by a corporate client or member during the year for property or services provided by the corporate client or member in all barter transactions through the barter exchange. Form 1099-B additionally requires the name, address, and taxpayer identification number of the corporate client or member.
Penalty for Not Filing or Filing Incorrect Forms 1099-B
Failure to file Forms 1099-B can result in significant penalties under Internal Revenue Code Section 6721. The penalty is based on when correct information returns are filed. The penalties are:
$15 per information return if filed correctly within 30 days of the specified due date with a maximum penalty of $75,000 per year ($25,000 for small businesses, defined below).
$30 per information return if filed correctly more than 30 days after the due date, but by August 1 with a maximum penalty of $150,000 per year ($50,000 for small businesses).
$50 per information return if filed after August 1, or not filed, with a maximum penalty of $250,000 per year ($100,000 for small businesses).
A minimum of $100 for each unfiled information return for intentional disregard.
How to Determine if Your Business Qualifies as a Small Business for the Lower Maximum Penalties
If your average annual gross receipts were $5 million or less for the three most recent tax years, or for the period you were in business if shorter, before the calendar year in which the information returns were due, then you are a small business qualified for the lower maximum penalties.
Back-up Withholding and the “B” Process
Back-up withholding can apply to most kinds of payments that are reported on Form 1099, including payments by broker/barter exchanges. Barter exchanges are required to issue “B” notices and are subject to performing back-up withholding if barter participants fail to furnish a valid Taxpayer Identification Number (TIN). For more information please refer to the Back-up Withholding “B” Processes page.
How to Get More Help
If you have questions about reporting on Form 1099-B, call the IRS information reporting customer service site toll free at 1-866-455-7438 or 304-263-8700 (not toll free). For TTY/TDD equipment, call 304-267-3367 (not toll free). The hours of operation are Monday through Friday from 8:30 a.m. to 4:30 p.m., Eastern Time.
What are the Tax Requirements for Barter Exchanges?
Barter exchanges, whether Internet based or with a physical location, are required to file Form 1099-B for all transactions unless certain exceptions are met. Barter exchanges are not required to file Form 1099-B for:
- Exchanges through a barter exchange having fewer than 100 transactions during the year
- Exempt foreign persons as defined in Regulations section 1.6045-1(g)(1)
- Exchanges involving property or services with a fair market value of less than $1.00
For calendar year 2008, Copy B of Form 1099-B is due to barter exchange participants by February 2, 2009. Copy A of the form is required to be filed with the IRS by March 2, 2009. If filing electronically, the due date is March 31, 2009. Software that generates a file according to the specifications in Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Electronically (PDF) must be used by barter exchanges. The IRS does not provide a fill-in form option.
Caution: Paper forms are scanned during processing by the IRS. Forms 1096, 1098, 1099, or 5498 that are printed from IRS.gov will not be accepted.
Non-corporate client or member bartering is reported on a transactional basis on Form 1099-B, but additional information is to be added to the form by the barter exchange. Under Regulation 1.6045-1(f)(i), barter exchanges are required to make a return of information reporting the name, address, and taxpayer identification number of each member or client providing property or services in the exchange, the property or services provided, the amount received by the member or client for such property or services, the date on which the exchange occurred and other information required on Form 1099-B. This means that multiple Forms 1099-B may be required for member clients with multiple bartering transactions during the year. To learn more about 1.6045-a(f)(i), Returns of Information of Broker and Barter Exchanges, visit the Electronic Code of Federal Regulations site, click on “Simple Search” and enter 26 in the Title and “Returns of information of brokers and barter exchanges.” in the “Search for” field.
Corporate client or member bartering is reported on the aggregate for the year, rather than on a transactional basis. Under Regulation 1.6045-1(f)(ii), barter exchanges are required to file annual Forms 1099-B including the aggregate or total amount received by a corporate client or member during the year for property or services provided by the corporate client or member in all barter transactions through the barter exchange. Form 1099-B additionally requires the name, address, and taxpayer identification number of the corporate client or member.
Penalty for Not Filing or Filing Incorrect Forms 1099-B
Failure to file Forms 1099-B can result in significant penalties under Internal Revenue Code Section 6721. The penalty is based on when correct information returns are filed. The penalties are:
- $15 per information return if filed correctly within 30 days of the specified due date with a maximum penalty of $75,000 per year ($25,000 for small businesses, defined below).
- $30 per information return if filed correctly more than 30 days after the due date, but by August 1 with a maximum penalty of $150,000 per year ($50,000 for small businesses).
- $50 per information return if filed after August 1, or not filed, with a maximum penalty of $250,000 per year ($100,000 for small businesses).
- A minimum of $100 for each unfiled information return for intentional disregard.
How to Determine if Your Business Qualifies as a Small Business for the Lower Maximum Penalties
If your average annual gross receipts were $5 million or less for the three most recent tax years, or for the period you were in business if shorter, before the calendar year in which the information returns were due, then you are a small business qualified for the lower maximum penalties.
Back-up Withholding and the “B” Process
Back-up withholding can apply to most kinds of payments that are reported on Form 1099, including payments by broker/barter exchanges. Barter exchanges are required to issue “B” notices and are subject to performing back-up withholding if barter participants fail to furnish a valid Taxpayer Identification Number (TIN). For more information please refer to the Back-up Withholding “B” Processes page.
How to Get More Help
If you have questions about reporting on Form 1099-B, call the IRS information reporting customer service site toll free at 1-866-455-7438 or 304-263-8700 (not toll free). For TTY/TDD equipment, call 304-267-3367 (not toll free). The hours of operation are Monday through Friday from 8:30 a.m. to 4:30 p.m., Eastern Time.
Tags: Barter Exchanges, business tax, business taxes, Exempt foreign persons, Form 1099-B, Form 1099B, income tax, income taxes, Internal Revenue Code, irs, irs gov, Returns of information of brokers and barter exchanges, Tax, Tax Requirements, Tax Requirements for Barter Exchanges, tax years, taxes, Taxpayer Identification Number, What are the Tax Requirements for Barter Exchanges?, www irs gov
Posted in Uncategorized | 4 Comments »
Tuesday, August 31st, 2010
What are the Tax Responsibilities of Bartering Participants?
If you engage in barter transactions you may have tax responsibilities. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter – barter for another’s products or services – you will have to report the fair market value of the products or services you received on your tax return.
Reporting Bartering Proceeds
If you barter your products or services through a barter exchange, you should receive a Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The amount shown in 1099-B Box 3 Bartering is your barter transactions proceeds and is generally reportable as income and must be included on your tax return. Barter exchanges have an annual obligation to report your bartering proceeds to the IRS.
If a business makes payments of bartered services to another business (except a corporation) of $600 or more in the course of the year, these payments are reported on Form 1099-MISC.
For example, an attorney represents a painter for nonpayment of business debts in exchange for painting the attorney’s law offices. The amount reportable by each on Form 1099-MISC is the fair market value of his or her own services performed. However, if the attorney represents the painter in a divorce proceeding, then there are two types of expenses involved in this transaction, painting the office is a business expense for the attorney but the divorce expenses are personal expenses for the painter.The requirement to report barter payments only applies to payments made in the course of a trade or business, Therefore, the attorney must report on Form 1099-MISC the value of the painting services because painting the law office is an activity that is related to the attorney’s trade or business. But the painter need not send a Form 1099-MISC to the attorney reporting the value of painting the law offices, because the work is in exchange for divorce legal services that are personal expenses and separate from the painter’s business. See Form 1099-MISC Instructions for more information. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business (PDF), or other business returns such as Form 1065 for Partnerships (PDF), Form 1120 for Corporations (PDF), or Form 1120-S for Small Business Corporations (PDF).
Nevertheless, even if no Forms 1099-B or 1099-MISC are filed, bartering is generally taxable to the extent of the fair market value of the products or services bartered under Internal Revenue Code Section 61. In the case of the example above, the painter would still have a taxable transaction in the bartering of painting for legal work by the attorney on the divorce proceedings even though no Form 1099-MISC is required to be filed by the attorney. Please refer to Publication 525, Taxable and Nontaxable Income, and Internal Revenue Code Section 61 for more information.
Staying in Compliance
Treat barter income as you would any other business activity. Keep good records, work with a reputable barter exchange and consult the IRS or a tax professional if you have questions.
If you have failed to report this income, correct your return by filing an amended return such as Form 1040X (PDF). Refer to Topic 308 for Amended Return information. If you receive income from bartering, you may be required to make estimated tax payments.
What are the Tax Responsibilities of Bartering Participants?
If you engage in barter transactions you may have tax responsibilities. You may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.
Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter – barter for another’s products or services – you will have to report the fair market value of the products or services you received on your tax return.
Reporting Bartering Proceeds
If you barter your products or services through a barter exchange, you should receive a Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The amount shown in 1099-B Box 3 Bartering is your barter transactions proceeds and is generally reportable as income and must be included on your tax return. Barter exchanges have an annual obligation to report your bartering proceeds to the IRS.
If a business makes payments of bartered services to another business (except a corporation) of $600 or more in the course of the year, these payments are reported on Form 1099-MISC.
For example, an attorney represents a painter for nonpayment of business debts in exchange for painting the attorney’s law offices. The amount reportable by each on Form 1099-MISC is the fair market value of his or her own services performed. However, if the attorney represents the painter in a divorce proceeding, then there are two types of expenses involved in this transaction, painting the office is a business expense for the attorney but the divorce expenses are personal expenses for the painter.The requirement to report barter payments only applies to payments made in the course of a trade or business, Therefore, the attorney must report on Form 1099-MISC the value of the painting services because painting the law office is an activity that is related to the attorney’s trade or business. But the painter need not send a Form 1099-MISC to the attorney reporting the value of painting the law offices, because the work is in exchange for divorce legal services that are personal expenses and separate from the painter’s business. See Form 1099-MISC Instructions for more information. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business (PDF), or other business returns such as Form 1065 for Partnerships (PDF), Form 1120 for Corporations (PDF), or Form 1120-S for Small Business Corporations (PDF).
Nevertheless, even if no Forms 1099-B or 1099-MISC are filed, bartering is generally taxable to the extent of the fair market value of the products or services bartered under Internal Revenue Code Section 61. In the case of the example above, the painter would still have a taxable transaction in the bartering of painting for legal work by the attorney on the divorce proceedings even though no Form 1099-MISC is required to be filed by the attorney. Please refer to Publication 525, Taxable and Nontaxable Income, and Internal Revenue Code Section 61 for more information.
Staying in Compliance
Treat barter income as you would any other business activity. Keep good records, work with a reputable barter exchange and consult the IRS or a tax professional if you have questions.
If you have failed to report this income, correct your return by filing an amended return such as Form 1040X (PDF). Refer to Topic 308 for Amended Return information. If you receive income from bartering, you may be required to make estimated tax payments.
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Posted in Uncategorized | 3 Comments »
Monday, August 30th, 2010
What are Barter Exchanges?
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a barter exchange company. A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.
Unlike one-on-one bartering, members of exchanges are not obligated to barter or purchase directly from a seller. Instead, when a barter exchange member sells a product or a service to another member, their barter account is credited for the fair market value of the sale. When a barter exchange member buys, the account is debited for the fair market value of the purchase.
Internet-based Barter
The Internet provides a new medium for the barter exchange industry. Pure Internet-based barter companies differ from traditional, organized trade exchanges in that they do not have a physical office. In modern Internet barter exchanges, there is an agreement or process in place to value goods and services exchanged, which is facilitated by the barter exchange for a fee. A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves.
Trade Dollars
Barter exchanges have their own unit of exchange, usually known as barter or trade dollars. Trade dollars or barter dollars are valued in U.S. currency for the purposes of information returns. Trade dollars allow barter to take place between parties when one party may not have a simultaneous need or desire for the goods or services of the other members. Barter exchanges act as the bookkeeper for keeping track of trade dollars that participants accumulate. Earning trade or barter dollars through a barter exchange is considered taxable income, just as if your product or service was sold for cash.
Requirement for Barter Exchanges to File Information Returns
Barter exchanges are required to issue Form 1099-B Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the Internal Revenue Service. Learn more about information return filing requirements for barter exchanges.
What are Barter Exchanges?
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a barter exchange company. A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.
Unlike one-on-one bartering, members of exchanges are not obligated to barter or purchase directly from a seller. Instead, when a barter exchange member sells a product or a service to another member, their barter account is credited for the fair market value of the sale. When a barter exchange member buys, the account is debited for the fair market value of the purchase.
Internet-based Barter
The Internet provides a new medium for the barter exchange industry. Pure Internet-based barter companies differ from traditional, organized trade exchanges in that they do not have a physical office. In modern Internet barter exchanges, there is an agreement or process in place to value goods and services exchanged, which is facilitated by the barter exchange for a fee. A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves.
Trade Dollars
Barter exchanges have their own unit of exchange, usually known as barter or trade dollars. Trade dollars or barter dollars are valued in U.S. currency for the purposes of information returns. Trade dollars allow barter to take place between parties when one party may not have a simultaneous need or desire for the goods or services of the other members. Barter exchanges act as the bookkeeper for keeping track of trade dollars that participants accumulate. Earning trade or barter dollars through a barter exchange is considered taxable income, just as if your product or service was sold for cash.
Requirement for Barter Exchanges to File Information Returns
Barter exchanges are required to issue Form 1099-B Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the Internal Revenue Service. Learn more about information return filing requirements for barter exchanges.
Tags: barter dollars, barter exchange industry, Barter Exchanges, Bartering, bookkeeper, File Information Returns, Form 1099-B, Form 1099-B Proceeds from Broker and Barter Exchange Transactions, income tax, income taxes, Information Returns, internal revenue service, Internet-based Barter, organized trade exchanges, Proceeds from Broker and Barter Exchange Transactions, Tax, taxable income, taxes, Trade Dollars, What are Barter Exchanges?
Posted in Uncategorized | 4 Comments »
Saturday, August 28th, 2010
What is Bartering Income?
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. It is the most ancient form of commerce. Any business owner or professional who has a product or service to offer can barter.
While our ancestors may have exchanged eggs for corn, today you can barter computer services for auto repair. Another example of a one-on-one, non-barter exchange transaction is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of the goods and services exchanged must be reported as income by both parties.
Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.
Tax Responsibilities
Income from bartering is taxable in the year it is performed. The rules for reporting barter transactions may vary depending on which form of bartering takes place. Refer to Tax Responsibilities of Bartering Participants for more information about reporting income and staying in compliance.
Home-Based Online Barter Business
If online bartering turns into a business, or you have recurring barter transactions and are purchasing items to barter with the intention of making a profit, you may have started a barter business.
If Your Bartering is a Trade or Business
If you are operating a viable bartering business, you may be entitled to deduct business expenses. Do you have an established business and are augmenting your sales with barter transactions? If so, include the sales from bartering in your business income.
Bartering Depreciated Business Assets
If you barter business assets or close your business you may have capital gains, ordinary gains and depreciation recapture (explained in chapter 3 of Publication 544) to report.
Bartering Appreciated Assets
Examples of appreciated assets often include art, antiques and collectibles. If you have barter transactions of property where the fair market value is more than your cost or other basis, you usually will have a reportable gain. These gains may be business income or capital gains.
What is Bartering Income?
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. It is the most ancient form of commerce. Any business owner or professional who has a product or service to offer can barter.
While our ancestors may have exchanged eggs for corn, today you can barter computer services for auto repair. Another example of a one-on-one, non-barter exchange transaction is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of the goods and services exchanged must be reported as income by both parties.
Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.
Tax Responsibilities
Income from bartering is taxable in the year it is performed. The rules for reporting barter transactions may vary depending on which form of bartering takes place. Refer to Tax Responsibilities of Bartering Participants for more information about reporting income and staying in compliance.
Home-Based Online Barter Business
If online bartering turns into a business, or you have recurring barter transactions and are purchasing items to barter with the intention of making a profit, you may have started a barter business.
If Your Bartering is a Trade or Business
If you are operating a viable bartering business, you may be entitled to deduct business expenses. Do you have an established business and are augmenting your sales with barter transactions? If so, include the sales from bartering in your business income.
Bartering Depreciated Business Assets
If you barter business assets or close your business you may have capital gains, ordinary gains and depreciation recapture (explained in chapter 3 of Publication 544) to report.
Bartering Appreciated Assets
Examples of appreciated assets often include art, antiques and collectibles. If you have barter transactions of property where the fair market value is more than your cost or other basis, you usually will have a reportable gain. These gains may be business income or capital gains.
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Posted in Uncategorized | 7 Comments »
Friday, August 27th, 2010
Creating a New Economy: Bartering
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.
Bartering Income
Income from bartering is taxable in the year it is performed. The rules for reporting barter transactions may vary depending on which form of bartering takes place. Learn about bartering assets and online bartering.
Barter Exchanges
A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.
Tax Responsibilities of Bartering Participants
Learn about your federal tax responsibilities for reporting bartering proceeds and staying in compliance.
Tax Requirements for Barter Exchanges
Barter exchanges, whether Internet based or with a physical location, are required to file Form 1099-B for all transactions unless certain exceptions are met.
Backup Withhholding and the “B” Process
Backup withholding can apply to most kinds of payments that are reported on Form 1099, including payments by broker/barter exchanges. Barter exchanges are required to issue “B” notices and are subject to performing back-up withholding if barter participants fail to furnish a valid Taxpayer Identification Number (TIN).
Record Keeping for Business Barter Transactions
Bartering transactions generally have associated tax reporting, accounting and record-keeping responsibilities.
Creating a New Economy: Bartering
Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.
Bartering Income
Income from bartering is taxable in the year it is performed. The rules for reporting barter transactions may vary depending on which form of bartering takes place. Learn about bartering assets and online bartering.
Barter Exchanges
A barter exchange is any person or organization with members or clients that contract with each other (or with the barter exchange) to jointly trade or barter property or services. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.
Tax Responsibilities of Bartering Participants
Learn about your federal tax responsibilities for reporting bartering proceeds and staying in compliance.
Tax Requirements for Barter Exchanges
Barter exchanges, whether Internet based or with a physical location, are required to file Form 1099-B for all transactions unless certain exceptions are met.
Backup Withhholding and the “B” Process
Backup withholding can apply to most kinds of payments that are reported on Form 1099, including payments by broker/barter exchanges. Barter exchanges are required to issue “B” notices and are subject to performing back-up withholding if barter participants fail to furnish a valid Taxpayer Identification Number (TIN).
Record Keeping for Business Barter Transactions
Bartering transactions generally have associated tax reporting, accounting and record-keeping responsibilities.
Tags: associated tax, Backup Withhholding, Barter, Barter Exchanges, Bartering, bartering assets, Bartering Income, bartering is taxable, Business Barter Transactions, Creating a New Economy: Bartering, federal tax, federal tax responsibilities, Form 1099, Form 1099-B, New Economy, online bartering, Record Keeping, Record Keeping for Business Barter Transactions, reporting bartering proceeds, Tax, tax reporting, Tax Requirements, Tax Requirements for Barter, Tax Requirements for Barter Exchanges, Tax Responsibilities, Tax Responsibilities of Bartering, Tax Responsibilities of Bartering Participants, taxable, Taxpayer Identification Number (TIN)
Posted in Uncategorized | 2 Comments »
Thursday, August 26th, 2010
Top Ten Tips for Taxpayers Making Charitable Donations
IRS Summertime Tax Tip 2010-21
Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.
Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.
1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
8. For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
Top Ten Tips for Taxpayers Making Charitable Donations
IRS Summertime Tax Tip 2010-21
Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.
Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.
1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
8. For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description and good faith estimate of value of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.
9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
Tags: 2010 tax return, cash contributions, Charitable contributions, Charitable Donations, Cumulative List of Organizations, donated property, form 1040, Form 1040 Schedule A, Form 8283, Form 8283 Noncash Charitable Contributions, irs gov, IRS Publication 78, IRS Publication 78 Cumulative List of Organizations, Noncash Charitable Contributions, Schedule A, Tax Tip, tax year, Tips for Taxpayers, top 10, top ten, Top Ten Tips for Taxpayers Making Charitable Donations, www irs gov
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Wednesday, August 25th, 2010
Employee vs. Independent Contractor – Seven Tips for Business Owners
IRS Summertime Tax Tip 2010-20
As a small business owner you may hire people as independent contractors or as employees. There are rules that will help you determine how to classify the people you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers paychecks and what tax documents you need to file.
Here are seven things every business owner should know about hiring people as independent contractors versus hiring them as employees.
The IRS uses three characteristics to determine the relationship between businesses and workers:
Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.
Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
Workers can avoid higher tax bills and lost benefits if they know their proper status.
Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.
You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer’s Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS website or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Employee vs. Independent Contractor – Seven Tips for Business Owners
IRS Summertime Tax Tip 2010-20
As a small business owner you may hire people as independent contractors or as employees. There are rules that will help you determine how to classify the people you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers paychecks and what tax documents you need to file.
Here are seven things every business owner should know about hiring people as independent contractors versus hiring them as employees.
1. The IRS uses three characteristics to determine the relationship between businesses and workers:
- Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
- Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
- Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
2. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
3. If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.
4. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
5. Workers can avoid higher tax bills and lost benefits if they know their proper status.
6. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.
7. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer’s Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS website or by calling the IRS at 800-829-3676 (800-TAX-FORM).
Tags: Behavioral Control, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, Do You Qualify for Relief under Section 530, Employee vs. Independent Contractor – Seven Tips for Business Owners, Employer's Supplemental Tax Guide, employment tax, employment taxes, Financial Control, Form SS-8, Form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, Independent Contractor or Employee, irs, irs gov, IRS Publication 15-A, IRS Publication 15-A Employer's Supplemental Tax Guide, Publication 1779, Publication 1779 Independent Contractor or Employee, Publication 1976, Publication 1976 Do You Qualify for Relief under Section 530, tax bill, tax bills, tax documents, tax form, tax forms, Tax Tip, taxes, Type of Relationship, www irs gov
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Tuesday, August 24th, 2010
What You Need to Know About IRS Tax-Exempt Organization Workshops
IRS Special Edition Tax Tip 2010-10
IRS Exempt Organizations is offering one-day workshops for small and mid-size tax exempt organizations. The workshops are presented by experienced IRS Exempt Organizations specialists that will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. These one-day introductory workshops are designed for administrators or volunteers who are responsible for an organization’s tax compliance.
Here are five things you need to know about the 2010 IRS Workshops for Small and Mid-Size 501(c)(3) Organizations.
1. The 2010 workshops will be held in September, October and December in Michigan, Ohio, Vermont, North Carolina and Arizona. Additional workshops will be held in 2011.
2. Pre-registration is required.
Location Workshop Hosted By
Southfield, MI September 22 – 23 Lawrence Technological University
Cincinnati, OH October 5 – 7 Internal Revenue Service
South Royalton, VT October 12 Vermont Law School
Raleigh, NC October 20 Institute for Nonprofits at NC State University
Wilmington, NC October 21 QENO at University of North Carolina-Wilmington
Phoenix, AZ December 7 – 9 Internal Revenue Service
3. The one-day workshop is designed for representatives of organizations that are new – five years old or less – and for people who are new to tax compliance issues of 501(c)(3) organizations.
4. Each one-day workshop will cover the following topics:
Tax-Exempt Status - Benefits and responsibilities of tax-exempt status under 501(c)(3). Actions that may jeopardize tax-exempt status of an organization.
Unrelated Business Income - The definition of unrelated business income, common examples, common exceptions and filing requirements. Includes a discussion of charitable gaming.
Employment Issues - Classification of workers and filing requirements for employees and independent contractors.
Form 990 Series - An overview of the Forms 990, 990-EZ, and 990-N (e-Postcard), including tips for recordkeeping and answers to frequently asked questions.
Required Disclosures - Overview of disclosures tax-exempt organizations are required to make.
5. For more information about the workshops and how to register visit www.irs.gov/eo and click on Calendar of Events.
What You Need to Know About IRS Tax-Exempt Organization Workshops
IRS Special Edition Tax Tip 2010-10
IRS Exempt Organizations is offering one-day workshops for small and mid-size tax exempt organizations. The workshops are presented by experienced IRS Exempt Organizations specialists that will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. These one-day introductory workshops are designed for administrators or volunteers who are responsible for an organization’s tax compliance.
Here are five things you need to know about the 2010 IRS Workshops for Small and Mid-Size 501(c)(3) Organizations.
1. The 2010 workshops will be held in September, October and December in Michigan, Ohio, Vermont, North Carolina and Arizona. Additional workshops will be held in 2011.
2. Pre-registration is required.
Location Workshop Hosted By
Southfield, MI September 22 – 23 Lawrence Technological University
Cincinnati, OH October 5 – 7 Internal Revenue Service
South Royalton, VT October 12 Vermont Law School
Raleigh, NC October 20 Institute for Nonprofits at NC State University
Wilmington, NC October 21 QENO at University of North Carolina-Wilmington
Phoenix, AZ December 7 – 9 Internal Revenue Service
3. The one-day workshop is designed for representatives of organizations that are new – five years old or less – and for people who are new to tax compliance issues of 501(c)(3) organizations.
4. Each one-day workshop will cover the following topics:
- Tax-Exempt Status - Benefits and responsibilities of tax-exempt status under 501(c)(3). Actions that may jeopardize tax-exempt status of an organization.
- Unrelated Business Income - The definition of unrelated business income, common examples, common exceptions and filing requirements. Includes a discussion of charitable gaming.
- Employment Issues - Classification of workers and filing requirements for employees and independent contractors.
- Form 990 Series - An overview of the Forms 990, 990-EZ, and 990-N (e-Postcard), including tips for recordkeeping and answers to frequently asked questions.
- Required Disclosures - Overview of disclosures tax-exempt organizations are required to make.
5. For more information about the workshops and how to register visit www.irs.gov/eo and click on Calendar of Events.
Tags: 501(c)(3) organizations, 990-EZ, and 990-N (e-Postcard), charitable gaming, Employment Issues, Form 990-series, Forms 990, Institute for Nonprofits at NC State University, internal revenue service, IRS Exempt Organizations, Lawrence Technological University, QENO at University of North Carolina-Wilmington, Required Disclosures, tax compliance, tax compliance issues, tax exempt, tax exempt status, tax obligations, Tax Tip, Tax-Exempt Organization, Tax-Exempt Organization Workshops, Unrelated Business Income, Vermont Law School, What You Need to Know About IRS Tax-Exempt Organization Workshops, www irs gov
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Monday, August 23rd, 2010
Keeping Good Records Reduces Stress at Tax Time
IRS Summertime Tax Tip 2010-18
You may not be thinking about your tax return right now, but summer is a great time to start planning for next year and to make sure your records are organized. Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.
Here are a few things the IRS wants you to know about recordkeeping.
Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
Bills
Credit card and other receipts
Invoices
Mileage logs
Canceled, imaged or substitute checks or any other proof of payment
Any other records to support deductions or credits you claim on your return
You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:
A home purchase or improvement
Stocks and other investments
Individual Retirement Arrangement transactions
Rental property records
If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:
Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
Keeping Good Records Reduces Stress at Tax Time
IRS Summertime Tax Tip 2010-18
You may not be thinking about your tax return right now, but summer is a great time to start planning for next year and to make sure your records are organized. Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.
Here are a few things the IRS wants you to know about recordkeeping.
Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
- Bills
- Credit card and other receipts
- Invoices
- Mileage logs
- Canceled, imaged or substitute checks or any other proof of payment
- Any other records to support deductions or credits you claim on your return
You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:
- A home purchase or improvement
- Stocks and other investments
- Individual Retirement Arrangement transactions
- Rental property records
If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:
- Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
- Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
- Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
- Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
Tags: employment tax, employment tax records, federal tax, federal tax return, Form 1099-MISC, Forms 1099-MISC, Individual Retirement Arrangement, irs, IRS notice, Keeping Good Records Reduces Stress at Tax Time, tax records, tax return, tax returns, tax time, Tax Tip, taxpayers
Posted in Uncategorized | 2 Comments »
Sunday, August 22nd, 2010
Proposed Regulations Expand the Use of Electronic Payment System and Discontinue Paper Coupons Next Year
IR-2010-92, Aug. 19, 2010
WASHINGTON — Consistent with a Financial Management Service initiative announced in April of this year, the IRS today issued proposed regulations to significantly increase the number of electronic transactions between taxpayers and the federal government.
The proposed regulations (REG 153340-09) would eliminate the rules for making federal tax deposits by paper coupon because the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010. The proposed regulations generally maintain existing rules for depositing federal taxes through the Electronic Federal Tax Payment System (EFTPS).
Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government. EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.
Deposits can be made online with a computer or by telephone. EFTPS also significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due. EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.
Information on EFTPS, including how to enroll, can be found at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477.
Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS. More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are in the proposed regulations.
Proposed Regulations Expand the Use of Electronic Payment System and Discontinue Paper Coupons Next Year
IR-2010-92, Aug. 19, 2010
WASHINGTON — Consistent with a Financial Management Service initiative announced in April of this year, the IRS today issued proposed regulations to significantly increase the number of electronic transactions between taxpayers and the federal government.
The proposed regulations (REG 153340-09) would eliminate the rules for making federal tax deposits by paper coupon because the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010. The proposed regulations generally maintain existing rules for depositing federal taxes through the Electronic Federal Tax Payment System (EFTPS).
Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government. EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.
Deposits can be made online with a computer or by telephone. EFTPS also significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due. EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.
Information on EFTPS, including how to enroll, can be found at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477.
Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS. More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are in the proposed regulations.
Tags: depositing federal taxes, EFTPS, Electronic Federal Tax Payment System (EFTPS), Electronic Payment System, federal tax deposits, Financial Management Service, irs, Proposed Regulations Expand the Use of Electronic Payment System and Discontinue Paper Coupons Next Year, Tax, tax deposits, tax payments, tax return, taxes, taxpayers, Treasury Department, www.eftps.gov
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