Do you often make purchases that are directly related to your job? If you do, you may be able to deduct certain work-related expenses that are not reimbursed by your employer. The following information can help you determine which expenses are deductible as an employee business expense. You must itemize your deductions on IRS Schedule A to in order to qualify.

Here are the expenses that generally qualify for an itemized deduction:
• Business travel away from home
• Business use of your car
• Business meals and entertainment
• Use of your home
• Education
• Tools
• Supplies
• Miscellaneous expenses

If you are going to record business expenses as deductions, you must keep records as proof.

For more information on keeping records for your tax filing, see IRS Publication 552, Recordkeeping for Individuals available on the IRS website at www.irs.gov, or call 1-800-TAX-FORM (800-829-3676).

You should report  expenses that are not reimbursed on IRS Form 2106 or IRS Form 2106-EZ and attach it to Form 1040. Deductible expenses are then reported on IRS Schedule A, as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2 percent of your adjusted gross income.

For more information see IRS Publication 529, Miscellaneous Deductions, which is available on the IRS website at www.irs.gov, or by calling 1-800-TAX-FORM (800-829-3676).

Daniel Stoica Accounting Professional

Are you a small business owner or are you self-employed?  If you are, you probably have questions about taxes for your particular situation.  You can check out the IRS’s Small Business and Self-Employed Tax Center on the IRS website.

The IRS’s one-stop shop offers a variety of resources and online tools to help small businesses and self-employed individuals by providing resources such as:

• A-Z Index for Business, a fast way to find information
• Small business forms and publications
• Online applications for an Employer Identification Number
• Employment tax information – federal income tax, Social Security and Medicare taxes, FUTA and self-employment tax
• Tax-related news that could affect your business
• Small business educational events
• IRS videos for small businesses

Did you know that there is also a Tax Calendar for Small Business Taxpayers?  The Tax Calendar for Small Businesses and Self-Employed – Publication 1518 – is available online or as a printable PDF file. This 12-month calendar containts information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, and common tax filing dates. Each page highlights different tax issues and tips that may be relevant to small-business owners, with room on each month to add notes, state tax dates or business appointments.  You can also download the tax events into your calendar or subscribe to the tax calendar events.  The calendar provides the small business owner with a ready resource for meeting their tax obligations.

If you have other questions about your tax obligations, you might want to contact a tax professional.

Daniel Stoica Accounting Professional

Are you self-employed? Do you work as an independent contractor, or are you a sole proprietor of a business?

Self-employed individuals generally must pay self-employment taxes. Here are some facts that you should know about self-employment and the IRS:

1. Self-employment can be full-time or part-time. You may even have a regular full-time job and still be considered self-employed for the purposes of self-employment taxes.

2. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves, and you generally have to pay self-employment tax as well as income tax when you are self-employed.. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. When you file your Form 1040, you also file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business (also known as business expenses). These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. Business expenses must be both ordinary and necessary to be deductible. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

For more information check out the Self-employment Tax Center, IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at www.irs.gov. You can also call the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Daniel Stoica Accounting Professional

Take advantage of the Small Business Health Care Tax Credit

If you are a small business owner with employees who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35% of the premiums paid. Employers with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify.

The maximum credit for tax years 2010 to 2013 is 35% for small business employers and 25% for small tax-exempt employers such as charities. On Jan. 1, 2014, this rate will increase to 50% and 35%, respectively.

You can carry the credit back or forward to other tax years even if you did not owe tax during the year. And since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

Eligibility

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

The amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 full-time equivalent employees, or if the average wage is more than $25,000, the amount of the credit you receive will be less.

Claiming the Credit

In order to calculate the credit, you must use Form 8941, Credit for Small Employer Health Insurance Premiums.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don’t usually do so.

Remember… If you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

For more information, check out the Small Business Health Care Tax Credit page on IRS.gov.

Daniel Stoica Accounting Professional

The IRS routinely evaluates the standard mileage rates that are used to calculate the deductible costs of using a vehicle for business, medical, moving or charitable purposes. This evaluation is based on an annual study of the fixed and variable costs of operating an automobile, and the IRS adjusts the rates accordingly. Because the fixed and variable costs of operating a vehicle have not drastically changed since June 2011, the last time a standard mileage rate adjustment was announced, the 2012 rates will not change much.

Beginning on January 1, 2012, the standard mileage rates for the use of cars, vans, pickups or panel trucks will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is not changing from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.

Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

If you have questions about the best way to handle miles you have driven for business, charitable, medical or moving purposes on your taxes, contact a tax professional.

Daniel Stoica Accounting Professional

If you are self-employed, you most likely have to pay self-employment tax. Self-employment tax consists of Medicare and Social Security taxes for individuals who work for themselves and is similar to the Medicare and Social Security taxes that are withheld from the pay of most people who earn wages.

In order to figure self-employment tax, you should use Schedule SE (Form 1040).

You must pay self-employment tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. For church employees, your income needs to be $108.28 or more.

Generally, you must pay self-employment tax on net earnings from self-employment.  If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ to figure net earnings from self-employment.

If you have earnings subject to self-employment tax, use Schedule SE to figure your net earnings from self-employment.  Before you figure your net earnings, you generally need to figure your total earnings subject to self-employment tax.

Note: The self-employment tax rules apply no matter how old you are and even if you are already receiving Social Security or Medicare.

If you have questions about self-employment tax, consult with a tax professional.

Daniel Stoica Accounting Professional

If you receive tips as part of your employment, you must claim all tip income that you receive.  This includes both the tips that you receive directly from a customer as well as tips that your employer pays to you when a customer makes a credit card payment.

Tip Requirements for Employees

Employees must use Form 4070, Employee’s Report of Tips to Employer, to report tip income. This report is due on the 10th day of the month after the month the tips are received. This statement must be signed by the employee and must show the following:

• Employee’s name, address, and SSN
• Employer’s name and address
• The month or period the report covers
• The total tips received

No report is required from an employee for months when tips are less than $20.

Both Forms 4070 and 4070-A, Employee’s Daily Record of Tips, are included in Publication 1244, Employee’s Daily Record of Tips and Report to Employer.

Daniel Stoica Accounting Professional

Are you closing your business?  If you are, here are some things you’ll need to do in order to stay out of trouble with the IRS.

First, make sure you file the right tax returns for the year in which you close the business. If you have employees, you must also deposit payroll taxes.

You will need to file a different form depending on whether you are a corporation, an ‘S’ corporation, a partnership, or a sole proprietor.  Talk to a tax professional to determine the correct form.

Make sure you report tips if you sell food and/or beverages. Also, you’ll need to mark “final return” in the correct space on the form.

Your employees will still need their W-2s for the year the business closed so they can file individual returns.

If you have an employer identification number (EIN), correspond by mail with the IRS to close the account. The EIN will still belong to the business, so you can use it again later. You should also make sure the business has met all its state and local tax responsibilities.

For more information, including a checklist, go to irs.gov and type the words “closing a business” in the search box.

Daniel Stoica Accounting Professional

Although the upcoming holidays may be the biggest stress you’re thinking about right now, you can greatly reduce your holiday AND tax stress by getting organized and keeping good records.

Here are some tips to get you organized for tax time (and some are good tips for the holiday season as well).

Individual taxpayers should usually keep the following records that support their tax returns for at least three years:

• Bills
• Invoices
• Credit card and other receipts
• 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
• Stocks and other investments
• Individual Retirement Arrangement transactions

Generally speaking, keep records relating to properties until at least three years after you sell or otherwise dispose of the property.

• A home purchase or improvement
• 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.  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

Daniel Stoica Accounting Professional

Did you know that the IRS offers small business workshops in person, via webinars and on CD’s?

These small business workshops are designed to help owners understand and fulfill their tax responsibilities. Federal Tax specialists sponsor and present the workshops. The workshops cover everything from a general overview to recordkeeping and retirement plans. Some workshops are free and some have a fee.

More information about small business workshops and webinars can be found at this webpage. You can also find information at this link about workshops in your state. Just click on your state and you’ll see all of the upcoming workshops listed.

Daniel Stoica Accounting Professional