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

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

Time and circumstances seem to change on a daily basis. Once upon a time, the majority of marriages lasted a lifetime. Today, however, the chances of a lasting marriage are less than 50%. Because of that, the changes in taxes are important to note.

As we all know, divorce isn’t pretty. Parents fight, children rebel, and the long process of divorce takes its toll on everyone involved, not to mention the cost. Just because your divorce is final doesn’t mean you still don’t have issues. It’s now time to deal with taxes. When you understand how your taxes change, it makes the divorce process a little easier.

Alimony can be an issue in divorce. Alimony is payments made by one party to the other to maintain the lifestyle they have become accustomed to. Every state regards alimony differently, but the premise is the same. The IRS has strict rules regarding alimony that all taxpayers need to know.

The IRS does tax alimony payments that are received. The payer gets the better deal. They get a deduction on alimony payments they pay. It only applies, however, when alimony payments are granted in the divorce decree. If there is nothing about alimony written in the decree, the payments are not taxed, nor are they deductible.

In the case of child support, the IRS would rather avoid the subject matter altogether. Therefore, child support is neither taxable nor deductible.  However, if you don’t pay your child support as required by the court, they will take it from any refunds you may be entitled to. That is the only involvement the IRS has.

The IRS doesn’t care that you’re contemplating divorce, in the middle of divorce, or legally divorced, so it’s up to you, the taxpayer, to make sure you completely understand all of the tax issues.

Daniel Stoica Accounting Professional

The Internal Revenue Service has announced that they are going to increase in the optional standard mileage rates for the last six months of 2011. Now taxpayers can use these rates to figure out the deductible on the of operation of an automobile for business and other purposes.

The rate is going increase to 55.5 cents a mile for all business miles driven between July 1, 2011, and Dec. 31, 2011. This increase is up from the 51 cent rate that was in effect for the first six months of 2011. It is part of Revenue Procedure 2010-51.

The IRS has adjusted the rate for the last six months of 2011 due to the increase in gas prices. They normally update the mileage rates only once a year, in the fall, for the following year.

IRS Commissioner Doug Shulman said, “This year’s higher gas prices are having a serious impact on  Americans. The IRS is adjusting the standard mileage rates to reflect this increase in gas prices.”  The IRS is doing this to help offset the price taxpayers pay at the gas pumps. 

The price of gas plays a major role in this mileage rate adjustment, but there are other factors that caused this adjustment, such as depreciation and insurance, as well as other fixed and variable costs.

The business mileage rate is used to figure the business-related operation cost deductible when used to record actual mileage costs. It is also used to reimburse employees who use company vehicles for business activities.

The rate for medical and moving expenses will also increase to 23.5 cents per mile, which is up from 19 cents for the first six months of 2011. The rate for services for charitable organizations will stay at 14 cents per mile because this rate is set by statute and not the IRS.

The new rates are listed in Announcement 2011-40 on the optional standard mileage rates.

This has always been an optional deduction for taxpayers who use their vehicles for business purposes, rather than using the standard mileage rate.

Here are the mileage rates for 7/1/2011 to 12/31/2011:

Business purposes: 55.5 cents per mile (up from 51 cents per mile for 1/1/2011 to 6/30/2011)

Medical/moving purposes: 23.5 cents per mile (up from 10 cents per mile for 1/1/2011 to 6/30/2011)

Charitable purposes: 14 cents per mile (no change)

These new rates are helpful to anyone who uses their vehicle for business purposes because of the rising gas prices. If you need help figuring your mileage, please consult with a tax professional.

Daniel Stoica Accounting Professional

A 529 Plan is an education savings plan that is operated by a state or educational institution and is designed to help families set aside money for future college tuition and fees.  This plan is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996. Here are 7 reasons why opening a 529 plan might be beneficial to you. 

Federal Tax Benefits
529 plans offer supreme income tax breaks. Even though your contributions are not deductible on your taxes, your investment grows, tax-deferred, and distributions are paid out tax-free. The tax-free rule was made permanent with the Pension Protection Act of 2006.

State Tax Benefits
Your state might offer tax breaks in addition to the federal tax break. It would be wise to research what benefits you can get for investing in your state’s 529 plan. If your state doesn’t offer these benefits, you can choose the federal 529 plan.

Donor retains control of funds
With a 529, you are in control of the account. The named beneficiary, the student, does not have access to the funds. You decide when money is taken out and for what purpose. Most plans let you get back the funds for yourself any time. However, the earnings part of the “non-qualified” withdrawal is subject to taxes and an additional 10% penalty tax. Compared to an account under the Uniform Transfers to Minors Acts, you will se that the 529 plan gives you more control of how your investment is used.

Low maintenance
A 529 plan provides an easy way to save for college. Once you decide on the right 529 plan, you will need to complete an easy enrollment form and begin making your contribution. You can also sign up for automatic deposits. The continued investment of your account is taken care of by the plan itself. The plans assets are professionally managed by the state treasurer’s office or by an investment company.

Simplified tax reporting
You won’t need to fill out a 1099, which reports taxable and nontaxable earnings, until the year you make withdrawals on the 529.

Flexible
You can make changes in your 529 program every year, or you can roll it over to a different state’s program provided you haven’t done so in the prior 12 months. There is no federal limit on the regularity of these changes if you replace the beneficiary with another qualifying beneficiary at the same time. Each 529 plan has different rules that affect the number of changes you can make, so take some time to research each one if you think you might need this benefit.

Substantial deposits allowed
Everyone is eligible for a 529 plan, and the amounts you can deposit are sizeable; over $300,000 per beneficiary in many state plans. There usually are no income limitations or age restrictions.

If you are considering going back to college or graduate school in the future, check with an accounting or tax professional about a 529 plan. It could be one of the best investments you can make for your family’s education. There isn’t much to think about, except which plan is right for you. A little money deposited into the account each paycheck will add up, and your future student will (should) thank you.

Daniel Stoica Accounting Professional