Candidate Comparison | How Each Candidate Will Affect Small Biz

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The election will have a large impact on tax legislation.

As the presidential race heads into the fall both candidates are campaigning hard. Many analysts have said this election will come down to the economy. With that in mind, let’s review each candidate’s position on matters that affect small business.

Code Sec. 179

Currently covers qualifying new property placed in service before January 1, 2013. Dollar limit: $139,000; Investment limit: $560,000

President Obama: Has not addressed

Mitt Romney: Has not addressed

Bonus Depreciation

Currently allows for 100% depreciation for qualified investments made after September 8, 2010 and before January 1, 2012

President Obama: Has proposed extending 100% bonus depreciation

Mitt Romney: Has discussed extending bonus depreciation, but has not indicated a percentage

Research Tax Credit

Currently allows those who participate in research to calculate this credit using the alternative simplified credit method

President Obama: Proposed to make this credit permanent and to increase the alternative simplified credit to 17%

Mitt Romney: Proposed to make this credit permanent

Code Sec. 199 Deduction

Currently allows a qualified taxpayer to deduct an amount equal or less than the phased-in percentage of taxable income or qualified production activities income

President Obama:  Proposed to exclude oil, gas, coal and other producers of hard mineral fossil fuels from this credit

Mitt Romney: Has not addressed

Carried Interest

Currently allows general partners in private equity and hedge funds to charge limited partners a percentage of the fund’s earnings, aka, carried interest, which is characterized as a capital gain

President Obama: Proposed to tax as ordinary income with special rules for partners

Mitt Romney: Has not addressed

They’ve also both taken stances on things like individual rates, deductions and credits, estate tax, and the corporate tax (which we reviewed here).

Tax planning early will be difficult this year, as the presidential election will have a significant impact on tax law. Be sure to check out our October newsletter for even more tax planning ideas that may impact your tax situation for 2012.

If you have questions regarding what tax legislation is on the horizon please contact an H&S Tax Professional.

Source: CCH Tax Briefing

 

Candidate Comparison | How Each Candidate Will Affect Small Biz

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The election will have a large impact on tax legislation.


As the presidential race heads into the fall both candidates are campaigning hard. Many analysts have said this election will come down to the economy. With that in mind, let’s review each candidate’s position on matters that affect small business.
Code Sec. 179
Currently covers qualifying new property placed in service before January 1, 2013. Dollar limit: $139,000; Investment limit: $560,000
President Obama: Has not addressed
Mitt Romney: Has not addressed
Bonus Depreciation
Currently allows for 100% depreciation for qualified investments made after September 8, 2010 and before January 1, 2012
President Obama: Has proposed extending 100% bonus depreciation
Mitt Romney: Has discussed extending bonus depreciation, but has not indicated a percentage
Research Tax Credit
Currently allows those who participate in research to calculate this credit using the alternative simplified credit method
President Obama: Proposed to make this credit permanent and to increase the alternative simplified credit to 17%
Mitt Romney: Proposed to make this credit permanent
Code Sec. 199 Deduction
Currently allows a qualified taxpayer to deduct an amount equal or less than the phased-in percentage of taxable income or qualified production activities income
President Obama:  Proposed to exclude oil, gas, coal and other producers of hard mineral fossil fuels from this credit
Mitt Romney: Has not addressed
Carried Interest
Currently allows general partners in private equity and hedge funds to charge limited partners a percentage of the fund’s earnings, aka, carried interest, which is characterized as a capital gain
President Obama: Proposed to tax as ordinary income with special rules for partners
Mitt Romney: Has not addressed
They’ve also both taken stances on things like individual rates, deductions and credits, estate tax, and the corporate tax (which we reviewed here).
Tax planning early will be difficult this year, as the presidential election will have a significant impact on tax law. Be sure to check out our October newsletter for even more tax planning ideas that may impact your tax situation for 2012.

If you have questions regarding what tax legislation is on the horizon please contact an H&S Tax Professional.

Source: CCH Tax Briefing
 

New Michigan Tax Rate Coming Soon

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Tax Rate

Employers will need to be sure to adjust Michigan income tax withholdings for employees effective October 1, 2012

Beginning October 1, 2012, there are new rates in effect for Michigan taxes. Below is what employers need to be aware of:

  • The individual income tax rate will be 4.25%
  • The personal exemption amount will be raised to $3,950
  • Income tax withheld from pensions and/or retirement benefits will also be taxed at the 4.25% rate
  • There is no change to the monthly pension deduction rate
  • These rates are effective through December 31, 2012

Employers will need to be sure to adjust Michigan income tax withholdings for employees effective October 1, 2012. If you have any questions, contact H&S Companies.

Tax Planning Strategies | Time is Running Out for the WOTC

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veteran wotc tax credit

If you're planning on using the WOTC credit for hiring veterans, you need to hurry.

Although the Work Opportunity Tax Credit (WOTC) expired on January 1, 2012, for most candidates, employers can still receive a credit for hiring qualified veterans before January 1, 2013. Since the credit is scheduled to sunset in a few months, now is the time to act if you think you may be able to take advantage of it.

Both non-profits and for-profits are eligible to receive the WOTC, which is a credit against the employer’s share of the social security tax, but they have slightly different processes to follow to receive it.

Non-Profit Organizations must complete Form 8850, Pre-Screen Notice and Certification Request for the Work Opportunity Credit, and file it with the appropriate state workforce agency within 28 days of the new hire’s start date. Next, the organization will receive certification that their new hire is eligible for the credit. Once a non-profit receives this notification, they must file Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Hiring Qualified Veterans, with their tax return.  

For-Profit Organizations must complete Form 8850, Pre-Screen Notice and Certification Request for the Work Opportunity Credit, and file it with the appropriate state workforce agency within 28 days of the new hire’s start date. Next, the organization will receive certification that their new hire is eligible for the credit. Once a for-profit receives this notification, they must claim the credit as a general business credit against their income tax.

To learn more read, Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans 

Tax Planning Strategies | Time is Running Out for the WOTC

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veteran wotc tax credit

If you're planning on using the WOTC credit for hiring veterans, you need to hurry.


Although the Work Opportunity Tax Credit (WOTC) expired on January 1, 2012, for most candidates, employers can still receive a credit for hiring qualified veterans before January 1, 2013. Since the credit is scheduled to sunset in a few months, now is the time to act if you think you may be able to take advantage of it.
Both non-profits and for-profits are eligible to receive the WOTC, which is a credit against the employer’s share of the social security tax, but they have slightly different processes to follow to receive it.
Non-Profit Organizations must complete Form 8850, Pre-Screen Notice and Certification Request for the Work Opportunity Credit, and file it with the appropriate state workforce agency within 28 days of the new hire’s start date. Next, the organization will receive certification that their new hire is eligible for the credit. Once a non-profit receives this notification, they must file Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Hiring Qualified Veterans, with their tax return.  
For-Profit Organizations must complete Form 8850, Pre-Screen Notice and Certification Request for the Work Opportunity Credit, and file it with the appropriate state workforce agency within 28 days of the new hire’s start date. Next, the organization will receive certification that their new hire is eligible for the credit. Once a for-profit receives this notification, they must claim the credit as a general business credit against their income tax.
To learn more read, Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans 

Are Your Travel Expenses Deductible?

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deducting travel expenses

Stop! Just because you’re driving to work doesn’t mean you can deduct the expense.

In a recent Tax Court case, the court found that a taxpayer’s attempt to deduct travel expenses to his temporary worksites was not valid. Because the taxpayer’s worksites were temporary, he felt his permanent worksite was his home and, therefore, deducted his travel expenses to the temporary sites. However, the evidence did not show that there was any place where the taxpayer normally worked during the year from which the travel to the temporary sites would then be deductible.

Deducting Travel Expenses

Determine your tax home

  • Tax Home: Your tax home is typically your regular place of business or post of duty, regardless of where you live.
  • If you regularly work in more than one place, then you must determine your main place of business or work by asking yourself: (1) How much total time do you ordinarily spend in each place? (2) What is the level of business activity in each place? (3) Is your income from each place significant?

Decide whether you want to deduct standard mileage rate or actual car expenses

  • If you qualify to deduct car expenses, you may be able to use the standard mileage rate to figure the deductible costs of using your car for work. Remember, if you use the standard mileage rate for the year, you may not deduct actual car expenses for that year (maintenance, repairs, etc.)
  • Alternatively, you may be able to deduct actual car expenses which include the following: depreciation, licenses, gas, insurance, garage rent, parking fees, registration fees, repairs, etc.

For more information read, Publication 463, Travel, Entertainment, Gift, and Car Expenses. Questions? Contact H&S.

School is Out! Remember to Keep These Summer Tax Tips in Mind For Your Child’s Daycare…

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Child with Books

The Child and Dependent Care Tax Credit is available for childcare expenses incurred throughout the year.

School is out! For many families with young children, that means finding daycare facilities or babysitters to watch the kids. When you’re making plans don’t forget about the Child and Dependent Care Tax Credit!

This credit is available for childcare expenses incurred throughout the year so parents are able to work or look for work. Below is a reminder of what you need to know:

  • To qualify, children must be under age 13
  • Either at-home sitters or daycare facilities outside of the home may qualify
  • Overnight camps and summer school/tutoring do not qualify
  • The credit is available for up to $3000 of unreimbursed expenses paid in a year, for one qualifying child, or $6000 of unreimbursed expenses for two or more qualifying children

You will want to be sure to save receipts and documentation to reference when filing your taxes. Also, you are required to report the Employee Identification Number (EIN) of the camp, location, and dates the child(ren) attended, so be sure to keep track of these items throughout the year.

Sources + Forms
Child and Dependent Care Expense Tax Credit
 Keep the Child and Dependent Care Tax Credit in Mind for Summer Planning

Job Search Expenses May be Deductible

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Costs associated with looking for a new job may be deductible.

Costs associated with looking for a new job may be deductible. Below, is a list of what you need to know:

  • The costs must be related to searching for a job in the same occupation as your pervious job
  • Costs associated with preparing and mailing resumes, as well as, outplacement agency fees are deductible
  • Travel expenses and mileage may also be deductible if the time was primarily spent searching for employment
  • To claim job search expenses, list them as miscellaneous itemized deductions in Schedule A

What Doesn’t Qualify?

  • If there was a large time lapse between the end of your last job and the start of your search, then expenses are not deductible
  • Expenses related to those pursing their first job are not deductible

Remember, to keep receipts and any other proof of searching for a job. Be sure to make notes of date, time, mileage, and a description of what you were doing while traveling if you plan to deduct travel expenses. If you have questions regarding whether your expenses qualify for this deduction, please contact an H&S representative.

Reporting Vacation Rental Income

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Rental Property Income

Make sure you properly report income earned from renting a property. (Photo Credit: office.microsoft.com)

If you earn income from renting a vacation property, then you will need to report the following on your taxes:

  • Income earned from renting houses, apartments, condos, mobile homes, boats, etc. needs to be reported
  • Schedule E is normally used to report rental income and certain rental expenses
  • Expenses claimed from a property used as a vacation home and personal residence must be divided between personal and rental use (personal use is considered more than 14 days or 10% of the total days the property is rented)
  • Income is not required to be reported for a property that is used as a personal home but is rented for fewer than 15 days/year

Sources + Forms
Schedule E (Form 1040), Supplemental Income and Loss – IRS.gov

Another Charitable Contribution Deduction Lost on a Paperwork Technicality

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charitable contributions perks

If you made a charitable contribution and received a ‘perk’ in return, such as a free round of golf, you need to make sure you document it correctly.

Last week, a couple was denied their $18.5 million deduction due to a paperwork technicality, this week there was another case of a taxpayer losing their deduction based on a paperwork problem.

A $25,000 charitable contribution deduction was rejected because the donee organization failed to document whether the donor received any ‘perks’ as a result of the donation.

Why Does This Need To Be Documented?

This needs to be documented because you may only deduct the donation less any perks received. Here are a few examples:

  • You donate $200 to your favorite charity and, as a thank you, they give you two tickets to an MSU football game. The tickets have a fair market value of $100. You may only deduct $100 because of the ‘perk’ you received.
  • Concert tickets go on sale with all proceeds supporting your favorite charity, so you buy them for $50. The concert tickets have a fair market value of $14. You may only deduct $36.
  • You buy tickets to a benefit dinner for $500. The fair market value of the dinner and drinks you receive is $100. You may only deduct $400.
  • At a silent auction you bid $5000 on and win a flat screen TV. The fair market value of the TV is $1000, so you may only deduct $4000.

 

What if I received documentation from the organization I donated to, but they failed to document all the required information?

Contact the organization as soon as possible to receive proper documentation! The IRS has been cracking down on compliance with charitable contribution deductions, so you will want to make sure to keep your paperwork organized and ready for next tax season.

Further Reading + Useful Links
This Tax Season is Almost Over, But Stay Organized for Next!
In the News: Couple Loses $18.5 Million Deduction on Technicality
IRS Publication 561, Determining the Value of Donated Property
IRS Publication 526 (2012) Charitable Contributions
Form 8283, Noncash Charitable Contributions

 

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