Four Tips to Help People Avoid Errors On the Recovery Rebate Credit
Most people who received the economic stimulus payment last year will not be able to claim the Recovery Rebate Credit on their 2008 federal income tax returns. A small number of taxpayers who did not receive the full economic stimulus payment last year may be eligible to claim the Recovery Rebate Credit on their 2008 federal income tax return.
Figuring the Recovery Rebate Credit incorrectly or entering inaccurate information will delay the processing of your tax return and any refund due.
Below are the four things every person should know about this one-time credit(only for 2008 tax year), which is related to last year’s Economic Stimulus Payment:
1. You do not have to pay back your Stimulus Payment and the payment is not taxable.
2. Less than an estimated 3 percent of taxpayers are eligible. The vast majority of taxpayers are not eligible to receive the Recovery Rebate Credit.
3. Did you have a major life change? If so, you may be eligible to claim the Recovery Rebate Credit. Some of the major factors that could qualify you for the Recovery Rebate Credit include:
• Your financial situation changed dramatically from 2007 to 2008.
• You did not file a 2007 tax return.
• Your family gained an additional qualifying child in 2008.
• You were claimed as a dependent on someone else’s return in 2007, but cannot be claimed as dependent by someone else in 2008.
4. Any Recovery Rebate Credit amount will be included in your refund. The IRS will figure the credit for you and include it in your refund or put it toward any taxes owed.
Tuesday, January 27, 2009
IRS & Free File
Free File is the fast, easy, and free way to prepare and e-file your federal taxes online. The IRS has 2 ways to do so. One way is to utilize a participating company, the other way is to fill in the forms yourself and file them online yourself.
The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of private sector tax software companies.
Visit www.irs.gov for more details
Wednesday, January 14, 2009
Credit for First Time Home Buyer
Credit for First Time Home Buyer
Key Points
There is a credit available to individuals who purchased their first home after April 8, 2008, and before July 1, 2009. For a home that you construct, the purchase date is the first date you occupy the home.
The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns. The full credit is available for homes costing $75,000 or more.
The credit is actually an interest free loan and will be repaid over the next 15 years.
It is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.
Vacations home do not qualify for the credit.
Taxpayers who have not owned another home at any time during the three years prior to the date of purchase are considered first time home buyers.
The credit is claimed on a new form 5405.
As with most credits, it is subject to income limitations.
Staten Island Accountant
Staten Island Accountant
Goldenthal & Suss CPA's & Consultants, P.C.
Partner - David C. Egan, CPA
Staten Island, NY 10312
(p)718-227-6035
(f)718-227-6067
David C. Egan, CPA services Staten Island and the entire NY/NJ metro area.
Goldenthal & Suss CPA's & Consultants, P.C.
Partner - David C. Egan, CPA
Staten Island, NY 10312
(p)718-227-6035
(f)718-227-6067
David C. Egan, CPA services Staten Island and the entire NY/NJ metro area.
Monday, January 12, 2009
What Can I Deduct for my Business?
I get this question all the time. Based on guidance from the IRS, here is a good answer to the age old "What Can I deduct or What kind of expenses are deductible in my small business?"
Business expenses are the cost of carrying on (operating) your business. These expenses are usually deductible if the business is operated to make a profit. If your business never makes any profit, it may be a hobby and unfortunately hobby expenses are not deductible.
What Can I Deduct?
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. In other words, you use and expense the Internet at your office, but you could conduct business without it, although, it would take you back to the 19th century. Another example would be, business meals. They may be necessary depending on your line of work but may not be indispensable.
It is important to separate business expenses from the following expenses:
The expenses used to figure the cost of goods sold (Common in Businesses with Inventory as well as others), Capital Expenses, and Personal Expenses (Not Deductible).
Cost of Goods Sold
If your business manufactures products / items or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in calculating cost of goods sold. Cost of goods sold is deducted from your gross sales to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense; no double dipping. Inventory is complicated and requires your the taxpayer to keep detailed records of all purchases as well as which items were sold during the year.
Some Examples of the Types of expenses that go into figuring the cost of goods sold.
The cost of products or raw materials, including shipping & Storage, labor costs (including contributions to pensions or annuity plans) for workers who produce the products, Factory overhead.
Capital Expenses
You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business.There are, in general, three types of costs you capitalize.
Business start-up cost (See the note below)
Business assets
Improvements
Capital assets are written off over time via depreciation or amortization. Depending on the asset type, you may be able to elect a Section 179 deduction, subject to certain limitations.
Personal versus Business Expenses
Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.
For example, if you borrow money and use 80% of it for business and the other 20% for a family vacation, you can deduct 80% of the interest as a business expense. The remaining 20% is personal interest and is not deductible.
Business Use of Your Home
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.
Business Use of Your Car
If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Keep accurate records such as a daily travel log so you can provide substantive evidence in case of an audit or IRS examination.
Other Types of Business Expenses
Wages - You can generally deduct the pay you give your employees for the services they perform for your business.
Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.
Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.
Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
See my blog for details on how to correctly deduct health insurance for S-corporations.
Business expenses are the cost of carrying on (operating) your business. These expenses are usually deductible if the business is operated to make a profit. If your business never makes any profit, it may be a hobby and unfortunately hobby expenses are not deductible.
What Can I Deduct?
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. In other words, you use and expense the Internet at your office, but you could conduct business without it, although, it would take you back to the 19th century. Another example would be, business meals. They may be necessary depending on your line of work but may not be indispensable.
It is important to separate business expenses from the following expenses:
The expenses used to figure the cost of goods sold (Common in Businesses with Inventory as well as others), Capital Expenses, and Personal Expenses (Not Deductible).
Cost of Goods Sold
If your business manufactures products / items or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in calculating cost of goods sold. Cost of goods sold is deducted from your gross sales to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense; no double dipping. Inventory is complicated and requires your the taxpayer to keep detailed records of all purchases as well as which items were sold during the year.
Some Examples of the Types of expenses that go into figuring the cost of goods sold.
The cost of products or raw materials, including shipping & Storage, labor costs (including contributions to pensions or annuity plans) for workers who produce the products, Factory overhead.
Capital Expenses
You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business.There are, in general, three types of costs you capitalize.
Business start-up cost (See the note below)
Business assets
Improvements
Capital assets are written off over time via depreciation or amortization. Depending on the asset type, you may be able to elect a Section 179 deduction, subject to certain limitations.
Personal versus Business Expenses
Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.
For example, if you borrow money and use 80% of it for business and the other 20% for a family vacation, you can deduct 80% of the interest as a business expense. The remaining 20% is personal interest and is not deductible.
Business Use of Your Home
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.
Business Use of Your Car
If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Keep accurate records such as a daily travel log so you can provide substantive evidence in case of an audit or IRS examination.
Other Types of Business Expenses
Wages - You can generally deduct the pay you give your employees for the services they perform for your business.
Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.
Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.
Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
See my blog for details on how to correctly deduct health insurance for S-corporations.
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