Charitable Giving Tips

If you make a donation to a charity this year, you may be able to take a
deduction for it on your 2011 tax return. Here are the top nine things the IRS
wants every taxpayer to know before deducting charitable donations.

1. Make sure the organization qualifies Charitable contributions must be made to qualified
   organizations to be deductible. You can ask any organization whether it is
   a qualified organization or check IRS Publication 78, Cumulative List of
   Organizations. It is available online at the IRS.
2. You must itemize
   Charitable contributions are deductible only if you itemize deductions
   using Form 1040, Schedule A.
3. What you can deduct 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. When you receive something in return 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. Recordkeeping Keep good records of
   any contribution you make, regardless of the amount. For any cash
   contribution, you must maintain a record of the contribution, such as a
   cancelled check, bank or credit card statement, payroll deduction record
   or a written statement from the charity containing the date and amount of
   the contribution and the name of the organization.
6. Pledges and payments
   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, you can only deduct $200.
7. Donations made near the end of the year Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the
        credit card bill or have your bank account debited until the next year.
8. Large donations
   For any contribution of $250 or more, you need more than a bank record.
   You must have a written acknowledgment from the organization. It must
   include the amount of cash and say whether the organization provided any
   goods or services in exchange for the gift. If you donated property, the
   acknowledgment must include a description of the items and a good faith
   estimate of its value. For items valued at $500 or more you must complete
   a Form 8283, Noncash Charitable Contributions, and attach the form to your
   return. If you claim a deduction for a contribution of noncash property
   worth more than $5,000, you generally must obtain an appraisal and
   complete Section B of Form 8283 with your return.
9. Tax Exemption Revoked Approximately 275,000 organizations automatically lost
   their tax-exempt status recently because they did not file required annual
   reports for three consecutive years, as required by law. Donations made
   prior to an organization’s automatic revocation remain tax-deductible.
   Going forward, however, organizations that are on the auto-revocation list
   that do not receive reinstatement are no longer eligible to receive
   tax-deductible contributions.

For more information contact your local (Staten Island CPA) for more assistance.

Back-to-School Tips for Students and Parents Paying College Expenses

Back-to-School Tips for Students and Parents Paying College Expenses 

Whether you’re a recent graduate going to college for the first time or a returning student, it will soon be time to get to campus – and payment deadlines for tuition and other fees are not far behind. The Internal Revenue Service reminds students or parents paying such expenses to keep receipts and to be aware of some tax benefits that can help offset college costs.

Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

1. American Opportunity Credit  This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).
2. Lifetime Learning Credit  In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).
3. Tuition and Fees Deduction  This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).
4. Student loan interest deduction  Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

If you have any questions or concers, feel free to contact me at my office at 718-227-6035.
Goldenthal & Suss CPAs & Consultants, PC
David C Egan, CPA
Partner
465 Belfield Avenue
Staten Island, NY 10312

444 Madison Avenue
4 Fl
New York, NY 10022

Make Sure Your Tax Preparer Signs Your Tax Return - He or She May Be a Ghost

As part of its new oversight program of the nation’s tax return preparation industry, the Internal Revenue Service today announced it will send letters to approximately 100,000 tax return preparers who prepared returns in 2011 but failed to follow new requirements.

In 2010, the IRS launched an initiative to increase its oversight of the tax return preparation industry and regulate the conduct of tax return preparers. All paid tax return preparers must obtain a Preparer Tax Identification Number (PTIN) and, when required to do so, sign their names and include their PTINs on the returns and refund claims they prepare for compensation.

Starting July 7, 2011, the IRS began sending letters to about 100,000 tax return preparers who either used outdated PTINs or used social security numbers as identifying numbers on returns they prepared this filing season. The letters explain the new oversight program, inform preparers of how to register for a new PTIN, or renew an old PTIN, and where to get assistance.

“The vast majority of federal tax return preparers complied with the rules. Obviously, some preparers did not get the word, so these letters provide additional information so they can register as soon as possible,” said IRS Commissioner Doug Shulman. “We owe it to the compliant tax preparers to make sure that everyone is on a level playing field.”

The IRS launched its PTIN registration program last fall. Since then, about 712,000 tax preparers have registered and obtained PTINs. Paid preparers who are not Certified Public Accountants, attorneys or Enrolled Agents, have additional requirements to pass a competency exam and suitability check, which are expected to start this fall, and complete 15 hours of continuing education credits annually, which will start in 2012.

Some unscrupulous preparers may attempt to elude the new oversight program by not signing returns they prepare. Taxpayers should never use tax return preparers who refuse to sign returns and enter PTINs.

In an effort to identify these “ghost preparers,” the IRS later this year also will send letters to taxpayers who appear to have had assistance with their returns but lack tax return preparer signatures. The letter will inform taxpayers how to file a complaint against preparers who failed to sign returns and explain how to choose legitimate tax preparers. The goal of the letters is to protect taxpayers by ensuring that all paid federal tax return preparers are registered with the IRS, and sign tax returns they prepare and use an identifying number when required to do so.

Compliance is a central part of the new tax return preparer initiative and the letters are one step in an ongoing compliance effort to ensure tax return preparers are following the new regulations. The IRS also is working to identify tax return preparers who make repeated errors and IRS personnel have had face-to-face meetings with thousands of these tax return preparers over the past two years.

NYS Fair Play Act - NYS is Targeting Construction Firms

The NYS Construction Industry Fair Play Act takes effect on October 26, 2010; However, NYS is currently tightening up the enforcement of this Act.  The Law/Act creates a new standard for determining whether a worker is an employee or independent contractor in the construction industry.  It provides new penalties for employers who fail to properly classify their employees. 

The New Standards are Such:
The Law/Act presumes that individuals working for an employer are employees unless they meet ALL THREE criteria listed below.

1. Free from control and direction in preforming the job, both under contract AND in fact
2. Performing services outside of the usual course of business for the company AND
3. Engaged in an independently established trade, occupation or business that is similar to the service they preform.

Separate Business Entity:
The Law/Act also contains a 12 part "test" to determine when a sole proprietor, partnership, corporation or other entity will be considered a "separate business entity" from the contractor for whom it provides a service.  If an entity meets ALL of the 12 criteria, it will NOT be considered an employee of the contractor.  Instead it will be a separate business that is itself subject to the new law regarding its own employees.
To be considered a separate business entity from the business to which services are provided, a sole proprietor, partnership, corporation or other, entity must meet all 12 criteria.

1. be performing the service free from the direction or control over the means and manner of providing the service subject only to the right of the contractor to specify the desired result;
2. not be subject to cancellation when its work with the contractor ends;
3. have the substantial investment of capital in the entity beyond ordinary tools and equipment and a personal vehicle;
4. own the capital goods and gain the profits and bear the losses of the entity;
5. makes its services available to the general public or business community on a regular basis;
6. include the services provided on a federal income tax schedule as an independent business;
7. perform the services under the entity's name;
8. obtain and pay for any required license or permit in the entity's name;
9. furnish the tools and equipment necessary to provide the service;
10. hire its own employees without contractor approval, pay the employees without reimbursement from the contractor and report the employees' income to the Internal Revenue Service;
11. have the right to perform similar services for others on whatever basis and whenever it chooses; and
12. the contractor does not represent the entity or the employees of the entity as its own employees to its customers.

Coverage:
The law applies to all contractors in the construction industry. Construction is defined as including constructing, reconstructing, altering, maintaining, moving, rehabilitating, repairing, renovating or demolition of any building, structure or improvement or relating to the excavation of or other development to land.

Agencies Covered:
The new standard for determining employment applies to determinations under the Labor Law (including labor standards, prevailing wage law and unemployment insurance) and the Workers' Compensation Law. It does not apply to determinations under the NYS Tax Law. The NYS Department of Taxation and Finance will continue to use its existing standards to determine employment status. The penalties provided by the new law apply to determinations of misclassification under the Labor Law, Workers' Compensation Law, and the NYS Tax Law.

Penalties:
An employer that willfully violates the Fair Play Act by failing to properly classify its employees will be subject to civil penalties of up to a $2,500 fine per misclassified employee for a first violation and up to $5,000 per misclassified employee for a second violation within a five-year period.

Employers also may be subject to criminal prosecution (a misdemeanor) for violations of the act with a penalty of up to 30 days in jail, up to a $25,000 fine and debarment from Public Work for up to one year for a first offense. Subsequent misdemeanor offenses would be punishable by up to 60 days in jail, up to a $50,000 fine and debarment for performing Public Work for up to five years.

Employers also remain subject to all of the existing penalties, taxes and restitutions of the Labor Law, Workers Compensation Law, and Tax Law violations that result from the workers misclassification. Corporate officers and certain shareholders may be personally liable for the fines and penalties under the Act, where they knowingly  permit the violations to occur.

Posting:
Construction industry employers must post a notice about the Fair Play Act in a prominent and accessible place on the job site. The Commissioner of Labor will post the required notice on the department's web site within 30 days of the effective date of the law. Failure to post the notice can result in penalties of up to $1,500 for a first offense and up to $5,000 for the second offense.

Protect Your Tax Data This Hurricane Season

Prepare for Huricane Season and Safeguard your Records


The 2011 hurricane season starts today, and the Internal Revenue Service encourages individuals and businesses to safeguard themselves against natural disasters by taking a few simple steps.

Create a Backup Set of Records Electronically

Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.

Keeping a backup set of records –– including, for example, bank statements, tax returns, insurance policies, etc. –– is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD. Also, there are online sources that can securely store files on the web. 

Document Valuables

Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.

A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.


IRS Ready to Help

If disaster strikes, an affected taxpayer can call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return.
Alternatively, transcripts showing most line items on these returns can be ordered on-line, by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.

Ten Things to Know About the Child and Dependent Care Credit

If you paid someone to care for your child, spouse, or dependent last year, you may be able to claim the Child and Dependent Care Credit on your federal income tax return.

Below are 10 things the IRS wants you to know about claiming a credit for child and dependent care expenses.

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your federal tax return.

2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

3. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.

4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your federal tax return.

5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.

6. The qualifying person must have lived with you for more than half of 2010 tax year. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents.
7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.

8. For 2010, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.

10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax.

Ten Important Facts About Capital Gains and Losses

Ten Important Facts About Capital Gains and Losses


Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may deduct capital losses only on investment property, not on property held for personal use.

5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.

6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.

8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

If you have any questions, feel free to contact me at my office.
David C Egan, CPA
718-227-6035

Missing a W-2. We've Got You Covered

If You Are Missing a W-2 Here Is What You Should Do


Before you file your 2010 tax return, you should make sure you have all the needed documents including all your Forms W-2. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Employers have until January 31, 2011 to send you a 2010 Form W-2 earnings statement.

If you haven’t received your W-2, follow these four steps:

1. Contact your employer.

 If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS

If you do not receive your W-2 by February 14th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:

• Employer’s name, address, city and state, including zip code and phone number

• Dates of employment

• An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2010. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return.

 You still must file your tax return or request an extension to file April 18, 2011, even if you do not receive your Form W-2. If you have not received your Form W-2 by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

4. File a Form 1040X

On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676). 

Contact your New York CPA as soon as possible if you believe you are missing a W-2 or need to file an ammended return.

Goldenthal & Suss CPA's & Consultants PC
David C Egan, CPA
Partner
718-227-6035

Medical and Dental Expenses

Medical and Dental Expenses




Here are six things you should know about medical and dental expenses and other benefits.



1. You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.



2. You can only include the medical expenses you paid during the year. Your total medical expenses for the year must be reduced by any reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.



3. You may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn't meet the gross income or joint return test.



4. A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.



5. You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.



6. Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.

Ten Hot Tax Tips for Parents

Ten Tax Benefits for Parents


Did you know that your children may help you qualify for some tax benefits? Here are 10 tax benefits the IRS wants parents to consider when filing their tax returns this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born.
2. Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit.
3. Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work.
4. Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. 

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included.
6. Children with Earned Income If your child has income earned from working they may be required to file a tax return.
7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate.
8. Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income.
9. Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions.
10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent.

As always, we are here to help.  Call today for your individual tax or business tax appointment.

Goldenthal & Suss CPA's & Consultants, P.C.
David C Egan, CPA
Partner
718-227-6035