Hurricane Season - How to Claim a Casualty Loss

Top Ten Tips for Taxpayers Deducting Casualty and Theft Losses

People who find themselves the victim of a natural disaster or theft this summer should know the rules for deducting their casualty losses next year when they file their federal tax return. Generally, you may deduct losses to your home, household items and vehicles on your federal income tax return.

Here are ten things the IRS wants you to know about deducting casualty or theft losses.

You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement. You must reduce your loss by the amount of the reimbursement. I.E. Hurricane takes the roof off your home and the cost of the repairs EXCEEDS your insurance coverage, you have a deductible loss.

A casualty does not include normal wear and tear or progressive deterioration from age or termite damage.

The damage must be caused by a sudden, unexpected or unusual event like a car accident, fire, earthquake, flood or vandalism.

If your property is not completely destroyed or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty or theft, reduced by any insurance or other reimbursement you receive or expect to receive.

If business or income-producing property, such as rental property, is completely destroyed, the amount of your loss is your adjusted basis in the property minus any salvage value, and minus any insurance or other reimbursement you receive or expect to receive.

To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your federal tax return. Generally, you may claim casualty or theft loss of personal use property only if you itemize deductions on Form 1040, Schedule A. However, you can deduct a 2008 or 2009 net disaster loss from a federally-declared disaster even if you do not itemize your deductions.

If the property was held by you for personal use, you must further reduce your loss by $100. This $100 reduction for losses of personal-use property applies to each casualty or theft event that occurred during the year other than 2009. For 2009, individuals must reduce their casualty and theft losses for personal-use property by $500 instead of $100. This $500 reduction for losses of personal-use property applies to each casualty or theft event.

The total of all your casualty and theft losses of personal-use property usually must be further reduced by 10 percent of your adjusted gross income. The 10 percent AGI limitation does not apply to net disaster losses resulting from federally declared disasters in 2008 and 2009. Also if you are a Madoff victim, there are special rules that apply.

In figuring your loss, do not consider the loss of future profits or income due to the casualty. Its a shame but tis true, if your work truck gets destroyed and you use it to earn a living. Your Casualty loss is limited to truck, not the income earning potential of the truck.

Casualty losses are normally deductible only in the year the casualty occurred. But if you have a deductible loss from a federally declared disaster you can choose to deduct that loss on your tax return for the previous year. If you have already filed your return for the preceding year, you can claim the loss on the previous year tax return by filing an amended return.

Update on First Time Home Buyer Credit

Credit for First Time Home Buyer
Credit for First Time Home BuyerKey PointsThere is a credit available to individuals who purchased their first home after April 8, 2008, and before December 1, 2009. So Hurry up the clock is ticking on this credit. This is an extension of the previous date of April 2009.

For homes purchased in 2008, you may be eligible for a credit of up to $7500, which is basically an interest free loan due and payable over the next 15 years in equal annual installments beginning in 2010.

For homes purchased in 2009, you may be eligible for a credit of $8000, the credit does not have to be paid back unless the home ceases to be the taxpayers primary residence during the three year period following the purchase date. The credit cannot be claimed before the closing date. You may amend your return if you have filed already in order to take 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.

New Payroll Tax form for some New York Businesses

A New : New York State Payroll Tax

The metropolitan commuter transportation mobility tax (MCTMT) is a new tax imposed on certain employers and self-employed individuals engaging in business within the metropolitan commuter transportation district (MCTD). This department administers the tax for the Metropolitan Transportation Authority. (The MCTD includes the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester.)

Your MCTMT due is .34% (.0034) of your payroll expenses for all covered employees for each calendar quarter. The tax is remitted on a new quarterly form (MTA-305) Employer’s Quarterly Metropolitan Commuter Transportation Mobility Tax Return.

You can choose to pay this tax using the PrompTax program if you currently use the PrompTax program to file New York State withholding tax.

DUE DATES

Period	Due date
March 1, 2009 to September 30, 2009*	November 2, 2009
October 1, 2009 to December 31, 2009	February 1, 2010

For 2010, the return will be due quarterly with your other payroll tax returns so they will be due:

Quarter	Due date
January 1 to March 31	April 30
April 1 to June 30	July 31
July 1 to September 30	October 31
October 1 to December 31	January 31

You are not required to file until the first quarter when your payroll expense exceeds $2,500. However, if you previously filed but have a payroll expense of less than $2,500 for a later quarter, you must file a return showing no tax due.

Mortgage Workouts : What you should know

There is tax relief for struggling homeowners.

If your mortgage debt is partly or entirely written off/ canceled (forgiven) during 2007 through 2012; You may be able to claim a special tax relief for your federal taxes.

Here are few things the IRS wants you to know about mortgage debt forgiveness.

A. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from tax up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.

B. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief.

C. The debt must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

D. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax-relief provision. In some cases, other kinds of tax relief – based on insolvency, for example – may be available. In this economy, more and more clients are reducing their credit card debt via debt settlement companies, this will result in you receiving a 1099-C for the amount of debt canceled. You will be responsible to pay income taxes (ordinary income) on that amount.

E. If your debt is reduced or eliminated you should receive a Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven(canceled) and the fair market value of any property given up through foreclosure.

F. People who qualify claim the special exclusion by filling out Federal Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attaching it to their federal income tax return for the year.

For more information contact your CPA or tax professional.

Tax Tips for New Businesses

Thinking about Starting A New Business?

Here a few quick tax tips to help you along the way.

First, you must decide what type of business entity you are going to establish. This will determine how you are taxed by the IRS, State, and local (Including but not limited to Income tax, self-employment tax, employment or payroll taxes, and excise tax). The most common types of businesses are LLCs, sole proprietorship's, partnerships, corporations and S corporations.

Make sure you get An Employer Identification Number (EIN). Many people who use simple online sites to get Incorporated often neglect to get an EIN#. This is needed to open an bank account as well as report taxes to the various government agencies.

Keep Good records. If you can, purchase a computer based bookkeeping system such as QuickBooks. A good set of quickbooks is a valuable asset to have in case of a government audit as well as a client billing dispute. Also, there is a saying " Good Data In, Good Data out", so either learn quickbooks from a Quickbooks Proadvisor or hire a local bookkeeper to do the data entry for you.

Plan ahead. Many taxpayers fail to realize until the end of the year that they may owe tax. This occurs primarily because the taxpayer fails to notify his or her accountant of the activity inside the business until year-end. Ask your accountant to visit you at least quarterly to assure that your estimated tax payments are sufficient to cover your projected tax bill.

Filing Tax Returns Late or Paying Tax Returns Late

Filing Tax Returns Late or Paying Tax Returns Late

Which is the lessor of these two issues?

In this economy, it is not impossible to believe that small business owners or individual tax payers may have a hard time paying or completing their respective tax returns. There are options available for taxpayers who need assistance in preparing or paying their taxes.

Filing Late or not Filing

It is always in your best interest to file your taxes timely. If you cant file timely, prepare an extension to allow yourself additional time to prepare your returns. However, your tax (Money0 is due on the original due date either March 15th or April 15th depending on whether you are a corporation or a partnership.

If your return is late, and you have not filed; You should do so as soon as possible to avoid additional interests and penalties.

Paying Your Taxes

There are multiple options available to pay your taxes these days. From credit cards, to check, to the IRS's EFTPS (Electronic Funds Transfer Payment System). If you cannot pay your complete tax bill on time, you should pay as much as possible as soon as possible to reduce the amount of interest and penalties that will accrue.
Based on the circumstances, a taxpayer could qualify for an extension of time to pay, an Installment Agreement, temporary delay, or Offer in Compromise from the IRS. You must meet specific reasons and follow the appropriate procedures in order to qualify.

Keep in mind that with low borrowing rates, it may be cheaper to borrow the money to pay your taxes from a creditor rather than going on a n installment agreement with the IRS.

Retirement Plan Due Dates

Is your Corporate or Partnership return on extension? Do you have questions regarding your retirment plan contribution due dates? This post will help outline those dates for you so you can properly plan for the upcoming year as well as finalize your tax return that is on extension.


Consider a SEP
Simplified Employee Pension plans (SEPs) can provide a significant source of income at retirement by allowing employers to set aside money in retirement accounts for themselves and their employees. Under a SEP, an employer contributes directly to traditional individual retirement accounts (SEP-IRAs) for all employees (including the employer). A SEP does not have the start-up and operating costs of a conventional retirement plan and allows for a contribution of up to 25 percent of each employee’s pay.

SEP Plans can be extablished (started) as late as the extended due date of the tax return. That means if your corporation as a December 31, 2008 year end, you can start and fund your SEP for your business as late as the extended due date of September 15, 2009.

Check out IRS Publication 560 for more details or contact your Local CPA.