The Small Business Health Care Tax Credit

The Small Business Health Care Tax Credit

This is the latest in an effort to make health insurance more affordable to small businesses and not-for-profits.

Who is (generally) eligible?

• Have to provide health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• 
  Cant be too large. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Cannot pay your workers too much (Highly compensated managers could hurt your average)            A qualifying employer must pay average annual wages below $50,000.

How much is the credit?

• The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
  As with any IRS credit there is a Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

The IRS has even taken the time to post a video on YouTube to help taxpayers and preparers alike understand the credit and how to qualify. You can find the youtube link here.

Are Fines, Penalties, or Violations Tax Deductible?

Are Fines, Penalties, or Violations Tax Deductible?

No. Neither are parking tickets while on a business meeting or health department violations for your restaurant. 

According to Internal Revenue Code Sec 162, you cannot deduct fines or penalties paid to the government.  This includes local, state, federal & foreign.  Bottom line, the IRS does not want to promote breaking the law.

So even though you may have received that parking ticket because your business meeting ran 15 minutes too late, that expense is not tax deductible.

However, if you are fined by a local government and hire an attorney or CPA to represent you in litigating / addressing the case; those fees are tax deductible.

Not Ready to File Yet - Be Sure To File An Extension

Not Ready to File Yet?

Be sure to file an extension for both the Federal (IRS) and the states in which you lived and worked in if applicable.

Remember that an extension is only to extend the date to file, not to pay.  In other words, if you think you may owe taxes with your 2009 return, be sure to pay with your extension to reduce interest and penalties.  The IRS charges a variety of penalties for not-filing and you can avoid one of their largest ones, Failure to File Penalty, by filing a federal extension. (Form 4868).  In order to calculate how much you owe, please consult with your New York CPA.

A blank form 4868 can be found here form the IRS's website.  Consult with your preparer if you have questions.

Whitehouse has a page to help Taxpayers with Recovery Act

http://www.whitehouse.gov/Recovery

Look for the tax savings tool link.  Click on the link and answer some questions.  The site should guide you to some potential tax savings that you or your preparer are not aware of.

As with any reference source, take what you can and discuss the items in questions with your CPA.

Ten Facts About Mortgage Debt Forgiveness

A quick Note on Mortgage Debt Forgiveness

If your mortgage debt is partly or entirely Forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income.  Here are 10 facts the IRS wants to know about Mortgage Debt.

1. Normally, debt forgiveness results in taxable income.  However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2.  The limit is $1 million for a married person filing a separate return.

3.  You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4.  To qualify, the debt must have been used to buy, build, or substantially improve your principal residence and be secured by that residence.

5.  Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6.  Proceeds of refinanced debt used for other purposes - for example, to pay off credit card debt - do not qualify for the exclusion.

7.  If you qualify,  claim the special exclusion by filing out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the year in which the qualified debt was forgiven.

8.  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, however, other tax relief provisions - such as insolvency - may be applicable. See IRS Form 982 for specific details on this.

9.  If your debt is reduced or eliminated you normally will receive a year-end statement. Form 1099-C, Cancellation of Debt,  from your lender.  By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10.  Examine your 1099-C carefully.  Notify the lender immediately if any of the information shown is not accurate.  Particular attention should be paid to Box 2, Amount of Debt Forgiven, and Box 7, The value of your home.

For more information on the Mortgage Forgiveness Debt Relief Act of 2007, contact the IRS or your local Staten Island CPA.

Goldenthal & Suss CPA's & Consultants, P.C.

David C Egan, CPA
465 Belfield Avenue
Staten Island, NY 10312
718-227-6035

Ready to file but missing a W-2? Follow these steps.

Are you ready to file your tax return? Employers have until February 1, 2010 to send you a 2009 Form W-2 earnings statement.  If you have not received one or more of your W-2s, you can follow theses steps.


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.

Contact the IRS

If you do not receive your W-2 by February 16th, 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 2009. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

File Your Return

You still must file your tax return or request an extension to file by April 15, even if you do not receive your Form W-2. If you have not received your Form W-2 by April 15th, 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.

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.  Keep in mind, most tax professionals charge for an ammened return whereas most tax professionals dont charge for an extension to file.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or you can contact your local CPA.

David C Egan, CPA
(718)227-6035

Donate to Haiti - Deduct it on your 2009 Return

People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.
"Americans have opened their hearts to help those affected by the Haiti earthquake," said IRS Commissioner Doug Shulman." This new law provides an immediate tax benefit for the many taxpayers who have made generous donations."

Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.
The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.
To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.

The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.
Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

This year’s special Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26, 2004, Indian Ocean tsunami, allowed taxpayers to deduct donations they made during January 2005 as if they made the donations in 2004. 

For more information contact your tax professional.
David C Egan, CPA 718-227-6035