About us

Hello Taxpayers,

We are blogging to let you know that second-quarter estimated tax payments for 2012 are due to the IRS June 15.

If you plan to pay second-quarter (April 1 – May 31) estimated taxes, we can help by calculating the estimated amount you may owe. 

Get Answers to Common Questions About Quarterly Taxes 

http://www.irs.gov/businesses/small/article/0„id=110413,00.html

http://www.irs.gov/pub/irs-pdf/f1040es.pdf 

Contact Chad Shultz, CPA at shultzcpa@gmail.com or 904.400.1238

If you didn’t use a CPA, you may not have received the maximum tax refund you’re entitled to. Email or bring in your 2011, 2010, and/or 2009 tax return(s) for review by Chad Shultz, CPA. Who will review them for accuracy and check to see if you claimed all eligible tax credits and deductions.

A CPA Review can uncover differences in your return which may lead to bigger refunds. This review includes a professional review of your original tax return and advice on what to do if variances are found. If your tax return is correct, or if you have us file a corrected return for you, we’ll stand behind you in case you’re audited. That’s just part of working with a CPA.

With a CPA Review you’ll get:

• A professional review of your tax return

• Advice on what to do next if any variances are found

  Contact Chad Shultz, CPA at 904.400.1238 or shultzcpa@gmail.com

  

Contact Chad Shultz, CPA shultzcpa@gmail.com or 904.400.1238.

The Internal Revenue Service announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed and making Installment Agreements available to more people.

Under the new Fresh Start provisions, part of a broader effort started at the IRS in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS is doubling the dollar threshold for taxpayers eligible for Installment Agreements to help more people qualify for the program.

“We have an obligation to work with taxpayers who are struggling to make ends meet,” said IRS Commissioner Doug Shulman. ”This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.”

Penalty Relief

The IRS announced plans for new penalty relief for the unemployed on failure-to-pay penalties, which are one of the biggest factors a financially distressed taxpayer faces on a tax bill.

To assist those most in need, a six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two categories of taxpayers:

Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year.
Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.
This penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A to seek the 2011 penalty relief. The new form is available on IRS.gov.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief, taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline. However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS strongly encourages taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, also with a 25 percent cap.

Installment Agreements

The Fresh Start provisions also mean that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes.

The IRS announced today that, effective immediately, the threshold for using an installment agreement without having to supply the IRS with a financial statement has been raised from $25,000 to $50,000. This is a significant reduction in taxpayer burden.

Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.

Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option.

An installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments.

Taxpayers can set up an installment agreement with the IRS by going to the On-line Payment Agreement (OPA) page on IRS.gov and following the instructions.

These changes supplement a number of efforts to help struggling taxpayers, including the “Fresh Start” program announced last year. The initiative includes a variety of changes to help individuals and businesses pay back taxes more easily and with less burden, including the issuance of fewer tax liens.

“Our goal is to help people meet their obligations and get back on their feet financially,” Shulman said.

Input from the Internal Revenue Service Advisory Council and the IRS National Taxpayer Advocate’s office contributed to the formulation of Fresh Start.

Offers in Compromise

Under the first round of Fresh Start, the IRS expanded a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the OIC program to more closely reflect real-world situations.

For example, the IRS has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Details on IRS Collection and Other Information

A series of eight short videos are available to familiarize taxpayers and practitioners with the IRS collection process. The series “Owe Taxes? Understanding IRS Collection Efforts”, is available on the IRS website, www.irs.gov.

The tax deadline may have just passed but planning for next year can start now. The IRS reminds taxpayers that being organized and planning ahead can save time, money and headaches in 2013. Here are eight things you can do now to make next April 15 easier.

1. Adjust your withholding Why wait another year for a big refund? Now is a good time to review your withholding and make adjustments for next year, especially if you’d prefer more money in each paycheck this year. If you owed at tax time, perhaps you’d like next year’s tax payment to be smaller. Use IRS’s Withholding Calculator at www.irs.gov or Publication 919, How Do I Adjust My Tax Withholding?
   
   
2. Store your return in a safe place Put your 2011 tax return and supporting documents somewhere secure so you’ll know exactly where to find them if you receive an IRS notice and need to refer to your return. If it is easy to find, you can also use it as a helpful guide for next year’s return.
   
   
3. Organize your recordkeeping Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Just be consistent to avoid a scramble for misplaced mileage logs or charity receipts come tax time.
   
   
4. Review your paycheck Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. These payroll adjustments can make a big difference on your bottom line. Fixing an error in your paycheck now gets you back on track before it becomes a huge hassle.
   
   
5. Shop for a tax professional early If you use a tax professional to help you strategize, plan and make financial decisions throughout the year, then search now. You’ll have more time when you’re not up against a deadline or anxious for your refund. Choose a tax professional wisely. You are ultimately responsible for the accuracy of your own return regardless of who prepares it. Find tips for choosing a preparer at www.irs.gov.
   
   
6. Prepare to itemize deductions If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to bundle deductions into 2012 may pay off. An early or extra mortgage payment, pre-deadline property tax payments, planned donations or strategically paid medical bills could equal some tax savings. See the Schedule A instructions for expenses you can deduct if you’re itemizing and then prepare an approach that works best for you.
   
   
7. Strategize tuition payments The American Opportunity Tax Credit, which offsets higher education expenses, is set to expire after 2012. It may be beneficial to pay 2013 tuition in 2012 to take full advantage of this tax credit, up to $2,500, before it expires. For more information, see IRS Publication 970, Tax Benefits for Education.
   
   
8. Keep up with changes Find out about tax law changes, helpful tips and IRS announcements all year by subscribing to IRS Tax Tips through www.irs.gov or IRS2Go, the mobile app from the IRS. The IRS issues tips regularly during summer and tax season. Special Edition tips are sent periodically with other timely updates.

The IRS emphasizes that each household’s financial circumstances are different so it’s important to fully consider your specific situation and goals before making large financial decisions.

You can find forms and publications at www.irs.gov or order them by calling 800-TAX-FORM (800-829-3676).

Links:

• IRS Withholding Calculator
• Publication 919, How Do I Adjust My Tax Withholding? (PDF)
• 2011 Form 1040 (Schedule A) (PDF)
• Publication 970, Tax Benefits for Education (PDF)

Contact Chad Shultz, CPA at chadshultz@shultztax.com or 904.400.1238 with questions. 

Reminder to Parents and Students; Don’t Overlook College Tax Benefits

** Need help or have questions? Contact Chad Shultz, CPA at shultzcpa@gmail.com **

Two tax credits and a tax deduction are available to taxpayers who paid tuition and other expenses for an eligible student during 2011. Because an eligible student can be the taxpayer, spouse or dependent, these benefits can, for example, help workers taking continuing education courses and people returning to school, as well as parents paying for their children’s college education.

Given the number of different higher education credits and deductions, the IRS reminds taxpayers to carefully review eligibility requirements so they don’t overlook these important college benefits. Tax benefits include the following:

• The American Opportunity Tax Credit helps pay for the first four years of post-secondary education. Tuition, required enrollment fees, books and other required course materials generally qualify, and eligible students must be enrolled at least half time. Qualifying expenses of $4,000 or more in 2011 can earn a taxpayer the maximum credit of $2,500 per student per year. Even taxpayers who owe no tax can get a payment of the credit of up to $1,000 for each eligible student. The credit is claimed on Form 8863. But the IRS warns taxpayers to avoid an often-costly tax scam, currently being promoted widely to senior citizens, low-income families and church members falsely claiming that refunds based on the credit are available, even if they’re not currently enrolled in college and even if they went to school decades ago. In addition, some international students, normally considered nonresident aliens for tax purposes, have been improperly advised that they qualify for the credit.
• The Lifetime Learning Credit, limited to $2,000 per taxpayer per year, can be claimed based on tuition and required enrollment fees paid for any level of post-secondary education. Because of differences between the two credits and the fact that the American Opportunity Tax Credit usually yields greater tax savings at the undergraduate level, the Lifetime Learning Credit may be particularly helpful to graduate students, students taking only one course and those who are not pursuing a degree. The Lifetime Learning Credit is also claimed on Form 8863.
• The tuition and fees deduction is available for both full-time and part-time students at all levels of post-secondary education. The deduction of up to $4,000 is claimed on Form 8917.

Each year, a student normally receives a Form 1098-T from their college showing tuition payments and other information.

Though a taxpayer often qualifies for more than one of these benefits, he or she can only claim one of them for a particular student in 2011. Income limits and other special rules apply to each of these benefits. The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for each of these benefits.

Often, tax credits are more valuable, because they reduce the amount of tax owed, whereas deductions reduce the income on which tax is figured. Tax software can often help parents and students determine which benefit yields the greatest tax savings.

Besides these tax benefits, parents, students and former students who made student loan payments during 2011 can deduct up to $2,500 of student loan interest. Normally, borrowers receive from their financial institution Form 1098-E showing student loan interest paid for the year. This deduction is claimed on Form 1040 Line 33 or Form 1040A Line 18. Income limits and other special rules apply. For example, the student must have been enrolled at least half time in a degree or certificate program. A worksheet in the tax form instructions can help taxpayers figure the deduction correctly.

The student loan interest deduction, the tuition and fees deduction and both tax credits can be claimed by eligible taxpayers, regardless of whether they itemize deductions on Schedule A. These benefits are available to both Form 1040 and 1040A filers. Details on these and other education-related deductions and credits can be found in the Tax Benefits for Education Information Center on IRS.gov.

Some employees may be able to deduct certain work-related expenses. The following facts from the IRS can help you determine which expenses are deductible as an employee business expense. You must be itemizing deductions on IRS Schedule A to qualify.

Expenses that qualify for an itemized deduction generally include:

• Business travel away from home
• Business use of your car
• Business meals and entertainment
• Travel
• Use of your home
• Education
• Supplies
• Tools
• Miscellaneous expenses

You must keep records to prove the business expenses you deduct. For general information on recordkeeping, see IRS Publication 552, Recordkeeping for Individuals available on at  www.irs.gov.

If your employer reimburses you under an accountable plan, you should not include the payments in your gross income, and you may not deduct any of the reimbursed amounts.

An accountable plan must meet three requirements:

1. You must have paid or incurred expenses that are deductible while performing services as an employee.
   
   
2. You must adequately account to your employer for these expenses within a reasonable time period.
   
   
3. You must return any excess reimbursement or allowance within a reasonable time period.

If the plan under which you are reimbursed by your employer is non-accountable, the payments you receive should be included in the wages shown on your Form W-2. You must report the income and itemize your deductions to deduct these expenses.

Generally, you report unreimbursed expenses on IRS Form 2106 or IRS Form 2106-EZ and attach it to Form 1040. Deductible expenses are then reported on IRS Schedule A, as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2 percent of your adjusted gross income.

For more information contact Chad Shultz, CPA at 904.400.1238 or chadshultz@shultztax.com

Tax Thursdays: Paperless Tax Records

Welcome to the FreshBooks Tax Thursdays series! We know a lot of small businesses struggle with taxes, so we’re hoping to help make it a little easier by featuring advice from leading accounting professionals every second Thursday from January to April. Today Chad Shultz, CPA explains how to set up electronic tax records.

Paperless tax records can save you time, money and a ton of shelf space where boxes of paper once sat collecting dust. No more overflowing file drawers of old tax returns, just a few neatly organized folders on your computer or the Web.

Here are the 3 rules to making sure everything is safe and kept correctly as you prepare to file tax returns online:

1.    Create tax records as PDF files

As a general rule when going paperless, you’ll want to keep an electronic copy (or scan) of these records:
•    receipts
•    mileage logs
•    bank statements
•    tax documents (W-2′s, 1099′s, T4’s, etc.)
•    Statements (Mortgage, Church contributions, etc.)
If scanning receipts is starting to feel tedious, consider using a service like Shoeboxedwho will turn piles of receipts into expense reports. You can also have records emailed to you or download the records from the web.

2. Save tax records in a safe place (at least twice)

The most secure way to store your records is to save the electronic files to an external jump drive and then save them online.
TO be safe, protect your computer files with passwords, delete the files from your laptop and lock the jump drive in a safe place. It’s highly advised to store the records online so that you can access your files from any computer, laptop, tablet or phone. This means saving your work to the “Cloud” with an online storage provider with whom you set up an account. Many people use Google Docs, Dropbox or Box. Simply create a new folder for each year and save all of your PDF files to the folder. If you have an accountant or tax preparer, you can share the online files with them to view, print and download as required.

3.    Experience the benefits to filing your tax return online

Preparing tax returns electronically is the norm today. You can find a service on the Web, purchase software at a store, or use a professional tax preparer. Once the tax return is complete, preview the file before filing. If a tax professional has prepared your return, ask them to email you a PDF copy for your review. Once you have reviewed the return and double-checked the results, it’s time to file. Should you owe taxes, you can setup a payment by e-check or credit card. If you are one of the lucky ones receiving a refund, have the refund direct deposited into your bank.

Electronic filing to the appropriate tax authority will not only will you save postage, paper and time but you will receive a confirmation that your tax return was received. Save a copy of your tax return as a PDF and save the tax return to the jump drive and online.

The paperless process we’ve outlined can relieve you of the burden of paper and lost records but it is a commitment. However, setting up the system so that you’re able to file quickly and painlessly will have you thanking yourself in the long run!

Chad Shultz is a Certified Public Accountant in Jacksonville, Florida, USA. Chad is the Chief Innovation Officer of Chad Shultz, CPA, which provides progressive accounting & tax services. Chad believes the future of accounting is moving to the cloud and is changing the way accountants do business. To get in touch, visitwww.shultztax.com

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
   
   
2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
   
   
3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.
   
   
4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.
   
   
5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
   
   
6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

As usual, Congress and the IRS have implemented a host of new tax law changes for us to digest. We have summarized the high impact items below so that you’re fully prepared for tax season.

Due Date of Tax Return

This year taxpayers have two extra days or until Tuesday, April 17, 2012 to file their 2011 income tax returns. That’s because April 15 falls on a Sunday and Monday, April 16 is Emancipation Day, a holiday in the District of Columbia.

Non-Business Energy Property Credit

This popular credit has been extended for 2011 but the associated benefits have been decreased. The credit has been reduced from 30 percent to 10 percent of the amount the homeowner spends on energy-saving improvements. The lifetime limit has been decreased from $1,500 to $500. This represents the aggregate credit amount that taxpayers can claim on their 2006, 2007 and 2009 – 2011 tax returns (the credit did not exist in 2008).

Reporting Capital Gains and Losses

The IRS has added a new Form 8949 for taxpayers to report capital gain and loss transactions. Schedule D is used as a summary sheet and to compute the capital gains tax. For securities that are purchased beginning in 2011, financial institutions must now report the taxpayer’s basis on Form 1099-B.

Roth IRA Rollovers and Conversions

As was the case in 2010, there are still no income limits associated with rollovers and conversions from retirement plans to Roth IRAs. However, this year you need to report the full amount of the tax in the current year, whereas in 2010 you could defer the tax into 2011 and 2012.

If you converted or rolled over an amount from a retirement plan to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, you need to report 50% of the tax in 2011 and 50% in 2012.

Designated Roth Accounts

As with the Roth IRA rollovers and conversions, if you rolled over an amount from a 401(k) or 403(b) plan to a Designated Roth Account in 2010 and did not elect to report the taxable amount on your 2010 return, you need to report 50% of the tax in 2011 and 50% in 2012.

Expired Benefits

The making work pay credit reported on Schedule M has expired for 2011. It was basically replaced by the 2% payroll tax holiday.

The self-employed health insurance deduction is no longer allowed in computing the self-employment tax. It continues to be allowed as a deduction in arriving at adjusted gross income.

Alternative Minimum Tax

The government has decided to keep the AMT exemption amounts at elevated levels for the year, thereby preventing many taxpayers from falling into AMT. For 2011, the exemption amounts are: $74,450 for married filing joint and qualifying widow filers; $48,450 for single and head of household filers; and $37,225 for married filing separate filers.

Standard Mileage Rates

As a result of increased gas prices, the standard mileage rate for using your vehicle for business purposes was raised from 51 cents a mile for the first 6 months of 2011 to 55.5 cents a mile for the second 6 months. The rate for using a vehicle for medical and moving purposes was raised from 19 cents a mile for the first half of the year to 23.5 cents a mile for the second half. The rate for using a vehicle for charitable purposes was 14 cents a mile for the whole year.

Depreciation

To stimulate investments in business property, taxpayers are allowed to take 100% bonus depreciation for new assets purchased after September 8, 2010 and before January 1, 2012. This percentage drops down to 50% for assets purchased in 2012.

In addition, the section 179 limit is set at $500,000 with a $2,000,000 phase-out threshold level in 2011. The section 179 limit drops down to $125,000 with a $500,000 phase-out threshold level in 2012.

Foreign Financial Asset Reporting

In an effort to improve compliance of offshore accounts, the IRS has added a new Form 8938 for taxpayers to report certain foreign financial assets. Form 8938 does not replace the already existing Form TDF 90-22.1 and is attached to the tax return if required.

The new form is required to be filed when the value of the foreign assets exceeds certain threshold levels. For example, married filing joint taxpayers who live in the United States must file if the total value of foreign financial assets is more than $100,000 at the end of the year or more than $150,000 at any time during the year.

Receive a Form 1099-C, Cancellation of Debt?

Contact Chad Shultz, CPA @ 904.400.1238 or chadshultz@shultztax.com 

Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.

The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness:

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 filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax 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. IRS Form 982 provides more details about these provisions.
   
   
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 the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit www.irs.gov. IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, is also an excellent resource.

You can also use the Interactive Tax Assistant available on the IRS website to determine if your cancelled debt is taxable. The ITA takes you through a series of questions and provides you with responses to tax law questions.

As an owner of a small business, staying aware of the day-to-day operations of the business is a priority. At this time of the year, an owner must constantly stay aware of tax strategies for the business. Here are some write-off ideas:

Car Expenses

Using a vehicle for business is quite common; one decision to make is whether to use the Actual Expense Method or the Standard Mileage Deduction.

The Actual Expense Method allows the taxpayer to write off actual out-of-pocket costs plus depreciation if he or she owns the car. Examples of expenses include Depreciation, Licenses, Tires, Loan Interest, Tolls, Gas, Oil, Towing, Insurance, Parking Fees, Registration Fees, Lease Fees, Repairs and Garage Rent. Keep in mind that parking and traffic tickets are not deductible. Also, if the car is used for personal and business, then a percentage of use needs to be determined and the business percentage is what the owner uses for the business write-off.

If you opt for the Standard Mileage Deduction, then track the business mileage and multiply that the IRS rate (i.e., $ .555/mile – July 1-Dec. 31, 2011); the total is the deduction.

To track you might use a mileage log or a smartphone app. An example of a business mileage log includes: Date, Destination, Business Purpose, Odometer Start/Stop and # of Miles. Auto expenses are also tracked with the type and amount spent (i.e., toll).

Travel Expenses

Airfare is, of course, deductible, but if the taxpayer uses frequent flyer miles to purchase a particular ticket, the cost of the airfare cannot be deducted. The taxi from the airport to the hotel, as well as transportation costs to go to a customer, including bus and limo costs, lodging, and meals (food, drinks, tax and tip) qualify. Other deductible items include the reasonable cost of cleaning/laundry, tips to the taxi driver, meals, bellhop, telephone costs to your office, receiving a fax, and computer/cell phone rental. These are based on actual costs and not per diem travel rates.

Business Gifts

With the holidays upon us, business owners need to understand how much of these costs are deductible. You can deduct up to $25 per person per year, so keep in mind that if the business owner purchases a $30 bottle of wine for a client, only $25 is deductible. Some people also get confused with “gifts” vs. entertainment. If you give someone a ticket that costs $20 to a ballgame as a gift, then you can deduct this. If, however, you code it as entertainment, it may be subject to the 50% rule, making it a $10 deduction.

Make sure receipts are kept for any of the gifts, expenses with notes, showing the date, the person the purchased meal/gift is for, purpose of meeting/gift, and any other pertinent information. Suggestion: scan their receipts, since most receipts are on thermal paper that fades.

Repairs

The cost to repair business equipment or property is deductible, but be sure you make the distinction between “repair” and capital items. For example, if you replace an air compressor in the business air conditioner, that is considered a repair vs. adding a new air conditioning unit, which is a capital item.

Rent

Rent expenses are deductible, along with other terms of a lease (i.e., property taxes.). Many make January rent payments in December. If the business is using cash basis, then it will be deducted with the current year. If the business uses accrual accounting, then it must be capitalized.

Advertising

Deductible advertising expenses include business cards, print/radio/TV ads, yellow page advertising, package design costs as part of advertising campaign, billboard rental fees and signs on the side of cars/trucks, and PR expenses, including fees, event fees and costs of press kits.

Other Expenses

Dues and Subscriptions: Dues for professional, business or civic organizations are deductible (i.e., American Bar Association, American Marketing Association), Chamber of Commerce and Rotary. However, athletic, sporting, airline or hotel membership costs are not, even though they are business oriented. Business and professional publication subscriptions are deductible.

Legal  and Professional Fees: These fees, which include legal, accounting and tax prep, and appraisal fees, are deductible.

Bank and Merchant Fees: Bank-related fees, such as monthly, ATM and online banking costs, as well as merchant service fees, including Pay Pal related costs, are deductible.

General Office Expenses: Office supplies, postage, books, cleaning/janitorial services, flowers and  plants, snacks and beverages, are all deductible.

For specific information on of your industry visit the IRS.gov Small Business website, where you’ll find information that IRS agents use for examining returns. Another resource is the IRS’ Self Employed Individuals Tax Center.

If you need an awesome CPA contact me at chadshultz@shultztax.com, 904.400.1238 or www.shultztax.com.

Here’s what the IRS recommends to save on income taxes:

Special Edition Tax Tip 2011-09, December 21, 2011

The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim certain tax benefits.

Here are six tax-saving tips for you to consider before the calendar turns to 2012:

Make Charitable Contributions – If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn’t paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.

Install Energy-Efficient Home Improvements – You still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property. For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the IRS.gov website.

Consider a Portfolio Adjustment – Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.

Contribute the Maximum to Retirement Accounts – Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.

Make a Qualified Charitable Distribution – If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion for QCDs is $100,000. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This benefit is available even if you do not itemize deductions.

Don’t Overlook the Small Business Health Care Tax Credit – If you are a small employer who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35 percent of the premiums paid. An employer with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify. For more information see the Small Business Health Care Tax Credit page on IRS.gov.
And here is one final tip to remember: you should always save receipts and records related to your taxes. Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year.