We will be taking a break from blog posts for the next two weeks to enjoy time with friends and family. Merry Christmas and Happy New Year to our loyal readers!
It’s that time of year – time to clean up your numbers and make sure your books are ready for the end of the year reports and the upcoming tax season. If you own a small business, or even if you’ll just be dealing with your own personal finances, the more organized you are at the end of year, the easier tax time will be for you. Here are some basic tips for things you can do now to organize and prepare in the next month or so:
1. Review last year’s tax form and compare it this year’s expenses and income. Note any extreme discrepancies and look into them.
2. Enter all outstanding invoices, payments, and receipts and reconcile all accounts – if you don’t have a bookkeeping software system, seriously consider one – spreadsheets won’t cut it for most people.
3. Go after outstanding accounts – try ot get paid before you write off any bad debt. You might want to consider enlisting the help of a collection agency if you have attempted to get payment for more than 3 months.
4. Organize receipts for expenses to be itemized on your tax return – categories such as utilities, supplies, contract labor, rent, etc.
5. If you have employees, be sure to order your W2 or 1099 MISC forms so you can prepare those as soon as possible in the new year. Make sure you have up-to-date employee records and know the total that was paid to each employee through the year.
6. Review your budget in comparison with actual expenses to determine how to budget for next year more effectively.
7. Talk to your bookkeeper or accountant about what additional information you need to complete your tax forms and prepare year-end reports. If you don’t have a bookkeeper or accountant, then contact our office so we can help you wrap up 2009 and get on the right track for 2010.
Think the price for a college education is already outrageous? How you would you feel about paying an additional amount in tax on college tuition? The City Council of Pittsburgh is considering a first-in-the-nation 1% tax on college tuition at one of the 10 colleges and universities in the Pittsburgh area. The city claims it needs the $16 million the tax would raise for pensions for retired municipal workers. Other cities like Boston and Providence, RI are considering similar measures.
Critics of the tax say it will discourage students from studying in Pittsburgh and participating in the local economy. Others argue that it is unfair to penalize the upcoming generation of students to pay for what they argue is already an overinflated pension program.
Colleges and universities are struggling more now that endowments and giving are down – many have had to raise tuition and fees. Is it fair to tax the already stressed students? If this passes in Pittsburgh, what other cities will follow suit? Will they soon begin to tax other areas of our lives? What do you think?
In a giving mood this time of year? If you plan to make charitable contributions that will apply to your 2009 tax return, there are some changes for this tax year that you should know about.
The IRS Website’s most recent article provides some helpful highlights of the recent changes and things to keep in mind when making personal or business contributions before December 31. Here are some highlights:
1. IRA owners, age 70 1/2 or older, can transfer up to $100,000 to an eligible charity tax-free.
2. Donated household items and clothing must be in good working condition or better unless the donation is worth over $500 and there is written qualified appraisal.
3. Cash donations must have a written receipt from the receiving party detailing how much was given and on what date.
4. Contributions are deductible in the year they are made only. Charitable donations are available only to those who itemize deductions. Make sure you have careful records and receipts of any donations made.
For more information, visit the IRS Website or contact our office.
Ever feel like everyone is grabbing for your money in the form of taxes and fees? Well, if you live in one of the states that will be increasing some taxes and creating new fees for 2010, if you don’t now, you soon will. According to an article on CNNMoney.com, many states are facing serious financial problems and are trying to make up for the deficit with a record $23.9 billion in tax hikes and fees and $7.7 billion in other revenue increases. Examples of these new tax hikes include higher state income tax rates for the wealthy, new tax fees on cigarettes, gambling winnings, digital downloads, broadcast satellite service, entering horse races, preparing taxes, and excessive speeding. States that are enacting these new taxes are looking at multi-billion dollar deficits going into 2010, and these new fees are expected to help fill the gap.
Luckily in Texas we are a low state tax state, and we have no state income tax. We also have relatively low state debt, unemployment, and foreclosure rates. So hopefully we will continue to avoid these type of tax increases. However, if the economy doesn’t start looking up soon, we too may be paying more for our digital movies, our Marlboros, and our speeding tickets. We just hope here at Cloe Sill Bookkeeping and Tax Services that we never have to pay an extra fee to prepare your taxes!
The IRS wants to help you cut your tax bill by taking advantage of new tax breaks and understanding the changes for the 2009 tax year. To do that, they have just released the newly revised Publication 17: Your Federal Income Tax. This 308 page guide has information on all the new tax deductions and breaks that are part of the American Reinvestment and Recovery Act as well as basic tax filing info and tips on reporting income, taking deductions, and other important topics. It has more than 6000 interactive links that will take you to pages that can provide more information. If you don’t have internet access or want a printed copy, you can get one free from the IRS by calling 1-800-TAX-FORM (829-3676). Printed copies will be available in January.
The IRS website has lots of other helpful forms and information for preparing your 2009 taxes. The American Recovery and Reinvestment Act of 2009 Information Center also provides more detailed information on the recovery act and its tax changes and benefits. New updated 2009 forms are being added all the time, so check back frequently.
A recent article in The Boston Globe outlines the upcoming changes in tax law for 2010. As 2009 draws to a close, businesses and individuals who are preparing for 2010 should make note of these changes. They are briefly discussed below:
1. New vehicle sales tax – after January 1, 2010, sales tax on the purchase of a new vehicle will no longer be deductible.
2. Sales tax – in 2010, state and local sales tax will no longer be an itemized deduction.
3. Teacher expenses – in 2010, teachers will no longer be able to deduct classroom expenses paid out of pocket (they are currently allowed a $250 deduction).
4. Roth IRA conversion – no income limits for converting a traditional IRA into a Roth IRA, and the tax on any conversions is not due until 2011 and 2012.
5. Phase out – there will be no phase out of itemized deductions in 2010.
6. Unemployment income – people who receive unemployment income in 2010 will not be able to exclude any of it from taxable income (there is an exclusion for 2009 of $2400).
7. Charitable distributions – distributions to charities from an IRA will no longer be excluded from income.
8. Home buyers credit – home buyers credit must be paid in 2010.
9. AMT – AMT is scheduled to decrease in 2010 to $33,750 for singles and to $45,000 for couple filing jointly.
10. Mileage reimbursements – as listed in the previous post IRS Announces 2010 Mileage Rates.
For more information on these changes, visit the 2010 Tax Facts sheet or the Boston Globe article.
There’s a chance for snow here in South Texas tomorrow and everyone is excited! Snow is a rare sight around here. You may not usually get a white Christmas where you live either, but enjoy the snow on my blog! Here’s hoping it puts you in festive holiday mood.
And remember that as tax time approaches, check back with us for more updates and information. And don’t hesitate to contact our office if we can help you with your tax preparation needs for 2010. Have a very happy holiday season!
The IRS announced the new 2010 standard mileage rates for deducting costs of operating a vehicle for business, medical, moving, and charitable work. The new rates are as follows:
1. $.50 per mile for business
2. $.16.5 per mile for medical or moving usage
3. $.14 per mile for miles driven for a charitable organization
The IRS says rates are slightly lower than 2009 which reflects lower costs of transportation. The IRS website further explains how rates are calculated and used:
“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.”
You can take the IRS to court if they have made an error in your taxes, you may even win, but don’t ever expect an apology from them! Just a few weeks ago the Tax Court ruled, in Caldwell vs. Commissioner, that although the individual was entitled to a deduction the IRS had previously denied him, he was NOT entitled to an apology. The court ruled that they did not have jurisdiction to order the IRS to apologize or change its procedures. Mr Caldwell had asked for the IRS Commissioner to write a written note of apology outlining what the IRS would do to prevent this kind of error from happening again. The court said it had no authority to force the IRS to do it.
So what if there were laws requiring government agencies to apologize for errors? Would people who make errors on their taxes be required to apologize to the IRS as well? How far does this go – can we pass a law requiring everyone to apologize to each other when an apology is demanded? What if that apology isn’t really deserved? It is an interesting, if not somewhat scary, thought. And I’m sorry if it upsets you. 
