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Tax Tip of the Week | No. 313 | Sales Tax Holiday July 29, 2015

Posted by bradstreetblogger in : General, Taxes, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 29, 2015 | No. 313 | Sales Tax Holiday

Just in time for your back-to-school shopping!

The state of Ohio recently enacted a one-time sales tax holiday to occur only in 2015. The holiday starts on Friday, August 7, 2015 at 12:01 a.m. and ends on Sunday, August 9, 2015 at 11:59 p.m.

During the holiday, the following items are exempt from sales and use tax:

•    An item of clothing priced at $75 or less;
•    An item of school supplies priced at $20 or less; and
•    An item of school instructional material priced at $20 or less.

Items used in a trade or business are not exempt under the sales tax holiday.

For more information see: Sales Tax Holiday Frequently Asked Questions

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 312 | Casualty Loss Deductions July 22, 2015

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes , add a comment

Tax Tip of the Week | July 22, 2015 | No. 312 | Casualty Loss Deductions

Living in the Midwest comes with plenty of perks. One of these perks is experiencing every season: gorgeous Autumns, frosty Winters, serene Springs, and blistering Summers. Unfortunately, Midwesterners also know severe weather all too well.

It seems that every year, a storm of epic proportions hits too close to home. While there is certainly no complete remedy for the despair these disasters cause, taxpayers may be able to take a tax deduction for their losses. These losses are considered casualty losses, and there are two categories:

Personal

Non-business, or “personal”, casualty losses are deductible in the year they are incurred. First, it is important to note that casualty losses must be sudden or unexpected. Once this criteria is established, the amount of loss must be determined. The loss is the lesser of the adjusted basis of the property or the decrease in the fair market value (FMV) due to the casualty, less any insurance proceeds. This amount is then reduced by $100, and the remaining amount in excess of 10% of adjusted gross income (AGI) is the deductible amount.

To illustrate, let’s look at an example: A large storm rolls into town and rips off the roof of your house. The roof has an adjusted basis of $10,000 and the decline in FMV is $7,000. The loss would be the lesser of the adjusted basis or the decrease in FMV; $7,000 in this case. The insurance company reimburses $1,000 of the loss, and your AGI is $50,000.

The calculation of the potential casualty loss deduction is: $7,000 loss – $1,000 insurance proceeds – $100 – $5,000 (10% x $50,000 AGI) = $900 casualty loss.

While the ability to deduct these losses is good news, casualty losses for individuals are included in itemized deductions. If you do not itemize your tax deductions, you are not eligible for this deduction.

Business

Casualty losses on business assets are 100% deductible- no $100 reduction and no 10% AGI reduction. There are two kinds of business casualty losses: a “total” loss and a “partial” loss.

A total loss occurs when business property is completely destroyed. When this is the case, the loss deduction is: The adjusted basis of the property less any salvage value less insurance proceeds. As an example, let’s say a tornado hits the city and completely destroys a truck used in your business. The truck has an adjusted basis of $25,000, $0 salvage value, and the insurance company reimburses $12,000.

The calculation for this business casualty loss is: $25,000 adjusted basis – $0 salvage value – $12,000 insurance proceeds = $13,000 casualty loss.

A partial loss occurs when business property is only partially destroyed. With a partial loss, the amount of loss is the lesser of the adjusted basis of the property or the decrease in FMV, less any insurance proceeds. Again, let’s use an example to illustrate: A tornado hits the city and destroys a portion of your business building. The building’s adjusted basis is $100,000 and the decrease in FMV is $20,000. The amount of the loss is the lesser of the adjusted basis or decrease in FMV, which is $20,000. The insurance company reimburses $5,000 of the loss. Thus, the business may take a casualty loss of 20,000 less the insurance proceeds of $5,000 or $15,000.

For more information on casualty losses, and whether or not a loss may be deductible for tax purposes, give us a call.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 311 | IRS Sets Limits for HSA Deductions for 2016 July 15, 2015

Posted by bradstreetblogger in : General, Healthcare, tax changes, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 15, 2015 | No. 311 | IRS Sets Limits for HSA Deductions for 2016

The Internal Revenue Service has released the inflation-adjusted deduction limitations for annual contributions to health savings accounts in 2016.

Revenue Procedure 2015-30 provides the 2016 inflation-adjusted HSA deduction limits, which are updated annually to reflect cost-of-living adjustments.

For calendar year 2016, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,350.  For calendar year 2016, the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,750.

Also for 2016, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,300 for self-only coverage, or $2,600 for family coverage, and the annual out-of-pocket expenses (including deductibles, co-payments and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 310 | The Nanny Tax July 8, 2015

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 8, 2015 | No. 310 | The Nanny Tax

Now that the school year has ended, it is time to consider child care during the summer months.

Instead of sending children to day care or summer day camp, many parents consider hiring a nanny or frequent baby sitter to watch their children. As if balancing work and childrearing is not challenging enough, if parents get outside help to care for their children at home, they will also need to understand the tax implications. Unless they are tax experts, they probably have a few questions about how to do things correctly.

If parents have a nanny or frequent babysitter watching their children at home, that person is considered a household employee if she is in charge of what work is done and how it is done (which is usually the case). It does not matter whether the person works full time or part time, or that the person was hired through an agency or from a list provided by an agency or association. It also does not matter whether the person is paid for the job on an hourly, daily or weekly basis.

On the flipside, someone providing childcare services in his or her own home is not a household employee of the parents. Likewise if an agency who provides the worker is in charge of what work is done and how it is done, the worker is not a household employee of the parents.

As a household employee, a nanny or frequent baby sitter is going to cost parents more than the rate they pay for watching their children. In addition to paying the employee’s wages, they may be required to pay household employment taxes, popularly referred to as the “nanny tax.”

The nanny tax involves two separate employment taxes. Whether the parents are responsible for either depends on the amount they pay.

First is FICA, which is Social Security and Medicare taxes. FICA is a 15.3 percent tax on cash wages that is generally split equally between the employer and employee. Parents and their household employee each pay 7.65 percent—which is 6.2 percent Social Security tax plus 1.45 percent Medicare tax.

In 2015, the IRS requires anyone with a household employee to withhold and pay FICA for any employee with annual cash wages of $1,900 or more.

The rules and reporting of “nanny wages” and “nanny taxes” get pretty complicated real quick.

The important thing to remember is that if you pay someone more than $1,900 this summer, you need to give us a call.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 309 | IRS Changes Identity Theft Policy July 1, 2015

Posted by bradstreetblogger in : General, tax changes, Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 1, 2015 | No. 309 | IRS Changes Identity Theft Policy

A recent article from Accounting Today

The Internal Revenue Service has agreed to change its policy on identity theft and provide victims with copies of the fraudulent tax returns that have been filed under their names by scammers.

The move comes in response to a request from Sen. Kelly Ayotte, R-N.H., who wrote to IRS Commissioner John Koskinen last month urging the IRS to provide tax-related identity theft victims with copies of fraudulent returns, which the agency had refused to do, citing privacy concerns.

In response to Ayotte on Thursday, Koskinen wrote, “As a result of your letter, we have decided to change our policy regarding disclosure of fraudulent identity theft returns to victims whose name and SSN the fraudulent return was filed under…We will put together a procedure that will enable victims to receive, upon request, redacted copies of fraudulent returns filed in their name and SSN.”

Ayotte said she is pleased with the change in policy. “I’m glad that the IRS has agreed to my request to reverse its policy and provide identity theft victims with copies of fraudulent tax returns so they can take proper steps to secure their personal information,” she said in a statement last Friday. “Victims of identity theft face significant emotional and financial hardships, and they shouldn’t be left in the dark about the extent of the theft. This is a positive step that will help them protect themselves and their families.”

Ayotte said she became aware of the issue after hearing from New Hampshire victims of identity theft who told her that the IRS’s refusal to provide copies of fraudulent tax returns prevented them from knowing what information was stolen.

Last month, Ayotte helped introduce the Social Security Identity Defense Act of 2015, which would require the IRS to notify potential victims of identity theft, something the agency has failed to do in the past. It also requires that the IRS notify law enforcement and that the Social Security Administration notify employers who submit fraudulently used Social Security numbers. The bill adds civil penalties and extends jail time for those who fraudulently use an individual’s Social Security number.

We’ll keep you posted on future developments in the growing abuse of tax fraud and identity theft.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.