There are types of expenses classified as a "miscellaneous itemized deductions," which may result in a tax deduction for you if you itemize your deductions, depending on your adjusted gross income (AGI) and the total of all your miscellaneous items.
Saturday, February 11, 2017
Tuesday, January 10, 2017
Here's a simple example of how averaging works. Assume that F, a single farmer, sold some of his farm machinery and more corn than usual, and all of this happened in 2015. F's 2015 taxable income is $50,000, of which $30,000 is from his farming business. F had no taxable income in 2014, $5,000 of taxable income in 2013, and $10,000 of taxable income in 2012. Since F's income is higher than in previous years, F elects to average $30,000 of his 2015 income over the three base years (2014, 2013, and 2012). F figures his 2015 tax in this manner:
- He subtracts the elected portion of his current year's taxable farm income ("elected farm income") from his total taxable income. Thus, in 2015, F subtracts the elected farm income ($30,000) from his taxable income of $50,000. F's remaining 2015 taxable income is $20,000.
- He figures the tax on the amount in (1) using the tax tables or tax rate schedules for the current year (in this case, 2015). Under the 2015 tax tables, the tax on $20,000 is $2,543.
- For each of the three base years (2014, 2013, and 2012), F adds one-third of the current year's (2015) elected farm income ($10,000 each year) to his taxable income for that year and figures the tax on that amount. Then, in each of the three base years (2014, 2013, and 2012), F subtracts his actual tax from the tax computed for the base year.
Friday, December 9, 2016
Like many of us, you've probably dreamed of turning a hobby or avocation into a regular business. You won't have any unusual tax headaches if your new business is profitable. However, if the new business consistently generates losses (deductions exceed income), the IRS may step in and say it's a hobby (an activity not engaged in for profit) rather than a business.
The classic "hobby loss" situation involves a successful businessperson or professional who starts something like a dog-breeding business, or a farm. But IRS's long arm also can reach out to more commonplace situations, such as businesspeople who start what appears to be a bona-fide sideline business.
Friday, December 2, 2016
A new federal law has moved up the filing date for W-2s and certain 1099 forms. Under the new law, employers (and paid preparers) must submit copies of these forms to the IRS and SSA by January 31. This change is effective with the 2016 information forms that will be due on January 31, 2017. The accelerated deadline is intended to help the IRS spot errors on returns and make it easier for the IRS to verify the legitimacy of tax returns filed.
Previously, a copy of these forms was required to be provided to recipients by January 31, but employers (and paid preparers) had until the end of February (if filing on paper) or March (if filing electronically) to send copies to the Internal Revenue Service (IRS) and the Social Security Administration (SSA).
A 30-day extension is available for IRS submission. If an extension is necessary, Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as possible, but no later than January 31.
Wednesday, November 30, 2016
On Wednesday, November 30, 2016, Curtis Root, CPA, gave a presentation on issues related to the upcoming audit cycle for local township officials. The handouts mentioned in the presentation can be viewed and downloaded here. Larsson, Woodyard & Henson would be pleased to answer any follow up questions. Please contact us with any questions you have.
Wednesday, November 23, 2016
ALERT! The proposed overtime rules will not take effect on December 1, 2016. A federal court has issued a preliminary injunction blocking implementation at this time. View more about this at http://www.reuters.com/article/us-usa-employment-overtime-idUSKBN13H2JY.
Thursday, November 10, 2016
The Department of Labor’s “final rule” updating overtime regulations has recently been released. The effective date of the new regulations is December 1, 2016.
The final rule includes the following changes to overtime:
- The salary threshold has increased to $913 per week ($47,476 annually) in order for overtime pay to not be required.
- The salary threshold for highly compensated employees has increased to $134,004, which is the current equivalent of the 90th percentile of full time salaried workers nationally.
- Salary thresholds will now be updated every three years beginning on January 1, 2020. The Department of Labor will publish the updated rates on the Wage and Hour Division’s website 150 days prior to their effective date.
- Nondiscretionary bonuses and incentive payments, including commission, may be used toward the salary threshold. These amounts must be paid at least quarterly to be considered and cannot exceed 10 percent ($4,748) of the new salary basis level. Discretionary bonuses (such as Christmas or year-end bonuses) cannot be used toward the salary basis level.
The final rule did not change the duties tests for the administrative, executive, professional, or highly compensated employee exemptions. An exempt employee must also still be paid a salary to be considered for overtime exemption.
Remember that overtime is not based on the number of hours worked on any given day during the week but rather on the number of hours worked in a seven-day work week. There are some exceptions to this (such as prevailing wage work). Hours worked does not include time where the employee was not performing work such as holiday and vacation time.
There are several actions that can be taken to comply with the new overtime rules. We can assist you with determining what actions, if any, you should consider for your employees.
- Increase your employees’ salaries to comply with the new levels if they meet the duties test.
- Consider hiring additional employees to cover the workload and limited non-exempt employees to 40 hour work weeks to reduce overtime premiums.
- Reduce any salaries that previously included overtime and pay the appropriate overtime premiums instead.
- Consider limiting employee travel time to business hours.
If you have a new employee start during the year, they must earn at least $913 per week to be considered for the exemption. Overtime is based on a seven-day work week – not an annual amount. The minimum weekly amount may be translated into equivalent amounts for periods longer than one week up to one month.
You are not required to exempt your employees from overtime if they meet both the salary and duties tests. You may still pay them overtime if you wish. These rules simply state the requirements and exceptions to overtime regulations.
Please contact us if you need any assistance interpreting or complying with these new rules.