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6 posts from February 2012

02/29/2012

The Ups & Downs of Mileage Rates

The standard mileage rate is used to calculate the amount a person may deduct for the use of a personal vehicle for business purposes.  This rate applies to a car or light duty truck for each mile of business use.

For 2011 tax returns, the standard mileage rate is:

  • 51 cents per mile from January 1st to June 30th
  • 55.5 cents per mile from July 1st to December 31st

On an interesting note, many taxpayers don’t realize that they may also use the standard mileage rate for business use of a car for hire, such as a taxi.  Reminder:  Proper records are a must.  You can find an interactive auto mileage log on the McRuer CPAs’ website under Tools and Downloads.

 

02/24/2012

Thoughts on the Payroll Tax Cut Debate

We've been asked a lot of questions recently about the Payroll Tax and the debate in Washington about extending the Payroll Tax cut that's been in effect for awhile.  As in any debate, there are positives and negatives to consider. Any payroll tax cut affects the bottom line for businesses as well as the government's ability to pay benefits owed to a wide range of working and retired Americans. The Payroll Tax also has a direct affect on an individual's paycheck. 

Here's a short segment on McRuer Money Minutes with a quick review of both sides of the debate.

If you have any questions or would like more information about how the Payroll Tax affects your business and/or your personal income, please give us a call and we'd be happy to talk things over with you.  816.741.7882

02/23/2012

Most Common Tax Filing Mistakes

Today’s tax preparation rules and requirements are growing more complicated and the rules on deductions are rapidly changing.  Many errors on self-prepared tax returns have to do with mathematical mistakes, improper calculations or innocent omissions that cause major headaches. 

As a result, more taxpayers are requesting professional accountants to prepare their tax returns than ever before to help them navigate through the challenges.

The kinds of errors that CPAs see most often on self-prepared tax returns include math mistakes and improperly calculated deductions.  IRS auditors list the top mistakes they find on self-prepared tax returns as:

  1. Computation errors in figuring taxable income
  2. Computation errors on withholding and estimated tax payments
  3. Incorrect tax entered based on taxable income and filing status
  4. Math Errors: Both addition and subtraction
  5. Improper calculation of the amount and type of deductions
  6. Improper claims for non-qualifying deductions
  7. Missing and/or improperly used forms

Here at McRuer CPAs, it’s typical for us to be asked to step in after an individual receives a notice from the IRS regarding an error or several errors on their self-prepared income tax returns.  These mistakes can cause a tax audit for a taxpayer, and may result in interest and penalties.

Having a CPA on your team may help avoid common pitfalls as well as provide the taxpayer updated information on deductions and tax credits that may save the taxpayer money.

Part of what we do at McRuer CPAs is fix “I-did-it-myself” tax returns. Then we guide a taxpayer through proper tax planning, so that the tax preparation time results in few surprises.

If your tax preparation needs have grown more complicated, consider calling us or a trusted CPA near you to enlist the help of a professional so that you will end up paying only the taxes you owe.

02/21/2012

One Last Time Deductions for 2011 Tax Returns

The country’s uncertain political climate makes long-term tax planning difficult especially regarding income tax laws.  For now, there are a few tax provisions that can be used on 2011 taxes, but they are expiring and you may not be able to deduct them in 2012.

The 2011 tax year is the last chance to use deductions for:

  • Private Mortgage Insurance
  • General State and Local Sales Tax
  • Expanded §179 Expense Election and Bonus Depreciation
  • Certain Energy Efficiency Deductions

For businesses, the Payroll Tax Cut was also set to expire, but now Congress has passed an extension which the President is expected to sign.  Find out more about the Payroll Tax Cut debate by watching our segment on McRuer Money Minutes at: http://www.kccpa.com/video/what-is-the-payroll-tax-cut-debate-about.html 

If you have any questions about this tax season's deductions or any other request regarding personal and business tax planning and preparation, please give us a call at:  816-741-7882.

02/20/2012

IRS Red Flags

Warning sign graphicAll of us want to file the most accurate tax return possible.  Yet, no matter how accurate the return, there are several red flags that can increase your chances of being audited by the IRS.  The top issues that raise the attention of the IRS include:

  • Large Amount of Itemized Deductions Compared to Income
  • Self-Employment Income
  • Office In Home Deduction
  • Automobile Expense
  • Meals and Entertainment Expense
  • Cash Basis Business
  • Large Charitable Contribution Compared to Income

You can improve your chances of successfully challenging an audit by maintaining receipts and records that show you are reporting accurately.  Let us know if you have any questions about this topic or another concern about your individual or business tax return.

02/17/2012

Claiming a Child as a Dependent

As you gather your records to complete your tax filing for 2011, you may be among the nearly 55% of all taxpayers who will declare a child as a dependent.  Many children today have grandparents, uncles and aunts, step-parents and adoptive parents who are their primary caregiver and who may claim them as a dependent for a bit of tax relief. 

But there are a number of things to consider before making the claim. 

This is especially important if a child splits their time living with parents in different locations.  For you to claim a child on your tax records as a dependent, the IRS requires that child and you to qualify in five key areas called “tests”. 

The 5 tests for a Qualifying Child that you must consider are:

  1. Relationship
  2. Age
  3. Residency
  4. Support
  5. Joint return

But things aren’t as simple as 1-2-3-4-5.  Even the age of the child that you can claim has a few twists.  For example, a child living with you who is under the age of 19 at the end of the year, that is, December 31st, can be claimed as a dependent as long as you have determined that the child is related to you, a permanent resident, receiving primary care from you and/or is not being claimed by someone else on a separate return.  Whew!  If they are a full-time student they may be claimed if they are under the age of 24, but there are particular qualifications that must be met regarding the kind of education the child is enrolled in.

Having a CPA on your side to consider all the information is key to making certain you receive the tax relief you qualify for and pay only the taxes you owe.   For more information, contact us at McRuer CPAs for a consultation. 

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