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Business Tax Preparation

05/01/2017

Trump Tax Reform Goals: Press Release and Articles

Trump at microphonePresident Donald Trump has released a single-page summary of the goals and priorities of his tax reform package.  We have a copy of the document to share with you as well as links to various articles on the subject available online for your review. While specifics of an actual proposal are not yet available, we hope the information and various media reviews will help clarify the intended direction of a tax reform proposal from the perspective of the White House. Please contact one of our tax planning experts if you have questions as to how the proposed tax reforms may affect your individual and/or business tax planning strategies.

Click on the information lines below to download articles and postings:

Actual Media Release from the White House

White House Press Briefing on Proposed Tax Reform Goals

Various Media Articles With Responses and Opinions   (Postings of these links to articles should not infer that McRuer CPAs is in agreement with any or all of the following media responses. The list is simply a way to provide you more information from various views.)

Journal of Accountancy from the American Institute of CPAs (AICPA.org)

FOX Business News

Wall Street Journal

New York Times

Bloomberg Review

The National Review

CNN Money

Kansas City Star

St. Louis Post-Dispatch

Jefferson City News Tribune

04/13/2017

Taxes on Tips

While tips are discretionary and reflect a happy customer, taxes on tips are not optional and, if overlooked, can cause unhappy headaches for both taxpayers and their employers.

Tip jar picAll cash and non-cash tips are considered income and are subject to Federal income taxes. Tips include cash left by a customer, tips added to debit or credit card charges, and tips received from other employees or employer through tip sharing, tip pooling or other arrangements.

Employees who receive tips regularly are responsible for keeping a daily tip record and reporting all tips on their individual income tax return.  They must report tips that total $20 or more in any month by the 10th of the following month regardless of total wages and tips for the year.

If an employee doesn’t have or isn’t assigned a tip-tracking and reporting tool, the IRS provides a Daily Record of Tips (Form 4070) that an employee may use to document tips in the manner which is considered sufficient proof of tips received. Reliable proof of tip income would include copies of restaurant bills and credit card charges that show the amounts customers added as tips.

Automatic service charges that are often added onto bills are not considered tips, but rather are treated as regular wages so any taxes owed would be withheld by an employer on an employee’s next paycheck. Examples of service charges include things like bottle service charges, gratuity that is automatically added to a bill for large parties, delivery charges, and room service charges.

Employers must withhold income, social security and Medicare taxes on tips just as they would on other income earned by their employee.  If tips are not reported to an employer as required, an employee may face a penalty of 50% of the unpaid social security and Medicare taxes due.

If there are any unreported tips, a taxpayer must file a report of the income through another Form 4137 "Social Security and Medicare Tax on Unreported Tip Income" which helps the employee figure the amount that is subject to tax and how much is owed.

It can be a tedious process especially for workers who make money through a predetermined hourly wage with unpredictable tip income added to the total.  Workers who receive their tips at the end of each shift must make certain they record the tip amounts on their monthly tip report to their employers.  The taxes owed would then be deducted from their next paycheck. It’s possible that hourly wages may not cover the taxes owed. When this happens, any remaining taxes owed can paid out of the next paycheck through an employer agreement. This is the area where most problems occur as tax obligations on tips for one month may impact several paychecks.  It’s up to the employee to keep track of required tax payments so that there are no outstanding payroll taxes owed at year’s end.

If you need more help understanding how to record and report tip income, please contact one of our tax preparation experts at McRuer CPAs.

04/10/2017

Deducting Work-Related Expenses

Work expensesTaxpayers who work for an employer and who pay for work-related expenses out of their own pocket may be able to deduct them on their income tax returns.  Qualified employee business expenses are deductible if when combined with other miscellaneous deductions, the total spent is more than two percent of a taxpayer’s adjusted gross income.

Some examples of qualified deductible employee business expenses may include:

  • the cost of purchasing required uniforms or work clothes not worn away from the work environment,
  • business use of a home,
  • business use of a personal vehicle,
  • business-related meals and entertainment,
  • work-related travel away from home, and
  • tools and supplies purchased for use on the job.

Other deductible expenses that employed taxpayers often overlook are costs of things like the depreciation of their own computer they use for work-related purposes, union dues, malpractice or business liability insurance premiums and subscriptions to professional journals and trade magazines related to work.

Taxpayers must to itemize the deductions and maintain records of income along with receipts of expenses.  If expenses have been reimbursed by an employer, they are not tax deductible.

The expenses must also be ordinary and necessary for their work.  An employee who purchases an item featuring their company’s logo may not deduct the expense unless the employer requires them to wear or use the item while performing their job.  For example, flight attendants who must buy their own uniforms to wear while serving passengers on an aircraft may deduct the expense of the uniform, but not the cost of personal earrings worn to complement their uniform.

K-12 teachers may be able to deduct up to $250 of certain out-of-pocket expenses.  Deductible expenses for 2016 federal income taxes may include the cost of books, classroom supplies, equipment and other materials teachers use to help instruct students.  For example, a physical education teacher may deduct up to $250 of athletic supplies purchased for students that were needed and used by the student(s) to complete or perform physical education course requirements. This particular work-related deduction is calculated as an adjustment to income rather than an itemized deduction, so they need not itemize to claim this deduction.

IRS Publication 529 “Miscellaneous Deductions” and Publication 463 “Travel, Entertainment, Gift and Car Expenses” provide more specific details about deducting employee business expenses.

If you need more information on deducting work-related expenses, contact one of our experts on tax preparation at McRuer CPAs.

03/15/2017

Going Digital With Direct Deposits

More than ever before, taxpayers are choosing digital tools to file their tax returns and receive refunds. The latest numbers show 4 out of 5 taxpayers filed electronically in 2016 using a professional tax preparer or online software.  Of those taxpayers who qualified for a refund, 8 out of 10 chose to have the money deposited directly into a bank account rather than waiting for a check to arrive by mail.

Picture1The growth in digital tax tools use is due in part to IRS mandates.  Paper returns require more man hours to process; costing more and lengthening the time to receive a tax refund by weeks or months.  The IRS now requires most tax preparation professionals to file all tax returns and attachments electronically.  While under no mandate, more do-it-yourself taxpayers with simple tax returns are choosing to use the internet to prepare their returns using the IRS Free File software, and send electronically prepared returns through IRS e-File.  This trend reflects security and privacy concerns as well as worries about delays that can come from paper filings and paper checks.

Combining IRS e-File with the direct deposit program is the fastest way to receive a refund and the transaction is free.  Most refunds are issued within 21 calendar days once the IRS receives a tax return.  A taxpayer may request that their refund be split into deposits in up to three separate financial accounts.  There are also options to purchase savings bonds, have a portion of a refund deposited into an Individual Retirement Account or make a deposit into an account with a pre-paid debit card.  A refund should only be deposited into an account or accounts that are in the taxpayer’s own name or spouse’s name, if it’s a joint account.

Tax agency officials try to reassure taxpayers the system used to receive tax records and payments as well as send refunds is the safest system available.  In the fall of 2015 and again in January 2016, new IRS software updates crashed the system and a small part of its online payment collection system was hacked causing delays and the need to reset taxpayer pins for security.  

Today, the IRS uses the same electronic transfer system for refunds that is used to deliver almost all Social Security and Veterans Affairs benefits to millions of accounts.  It combines built-in security protection tools with layers of online protection programs provided by banks and financial institutions.

You can request the electronic direct deposit option to receive your refund even if you file a paper return by mail; yet know that processing a paper return takes the IRS on average two months longer than processing a digital return.  Requesting a direct deposit of your refund will not speed up the processing time.

If you have questions about the direct deposit option for income tax refunds, please contact one of our tax preparation specialists at McRuer CPAs for more information.

02/15/2017

Going Digital With Direct Deposits


Internet-sales-tax copyMore than ever before, taxpayers are choosing digital tools to file their tax returns and receive refunds. The latest numbers show 4 out of 5 taxpayers filed electronically in 2016 using a professional tax preparer or online software.  Of those taxpayers who qualified for a refund, 8 out of 10 chose to have the money deposited directly into a bank account rather than waiting for a check to arrive by mail.

The growth in digital tax tools use is due in part to IRS mandates.  Paper returns require more man hours to process; costing more and lengthening the time to receive a tax refund by weeks or months.  The IRS now requires most tax preparation professionals to file all tax returns and attachments electronically.  While under no mandate, more do-it-yourself taxpayers with simple tax returns are choosing to use the internet to prepare their returns using the IRS Free File software, and send electronically prepared returns through IRS e-File. This trend reflects security and privacy concerns as well as worries about delays that can come from paper filings and paper checks.

Combining IRS e-File with the direct deposit program is the fastest way to receive a refund and the transaction is free.  Most refunds are issued within 21 calendar days once the IRS receives a tax return.  A taxpayer may request that their refund be split into deposits in up to three separate financial accounts.  There are also options to purchase savings bonds, have a portion of a refund deposited into an Individual Retirement Account or make a deposit into an account with a pre-paid debit card.  A refund should only be deposited into an account or accounts that are in the taxpayer’s own name or spouse’s name, if it’s a joint account.

Tax agency officials try to reassure taxpayers the system used to receive tax records and payments as well as send refunds is the safest system available.  In the fall of 2015 and again in January 2016, new IRS software updates crashed the system and a small part of its online payment collection system was hacked causing delays and the need to reset taxpayer pins for security.

Today, the IRS uses the same electronic transfer system for refunds that is used to deliver almost all Social Security and Veterans Affairs benefits to millions of accounts.  It combines built-in security protection tools with layers of online protection programs provided by banks and financial institutions.

You can request the electronic direct deposit option to receive your refund even if you file a paper return by mail; yet know that processing a paper return takes the IRS on average two months longer than processing a digital return.  Requesting a direct deposit of your refund will not speed up the processing time.

If you have questions about the direct deposit option for income tax refunds, please contact one of our tax preparation specialists at McRuer CPAs for more information.

02/10/2017

W-2 Scam Targets Small Business

Question-yikA5pBiEThe IRS has issued a new tax-related identity-theft scam warning to small businesses and human resources professionals.  The email phishing scam uses a business owner’s, corporate officer’s or human resource professional’s name in what looks like company or even official tax agency emails. The emails request copies of employee Forms W-2 from company payroll, internal accounting or human resources departments.

This is the second time the email scam has been identified as attacking businesses nationwide. The IRS urges business owners, internal accountants and company payroll officials to double check any executive-level requests for lists of Forms W-2 or Social Security Numbers.

The W-2 scam first appeared in early 2016. The IRS reports that cybercriminals tricked payroll and human resource officials into disclosing employee names, SSNs and income information. The thieves then attempted to file fraudulent tax returns to create fraudulent income tax refunds in a tax-related identity theft scheme.

This phishing variation is known as a “spoofing” e-mail.  It will contain, for example, the actual company chief executive officer’s name.  In this variation, the “CEO” sends an email to a company payroll office or human resource employee requesting a list of employees and information including their SSNs.

Crime investigators say some of the wording used in actual scam emails included:

  • “Kindly send me the individual 2016 Forms W-2 (PDF) and earnings summaries of our company staff for a quick review.”
  • “Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).”
  • “I want you to send me the list of Form W-2 copies of employees’ wage and tax statement for 2016.  I need them in PDF file type, and please send it as an attachment.  Kindly prepare the lists and email them to me asap.”

Working together in the Security Summit, the IRS, states and tax industry representatives have made progress fighting against tax-related identity theft.  However, cybercriminals continue developing more sophisticated tactics to impersonate taxpayers in their effort to steal even more data.

For more information about tax-related identity theft and other tax scams, click here to link to The Security Summit’s national taxpayer awareness campaign called “Taxes. Security. Together.

01/09/2017

2017 Mileage Rates for Business Use of a Vehicle

As reported by the Journal of Accountancy: The IRS has announced  the optional standard mileage rates for business use of a vehicle will drop slightly in 2017, the second consecutive annual decline. For business use of a car, van, pickup truck, or panel truck, the rate for 2017 will be 53.5 cents per mile, down from 54 cents per mile in 2016. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile.

Driving for medical or moving purposes may be deducted at 17 cents per mile, which is two cents lower than for 2016. The rate for service to a charitable organization is unchanged, set by statute at 14 cents per mile (Sec. 170(i)).

The portion of the business standard mileage rate that is treated as depreciation will be 25 cents per mile for 2017, one cent higher than for 2016.

To compute the allowance under a fixed and variable rate (FAVR) plan, the maximum standard automobile cost is $27,900 for 2017 (down from $28,000 for 2016) for automobiles (not including trucks and vans) and $31,300 for trucks and vans (an increase of $300 from 2016). Under a FAVR plan, a standard amount is deemed substantiated for an employer’s reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.

See more at: http://www.journalofaccountancy.com/news/2016/dec/irs-2017-mileage-rates-201615701.html#sthash.sxZ6OHvw.dpuf

01/06/2017

2017 Tax Rates (If Nothing Changes)

Income tax graphicPending any immediate changes under a new administration, tax officials say low inflation rates will ensure that current tax brackets and most other tax system features will change only slightly in 2017 with the exception of effects of health coverage mandates.

The standard deduction will rise $50 for individuals to $6,350 from $6,300.  The personal exemption increased $4,050 in 2016 and will remain the same in 2017. The standard deduction for married filing jointly rises $100 to $12,700.

The personal exemption for tax year 2017 remains at $4,050.  However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly).

But for those taxpayers who do not maintain the minimum essential health coverage in 2017, the penalty which is collected by the IRS will increase significantly. The charge for failing to have qualified health insurance coverage will be $695 or 2.5% of income for individuals and $2,085 or 2.5% of income for families.  The penalty was $325 for individuals and $975 for families in 2015. That was an increase from the penalty of $95 for individuals or $285 for families in 2014.

The 2017 top individual tax rate of 39.6% will apply to income above $470,000 for married couples, up
from $466,950.  The Affordable Care Act (ACA) or ‘Obamacare’ mandates that high-income taxpayers pay another 3.8% surtax on net investment income, so the top federal income tax rate for individuals is actually 43.4% and will remain at that level pending a possible ACA repeal.

Qualified dividends and long-term capital gains are also taxed an additional 15% or 20% depending upon income and are subject to another 3.8% net investment income tax.

Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.

These rates are set to apply to 2017 taxes which will be filed in early 2018.

Call us at McRuer CPAs if you have any questions: 816.741.7882 or contact us online by clicking here.

04/15/2016

Filing For a Tax Extension to Meet Deadline Time

Paying-taxesAlthough taxpayers have an extra weekend to prepare and file individual income tax returns due to the Friday April 15th federal holiday, the Monday April 18th deadline arrives with the same rules.  You must file your 2015 individual income tax return by the deadline or face penalties as well as additional penalties and interest charges on any unpaid taxes owed.

Even if you’re filing an extension allowing up to six months more time to complete and file your final return, you are still required to pay the estimated taxes you owe by the April 18th deadline.

Filing an Extension

At this point, there are only a few more days to complete your tax return on or before the deadline.  If you have a complicated return and have not yet submitted tax information to your tax preparation professional, requesting an extension of time to file may be your best option.

Form 4868 is the application you need for an automatic extension of time to file your federal individual income taxes.  The IRS will give you up to October 17, 2016 to file your 2015 individual income tax return before new late filing penalties will be assessed. You may file it any time before the extension expires.  Qualifying taxpayers who are out of the country are allowed two extra months to file and pay taxes owed without facing a penalty.  Those taxpayers include citizens who are in the military serving outside the country or live and/or work outside the United States and Puerto Rico. (Read more about military service tax benefits by clicking here.)

If you request an extension, you will still owe interest on any tax that was not paid by the regular due date, even if you qualify for the two-month extension to file your return. (Find out more about the penalties you may face by clicking here to read The Price of Missed Tax Deadlines.)

One way to escape having to file the extension request tax form is to pay the taxes you owe through an IRS venue such as Direct Pay, EFTPS or using your own credit card on irs.gov.  When you pay all that you owe online by the deadline through these venues you will receive a confirmation number for your records and do not have to file the Form 4868.  However, you will need to file your tax return as soon as you can.  On that return you will be asked to share your confirmation of paying your taxes by the deadline.  You still face a late filing penalty, but will not have to pay penalty and interest on the taxes owed. (For information about ways to pay the tax you owe, click here to read Tax Payment Options to Meet Deadline Date.)

Businesses may also apply for an extension of time to file tax returns under certain circumstances, such as being in the middle of declaring bankruptcy. Form 7004 provides a tool to request a 5-month or 6-month extension of time without paying a late filing penalty. Form 1138 allows certain corporations an extension of time to file if the entity is expecting a net operating loss carryback that cannot be calculated by the designated tax deadline date.

If you have any questions about filing an extension or meeting your tax deadline obligation, please contact us at McRuer CPAs for more information.

04/08/2016

Tax Payment Options to Meet Deadline Date

The IRS says more than 70 percent of taxpayers will receive tax refunds this year due to tax credits and having too much of their income withheld.  Last year’s average tax refund was $2,797 and it’s expected to be close to the same average for this year’s tax season.

Meanwhile, for the rest of taxpayers who owe taxes there are new and faster ways to pay.  The IRS offers several online or direct-call opportunities to pay taxes even without filing on time. 

Paying-moneyThe Direct Pay option allows individuals to pay their outstanding taxes or estimated taxes directly from a checking or savings account.  A taxpayer receives an immediate confirmation of payment if making an instant payment or can schedule a payment to be made at a later time or at future intervals.  The IRS system does not store the payment information after the transaction to avoid online hackers.  See a previous ReSource article Another Cyberattack on Taxpayer Information for more information about tax-related identity theft occurring through IRS systems.

For the first time there’s a new cash payment option for taxpayers in partnership with two online payment processing companies including OfficialPayments.com and PayNearMe.  Individuals may now use up to $1,000 cash per day to pay outstanding taxes if they do not have or do not want to use a bank account or credit card.  Payments can be made at more than 7,000 participating 7-Eleven convenience stores across the country.

The IRS still promotes that the easiest way to pay individual and business taxes is through the Department of Treasury’s Electronic Federal Tax Payment System or EFTPS.  A relatively new feature to this online registration payment method is the EFTPS Voice Response System.  Both services are offered for free with no extra fees charged for processing and scheduling regular payments.

Through EFTPS a taxpayer can use the internet, phone or mobile device to make, schedule and review tax payments any time of day.  Businesses and individuals can schedule payments up to a year in advance. Payments can be changed or cancelled up to two days before the scheduled transaction date. This method provides a way to pay all types of federal taxes from individual to business federal income taxes, employment taxes, estimated taxes and excise taxes.

Should a taxpayer prefer to use a credit or debit card to pay taxes, the IRS accepts payments from Visa, MasterCard, American Express and other card vendors.  The taxpayer must submit the payment information through IRS-approved secure credit card processing companies.  Each processing company charges a fee for the transaction.  The system is not designed to accept high balance tax payments nor federal tax deposits. Generally, the payments are limited to 2 per year for individuals and 2 per quarter for estimated tax payments.  The providers are Pay1040.com, PayUSATax.com and OfficialPayments. You can review the the IRS-approved options by clicking here.

We’ve explained a lot about federal income taxes, but don’t forget that you also have state and local tax obligations and deadlines.  Each state, county and municipality has different ways of accepting tax filings and payments.  Most have online payment programs in place.  Check with your state and local tax collector’s office online or by phone if you have questions about how, when and where to file your tax return and make tax payments as needed.

If you continually receive tax refunds, it may be a sign that you’re having too much withheld.  The money could be put to better use than loaning it to the government for free.  On the other hand, if you owe taxes every year that you did not expect, you may benefit from strategic tax planning that could lessen your tax burden or provide a more consistent tax payment structure that could ease tax deadline pressures. 

At McRuer CPAs it is our goal to make certain you pay only the taxes you owe. Contact us to set up a tax review session with one of our tax preparation experts.

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