IRS Reminds Parents of Ten Tax Benefits 

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents: In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit: You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit: The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income: If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income: Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits: Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest: You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction: If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

This last one is a good tip to ask a Laughlin Associates business consultant about. As the leading incorporation services provider since 1972, we can help you as a small business owner to get the most out of your tax deductions. In fact, if you’re self-employed we can help you get as much 45% back on your taxes this time next year. Want to learn more? Call Laughlin Associates at 1-800-648-0966 or email lee@laughlinusa.com.

*Tips provided by IRS.gov

As you prepare for the upcoming tax season, we wanted to give you a brief rundown of the 2012 tax changes that may apply to you:

* PAYROLL TAX CUT for employees extended through February 29, 2012. (Social security tax rate on wages up to $110,100 will be 4.2% rather than 6.2%.)

* ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.

* SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.

* STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.

* ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000. The ANNUAL GIFT TAX EXCLUSION remains at $13,000.

* 401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).

* SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).

* IRA contribution limit remains at $5,000 ($6,000 for 50 and older).

* KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).

* NANNY TAX threshold increases to $1,800.

* TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.

* SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.

* HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.

If you have further questions about the tax changes that may apply to you and your business in 2012, give Laughlin Associates a call at 1-800-648-0966 or drop us a line to get a qualified referral to an experienced CPA.

*Tax information courtesy of Mostad and Christensen, Inc.

As a small business owner, you’re entitled to a lot of special privileges and fringe benefits. This holiday season is a great time to use the spirit of giving as a way to help those in need, and an advantage for you as a small business owner is that you can deduct any charitable contributions you make in the name of your business! You can do this as an individual as well, but why not use your business as a way to create awareness for a particular group that speaks to your heart? There are tons of great charities out there, so if you don’t typically make charitable contributions during the holidays or throughout the year, check out Charity Watch for an A-Z list of some of the top-rated charities in the US.

Charity Watch is a great resource because they only list the top-rated charities willing to provide you with audited financial statements and annual reports so you can get a clear look at where your dollars and cents are being put to use.

Today the IRS sent out a list of helpful insights that individuals and businesses making contributions to charity should keep in mind.  Note that several important tax law provisions have taken effect in recent years.

Some of these changes include the following: (from www.IRS.gov)

• Special Charitable Contributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of 2011, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.

• Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens.

• Guidelines for Monetary Donations

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

• Reminders

To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

• Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2011 count for 2011. This is true even if the credit card bill isn’t paid until 2012. Also, checks count for 2011 as long as they are mailed in 2011.
• Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, searchable and available online, lists most organizations that are qualified to receive deductible contributions. It can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
• For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2011 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
• For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
• The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
• If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
• And, as always it’s important to keep good records and receipts.

Thank you to IRS.gov for providing this information. If you run a small business and are not incorporated, call us and discover how owning a Corporation or Limited Liability Company in Nevada or any of the other 49 states can get you many more deductions than you are allotted as a sole proprietor.

Incorporating just makes sense and Laughlin Associates has been providing incorporation services since 1972. We know how to help and get you the asset and liability protection plus the tax savings that you and your company deserve.

With the holidays fast approaching, our thoughts turn to “end of the year” business activities – particularly the financial reports that are due for the upcoming tax season. 

A little panic sets in wondering if we kept every receipt, tracked all our expenses in QuickBooks, and if we took advantage of the many deductions available to us as business owners.

 Here are 3 simple tips for lowering your taxes during the holidays:

1. Turn your road trip into a tax deduction: Schedule to meet with a client or a vendor on your way to the in-laws, and the mileage to the meeting (and back) is tax deductible! (Doesn’t the client deserve a nice holiday gift anyway?) Now you can truly laugh at your father-in-law’s corny jokes because you know the trip was partly paid for by the IRS!

2. Get the gift of tax deductions: Did you know that home office furniture is tax deductible even if you don’t take the home office deduction? So take advantage of the holiday sales and buy that new desk you’ve been eyeing for an extra 20-35% off! (Depending on your tax rate.) Talk about hitting the jack pot!

3. Getting your records in order will save you money: To do this we found a product created by one of our favorite tax experts, Sandy Botkin (a former IRS trainer, CPA and Tax Attorney), that we love because it has solved our Holiday Financial Panic and made taking tax deductions so easy. Taxbot is an amazing digital tax tracker that automatically tracks business mileage with a GPS Mileage Tracker, records expenses and intuitively makes them IRS compliant. It even has a built-in receipt scanner! It even syncs to a secure web portal that offers detailed integrated reports and expert tax training and tips. They really thought of everything!

This holiday season you, too, can take the stress out of tax planning with this ingenious app! 

Get your free 2-week Taxbot trial right here!

Want even more tips and tricks to get the most tax deductions possible as a business owner? Join us for a live webinar from Sandy Botkin on December 15 from 10-11 a.m. PST.

Click here to reserve your spot for “5 Strategies To Maximize Your Tax Deductions And Stay Out Of Trouble With The IRS!”

*Thank you to Sandy Botkin and the team at The Tax Reduction Institute for providing these helpful tips. 

One of the best parts of my job is that I get to cruise through the current events and news affecting our economy. Admittedly, although sometimes our current economic news is depressing, I look forward to seeing what small business owners have to say about the situation and how we can improve things heading into the future.

That being said, as I was perusing the Small Business News today, I came across a blog written by Shashi Bellamkonda, director of social media and PR at Network Solutions, proposing a tax break for frequent restaurant-goers that would both stimulate the economy and create jobs.

Shashi proposes a “tax-free lunch plan” for taxpayers spending more than $1,000 at restaurants in 2011. The amount could be completely written off by the taxpayer, so long as they provide receipts documenting the deductions for their tax return.

He backs up the proposal with facts. According to his research, the national restaurant industry has a total economic impact of more than $1.7 trillion. Every dollar spent in restaurants equates to $2.05 spent in the general economy. Given the data, this proposal for “tax-free lunch” may hold some weight in improving the plight of many restaurant owners’ declining sales over the last few years.

While President Obama and Congress have passed bills like the 2009 “Cash for Clunkers” program, which reportedly saved 42,000 jobs, industries like the restaurant and hospitality arena have continued to see fewer and fewer people frequenting their favorite eateries.

At Laughlin, we have several restaurant owner clients. This proposal for writing off restaurant expenses in 2011 got my wheels turning as to what those clients would have to say about this idea. Online coupon programs like Groupon and Living Social have taken off like wildfire, and often offer deals for dining out. Why wouldn’t this “tax-free lunch plan” work the same way?

With our debt ceiling out the roof and jobs steadily declining, it is time that we come up with solutions to stimulate this economy, create revenue, and offer incentives to the American taxpayer. Our small business owners are the backbone of this economy, and without small family-owned restaurants, we’ll only be left with the big name corporate restaurants and fast food chains. Is that what we want for our America? Do we still have a sense of what the American entrepreneur looks like anymore?

• What are your thoughts on the “tax-free lunch plan” proposed by this blogger?
• Will this help or hurt our economy?
• What viable changes need to be made in order to support American business owners today?

Drop me a line at sjohn@laughlinusa.com and let me know what you think about the “tax-free lunch plan.”

Read Shashi’s full proposal here.