KELLER CPAs

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Meridian, ID 83642
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Archive for Taxes

Furlough Causes IRS Failures

The 2014 filing season was originally scheduled to start on January 21st. With the delay, the IRS is not going to accept or process 2013 individual tax returns until January 28th at the earliest, February 4th at the latest.  Even though they moved their start date back, your deadline is still the same.

In addition to the 1 million items of correspondence the IRS was already processing when the shutdown occurred.   A mere 400,000 more came in during the shutdown.  That should definitely help with their efficiency!

IRS + New 1099 Rules = Horribly Bad Idea

The IRS just keeps getting more and more efficient and making things easier for taxpayers… NOT!

Anyone renting a house to someone else is now responsible to send 1099’s to anyone who does work for them on the home.  For example:

  • Have a plumbing repair?  …prepare to send out a 1099 to the plumber
  • Hiring a property management company so you don’t have the hassle of a rental?  …prepare to send out a 1099 to the management company
  • Having the carpets cleaned for a new tenant moving in?  …prepare to send out a 1099 to the carpet cleaner

 

Just wait – it gets better…

Anyone who has a business will now be required to send out a 1099 to anyone they pay money to in the course of their business…  What does that mean? 

  • Going to Office Depot for supplies?  …prepare to send out a 1099
  • Hiring someone to do a roof repair?  …prepare to send out a 1099
  • Buying materials from a supplier?  …prepare to send out a 1099

 

Now look at it from the other side…  Anyone who writes a check to you in the course of your business will be required to send YOU a 1099. 

  • Cleaning someone’s carpets?  …prepare to receive a 1099 from every business you deal with
  • Selling supplies or materials to someone’s business?  …prepare to receive a 1099 from every business you sell to

 

Bottom line is, you will now be required to track every dollar you spend and send a form to almost every vendor you deal with and receive a 1099 in return from almost every business you do work for.  Lots more red tape and paperwork for no additional benefit… Good job IRS!

Increased Deductions Through Depreciation

The ability to write off the cost of assets versus having to depreciate them over time just got better.

 New Immediate Write Off Limits Are as Follows:

  •  2010 and 2011– you are allowed to write off $500,000 if you do not purchase new assets in total of more than $2 million

 

  • 2012 – the amount is decreasing this year to $125,000 available write-off with an new asset limit of $500,000

 

  • 2012 – the amount is decreasing this year to only $25,000 available write-off with an new asset limit of $200,000

 

  • You cannot take Idaho investment tax credit on these assets

 

  • The property can be new property or used property as long as it is new to you

More 2011 Tax Law Changes

 Here are some additional items of interest…

  •  Standard mileage rates for 2011 are as follows:  business $.51 per mile, medical and moving $.19 per mile, charitable $.14 per mile. 

 

  • You should see an increase to your 2011 paychecks. For the year 2011 the social security tax withheld from your paycheck will decrease from 6.2% tax to only 4.2% tax. 

 

  • IRS is still revising forms due to the recent tax law changes and will not be accepting e-filed tax returns for 2010 until February 14, 2011. 

 

  • The IRS is increasing its audits of taxpayers who claimed the first time home buyer and the existing home buyer credit on their tax return.  In 2011, there will be 200,000 returns audited relating to those credits. 

 

  • Tax brackets in 2011 and 2012 for married filing joint will be as follows:

 $0 – 17,000  10%

$17,000 – 69,000  15%

$69,000 – 139,350  25%

$139,350 – 212,300  28%

$212,300 – 379,150  33%

$379,150 and up  35%

Concerned about missing deductions?

As you are gathering your year-end tax information, here are some things to think about…

  • Keep track of non-cash charitable contributions.  The IRS requires that you keep detailed records of your non-cash charitables – items donated, dates, market values and costs.  You will also get an additional Idaho tax credit for cash or non-cash contributions to Idaho schools or youth facilities. 

 

  •  Keep track of medical and charitable miles driven in your personal vehicle.  For 2010 you will receive a deduction of 16.5 and 14 cents per mile, respectively for those miles driven.  The IRS requires that you keep a detailed log of miles driven, dates and deductible purpose. 

 

  •  You can still contribute to your Health Savings Account and Individual Retirement Account and receive deductions on your 2010 tax return, as long as you contribute to the accounts before April 15, 2010 and before filing your 2010 tax return.

 

  •  For 2010, self employed individuals will be allowed to deduct their health insurance from their business income before any self employment tax is calculated.  This will be an additional savings to those business owners who operate a partnership or a sole proprietorship.   

 

  •  If you are in a low enough tax bracket that your capital gains income is taxed at a 0% rate, keep in mind that Idaho did not discount the rate of taxation for capital gains as the federal government did.  You will be paying tax on capital gains in Idaho at the top rate for your income level bracket, possibly up to 7.8%

2011 Tax Law Changes

What 2011 Tax Law Changes Were Just Passed

Through the Tax Relief and Job Creation Act of 2010?

  • Tax rates will remain the same as 2010 for 2011 and 2012: 10, 15, 25, 28, 33, 35%
  •  Capital Gains rates will remain the same for 2011 and 2012:  0% and 15%
  •  Itemized deductions will be deductible in full for 2011 and 2012 – no phase-out
  •  Personal exemptions will be deductible in full for 2011 and 2012 – no phase-out
  •  Unemployment benefits extended for an additional 13 months
  •  Employees portion of  FICA (payroll) tax withholding will be reduced from 6.2% to 4.2% for 2011
  •  Child tax credit of $1,000 will remain in effect for 2011 and 2012
  •  Earned income credit treatment will continue to be consistent for 2011 and 2012
  •  American Opportunity Tax Credit (education credit) extended to 2011 and 2012
  •  Bonus depreciation of 100% in 2011 and 50% in 2012 with no limitation
  •  Estate tax rate will be 35% with a $5 million exclusion

Energy Efficiency Tax Credits

Take Advantage of Energy Efficiency Tax Credits

Did you know that if you purchase qualifying energy efficient products, you may be eligible for a federal tax credit up to $1,500?

• The federal home energy efficiency tax credit ends December 31st, 2010 for improvements made to your existing principal residence (rentals do not qualify).

• The following improvements may qualify if done at any time during 2010:

o Heating and Air Conditioning

o Insulation

o Roofs

o Water Heaters

o Windows and Doors

• If any of the above are nearing the end of their expected life, you may want to consider replacing them before the end of year to take advantage of the tax credits.

• According to Energy Star, the average home can reduce its energy costs by 30% or more with a few cost effective improvements.

Roth IRA Conversions

For 2010, a conversion from a regular IRA to a Roth IRA is no longer subject to limitation based on the net income of the taxpayer. Previously, taxpayers with adjusted grow income of greater that $100k were not able to convert their IRA’s to Roth IRA’s. The amount of tax can either be paid in 2010 or an election can be made to defer the tax and spread it over two years – 2011 and 2012.

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