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Do you take advantage of the Home Office Deduction on your tax return?  The IRS recently announced a new method to claim this deduction starting for the 2013 tax filing year.  The deduction is capped at $1,500.

http://www.irs.gov/uac/Newsroom/Simplified-Option-for-Claiming-Home-Office-Deduction-Starting-This-Year

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year

IR-2013-5, Jan. 15, 2013

WASHINGTON — The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after Jan. 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

  • E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.
  • Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  • Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.

Please check out our updated and improved website at www.neilcoaccounting.com.  It has info on services that we provide, important links that you may find useful, and bio’s on all of the employees.  Let us know what you think on our Facebook page! http://www.facebook.com/NeilCompanyCPAsPC

The IRS has recently issued this warning regarding recent phishing attempts:

The Internal Revenue Service is issuing a warning about a new tax scam that uses a website that mimics the IRS e-Services online registration page.

The actual IRS e-Services page offers web-based products for tax preparers and payers, not the general public. The phony web page looks almost identical to the real one.

The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity.

The address of the official IRS website is www.irs.gov. Don’t be misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov.

If you find a suspicious website that claims to be the IRS, send the site’s URL by email to phishing@irs.gov. Use the subject line, ‘Suspicious website’.

Be aware that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

If you get an unsolicited email that appears to be from the IRS, report it by sending it to phishing@irs.gov.

The IRS has information at www.irs.gov that can help you protect yourself from tax scams of all kinds. Search the site using the term “phishing.”

What to Do If You Are Missing a W-2

Make sure you have all the needed documents, including all your Forms W-2, before you file your 2011 tax return. You should receive an IRS Form W-2, Wage and Tax Statement, from each of your employers. Employers have until Jan. 31, 2012 to issue your 2011 Form W-2 earnings statement.

If you haven’t received your W-2, follow these four steps:

1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or issue the W-2.

2. Contact the IRS If you do not receive your W-2 by Feb. 14, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, Social Security number, phone number and have the following information:

• Employer’s name, address and phone number

• Dates of employment

• An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2011. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return You still must file your tax return or request an extension to file by April 17, 2012, even if you do not receive your Form W-2. If you have not received your Form W-2 in time to file your return by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

4. File a Form 1040X On occasion, you may receive your missing W-2 after you file your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X and instructions are available on this website or by calling 800-TAX-FORM (800-829-3676).

December 2011

Dear Clients,

As 2011 comes to an end, changes in the tax world seem to be on the horizon. Many individual and business tax incentives are scheduled to expire after 2012. Presidential election years tend to bring change, so it will be interesting to see how everything plays out. The following is a list of tax changes, updates, and items of interest:

  • Set to expire after 2011 include the allowance for 100% first-year bonus depreciation (Sec. 168(k)), and the expiration of the increased deduction amounts under Sec. 179. The Sec. 179 expensing limitation for new fixed asset purchases is reduced to $25,000 for 2012.
  • The temporary extension of the decreased payroll tax relief is set to expire on February 29, 2012 for the employee’s portion of the tax. Without further legislative action, the rate will then revert back to 6.2%.
  • Standard business mileage rates beginning January 1, 2012 have been set at $0.555 per mile for business miles driven, $0.23 per mile driven for medical or moving purposes, and $0.14 per mile driven in service of charitable organizations.
  • Social Security benefits will go up 3.6% in 2012 which is the first hike in two years. Earnings limits will also increase. Individuals who turn 66 during 2012 will not lose any benefits if they earn $38,880 or less before reaching that age. Individuals 62 to 66 can make up to $14,640 before losing benefits, and there is no earnings cap once a beneficiary turns 66.
  • Retirement plan ceilings increase in 2012. The maximum 401(k), 403(b), and 457 plan contributions rises to $17,000 ($22,500 for individuals age 50 and older). The ceiling for SIMPLEs will remain at $11,500 ($14,000 for individuals age 50 and older).
  • Remember, Health Savings Account and IRA contributions can be made until April 17, 2012 as a 2011 contribution. Health Savings Account contribution limits for Self-Only and Family are $3,050 and $6,150, respectively, with a $1,000 additional contribution for individuals 55 or older. Traditional and Roth IRA limits for 2011 are $5,000 with an additional $1,000 for individuals 50 or older.

We at Neil & Company CPAs P.C. will continue to monitor any income tax changes passed during 2012 and will pass those along to you. We look forward to 2012 and promise to continue our commitment to you to provide the most consistent and valuable financial assistance!

Client Resources from your Trusted Business Advisorsm

The newly passed and signed 2010 Tax Act, formally named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, includes several provisions that will affect taxpayers. Here is the information you need to know now about this legislation, formally named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

Major Provisions

The new law

  • postpones the sunset of the 2001 and 2003 tax cuts;
  • reduces the estate tax;
  • extends unemployment benefits;
  • includes an alternative minimum tax (AMT) patch;
  • continues through 2012 the lower capital gains tax rate introduced by the Jobs and Growth Tax Relief Reconciliation Act of 2003; and
  • extends for two years the repeal of the itemized deduction phase-out and the personal exemption phase-out.

Provisions That May Affect You

Estate Tax

The Act temporarily reinstates the estate tax, with an estate tax rate of 35% and an estate tax exemption of $5 million (adjusted for inflation after 2011).

Payroll Tax

For 2011, the Act reduces the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2%. The employer’s portion remains 6.2%.

Family

The Act extends several expired or expiring provisions affecting families, including the following:

  • The increased standard deduction for married taxpayers filing jointly, which is scheduled to expire after 2010, continues for two years.
  • The $1,000 child tax credit amount continues for two years instead of reverting to $500.
  • The increased starting and ending points for the earned income credit continues for two years.
  • The $3,000 amount for the child and dependent care credit, which was scheduled to revert to $2,400 after 2010, continues for two years.
  • The American Opportunity Tax Credit continues for two years.

The Act also makes adjustments to the gift exclusion and generation-skipping transfer (GST) tax that will affect family giving:

  • The federal gift tax exemption is increased to $5 million for 2011 and 2012, up from $1 million in 2010.
  • The GST tax exemptions are set at $5 million for 2011 and 2012. The exemption limit is scheduled to drop to $1 million beginning in 2013.

Business

The Act extends the 100% bonus depreciation for business property acquired after September 8, 2010, before January 1, 2012, and placed in service before January 1, 2012 (or before January 1, 2013, in the case of certain property). It also sets the expensing limitation under IRC §179 at $125,000 and the phase-out threshold amount at $500,000 for 2012. The Act then reduces these amounts to $25,000 and $200,000 for tax years beginning after 2012.

The temporary 100% exclusion of gain from the sale of certain small business stock under IRC §1202, enacted by the Small Business Jobs Act of 2010, is extended through 2011.

AMT

The Act includes an AMT patch for 2010 and 2011.

  • For 2010, the AMT exemption amounts will be $47,450 for unmarried individuals and $72,450 for married individuals filing jointly.
  • For 2011, the amounts will be $48,450 and $74,450, respectively.

Needless to say, the 2010 Tax Act is still very new. It is only just being analyzed by professional advisers. The law is potentially subject to modifications by technical correction acts. In addition, provisions of the law may be interpreted by the Treasury Department issuing regulations and by the IRS issuing forms and instructions.

_________________________________________________________

This material was compiled by Martin M. Shenkman, CPA, MBA, PFS, AEP, JD

Health Care Tax Credit: Frequently Asked Questions The new health reform law gives a tax credit to certain small employers that provide health care coverage to employees. IRS is updating the frequently asked questions about the credit as new guidance becomes available.