Bookkeeping Tips

Do You Qualify for the Home Office Deduction?

Mar 132012

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The IRS has the following six requirements to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

as your principal place of business, or
as a place to meet or deal with patients, clients or customers in the normal course of your business, or
in any connection with your trade or business where the business portion of your home is a separate structure not attached to your home.

2. For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

3. Generally, the amount you can deduct depends on the percentage of your home used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

4. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home to figure your home office deduction and report those deductions on Form 1040 Schedule C, Profit or Loss From Business.

6. If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer.

Tax Scam Warning: Beware of Phony Refund Scheme Abusing Popular College Tax Credit; Senior Citizens, Working Families and Church Members Are Targets

Tax Tips, Tax Updates No Responses »

Mar 022012

Directly from the IRS

WASHINGTON – The Internal Revenue Service today warned senior citizens and other taxpayers to beware of an emerging scheme tempting them to file tax returns claiming fraudulent refunds.
The scheme carries a common theme of promising refunds to people who have little or no income and normally don’t have a tax filing requirement. Under the scheme, promoters claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.
In recent weeks, the IRS has identified and stopped an upsurge of these bogus refund claims coming in from across the United States. The IRS is actively investigating the sources of the scheme, and its promoters may be subject to criminal prosecution.
“This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund,” said IRS Commissioner Doug Shulman. “We want to warn innocent taxpayers about this new scheme before more people get trapped.”
Typically, con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with bogus promises of free money.
The IRS has also seen a variation of this scheme that incorrectly claims the college credit is available to compensate people for paying taxes on groceries.
The IRS has already detected and stopped thousands of these fraudulent claims. Nevertheless, the scheme can still be quite costly for victims. Promoters may charge exorbitant upfront fees to file these claims and are often long gone when victims discover they’ve been scammed.
The IRS is reminding people to be careful because all taxpayers, including those who use paid tax preparers, are legally responsible for the accuracy of their returns, and must repay any refunds received in error.

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To avoid becoming ensnared in this scheme, the IRS says taxpayers should beware of any of the following:
- Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
- Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
- Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
- Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
- Offers of free money with no documentation required.
- Promises of refunds for “Low Income – No Documents Tax Returns.”
- Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
- Unsolicited offers to prepare a return and split the refund.
- Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.

Property Rental Owners: Tax Deduction Tips

Property/Real Estate 2 Responses »

Mar 022012

If you are a landlord or rent out property, whether you hire a property manager or not, you will need to file a Schedule E with your tax return. Your schedule E is where you report your rent income and expenses. Here are a list of common things you can deduct as expenses on your Schedule E (This is , by no means, an exhaustive list):

Advertizing Expenses: This includes the cost of maintaining websites, domain names, online ads and listings, social media ads, flyers, newspaper and magazine ads, signs on cars, signs on buildings, etc.

Cleaning & Regular Maintenance: This includes the cost of paying someone to help you clean the property either for a new teanant or current tenants, lawn maintenance, general house repairs, lock replacements, replacement of other items like carpets, furniture, etc.

Insurance Expense: You can deductthe out of pocket amounts you paid for liability, home owners, fire, theft, flood and worker’s compensation (if you have employees) insurance.

Legal Fees: Any fees paid for legal purposes can be deducted. Legai fees include: eviciton filings, tenant disputes, drawing up leases and legal consultations related to the property.

Management Fees & Commisions: Whatever you spend in paying out commissions and paying a property manager, are deductible.

Maintenance and Repairs: Any amounts spent repairing and maintaining (‘fixing’) the property is deductible. This includes: Lawn/Gardening, pool maintenance, labor payments for repairs, plumbing, etc.

These are just a few of the things you can deduct. If you have any questions, drop me a note below.

Tax Scams in 2012

Tax Tips No Responses »

Feb 182012

Directly from IRS.gov

The Internal Revenue Service today issued its annual tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

The following are the tax scams for 2012:

Are Your Social Security Benefits (SSB) Taxable?

Tax Tips No Responses »

Feb 102012

If you recieve social security benefits, which are reported to you on form SSA-1099, a portion or all of your benefits may be taxable. Your form SSA-1099 shows you the entire amount you recieved as benefits for the year. The amount of your adjusted gross income determines whether your benefits are taxable or not.

Every SSB recipient has a base AGI amount which determines whether a portion of their benefits are taxable. For 2011, the base amounts are:

$32,000 for married couples filing jointly.
$25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouse at any time during the year.
$0 for married persons filing separately who lived together during the year.

HOW TO DETERMINE WHETHER YOU HAVE EXCEEDED YOUR BASE AMOUNTS

Add up your income from other sources. If your benefits were your only source of income, stop here! Your benefits are not taxable.
Divide your SSB in half and add it to the other sources of income.
If the resulting amount exceeds your base amount, some of your benefits may be taxable.

EXAMPLE:

Marina is filing as Head of Household for 2011. She made $5000 working at her local pizza shop and an additional $12,000 as the receptionist at her church. She also recieved social security benefits of $9861.

When we add up her income from other sources, we get:($5000+$12,000) = $17,000
We divide her SSB of $9861 by 2 and we get: (9861/2) = $4931
We now add the $4931 to the $17,000 and we get: ($4931 + $17,000) = $21,931

Since she is filing as head of household (HOH), her base amount is $25,000. Since $25,000 is greater than $21,931, her SSB is not taxable.

Contact me today to get help with your taxes or have your tax questions answered.

Do You Qualify for the Earned Income Credit: Check EITC Eligibility

Tax Tips No Responses »

Feb 032012

The Earned Income Credit is one of the biggest tax credits, for most people. It is a credit that is available to people who have earned less than $49,078.

There are a few things to know about the EITC and an online tool that can help you calculate whether you are eligible for it or not.

Things to Know about EITC:
1. The maximum amount of the EITC is $5,751. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,240 last year (Source: IRS).
2. If you are not required to file a return, you may be eligible for EITC. If that is the case, you must file an income tax return, in order to claim the credit.

3. You do not qualify for EITC if your filing status is Married Filing Separately.
4. You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child or children you intend to claim.
5. You must have earned income. This means that you must have made money from being self employed or worked for someone. Unemployment benefits do not qualify you for the EITC.

6. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.
7. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.

EITC Tool:

Here is the link to the EITC tool: http://apps.irs.gov/app/eitc2011/SetLanguage.do?lang=en

You answer questions and it should tell you whether you qualify for the EITC or not.

Contact me today to get help with your taxe sor have your tax questions answered.

Encourage Owner Confidence

Property/Real Estate No Responses »

Jan 172012

In a previous blog post, we discussed the importance of an optimal relationship between the property manager and the property owner. We glanced over ways to enhance this relationship, but in this post we will explore one method: making yourself a dependable source for real estate news and updates.

Property Manager-Client Relationship

Property/Real Estate No Responses »

Jan 142012

A great deal of emphasis must be placed on the relationship between a property manager and the tenants. This is because the foundation of the property manager’s duties and business is the tenant. It can be argued that a more important relationship is that between the property manager, and the owner of the property they manage.

Landing a new client is a big deal for a property manager, but it is easy to take the client for granted. The property manager should take care to maintain an optimal relationship with the property owner in order to keep them satisfied, and thus loyal.

Here are several suggestions to help optimize the relationship with the owner/client:

Maintaining Rental Properties

Property/Real Estate No Responses »

Jan 102012

In a recent article in Time Magazine, titled “Quiet on the Set!: What it’s like to live at the real Downton Abbey,” there is a discussion of the costs of keeping up England’s historic homes. One of their statistics was that average cost of maintenance for about 1500 0f these homes, including roof repairs and carpet cleaning, totals $150,000 a year. Most rental properties do not have maintenance costs up to $150,000/year, but these costs can add up quickly.

Without constant maintenance, property managers can find themselves faced with a rundown rental property and large repair bills. Here are three areas of a property which should be inspected and repaired on a regular basis in order to prevent this.

Attracting Tenants

Property/Real Estate No Responses »

Jan 072012

Getting new tenants is a necessity, but it is even more necessary to get good tenants. As it is, there is no way to attract only the good tenants, while avoiding the chaff. They only way to reliably get good tenants is to have a wide range of applicants, and then selecting the best through a fair and rigorous process. Luckily, attracting potential tenants, for the most part, involves common sense policies.