Thursday, December 29, 2011
Thursday, December 22, 2011
Hiring Children to Work for Parent's Unincorporated Business
Here is a tax-saving idea for those who operate a business as a sole proprietorship, a single- member LLC treated as a sole proprietorship for tax purposes, a husband-wife partnership, or a husband-wife LLC treated as a partnership for tax purposes. Consider hiring your under 18 child as a legitimate employee for your business. It can be part-time or full-time.
Your under age 18 child's wages are exempt from Social Security, Medicare, and federal unemployment taxes. In addition, your child can use his or her standard deduction to shelter up to $5,590 of 2012 wages from federal income tax (for 2011, the standard deduction was $5,800). Under this arrangement, your child will probably owe absolutely zero federal taxes on the first $5,590 of wages (for 2012). Your child can set aside some or all of the wages and invest the money. Hopefully, the cash stash will eventually be used to help pay for college, which means less stress for you.
Meanwhile, you can deduct the wages paid to your child as a business expense, as long as they are reasonable for the work performed. The write- off will cut your income tax bills and your self-employment tax bill (if applicable). The write- off will also lower your adjusted gross income, which will lower the odds of getting hit with unfavorable phase-out rules that can reduce or eliminate various tax brackets.
After your child reaches age 18, Social Security and Medicare taxes will kick in, however no federal unemployment tax will be due until age 21. The child's standard deduction will still shelter up to $5,950 (for 2010) from federal income tax. And, you can deduct the wages and employer's share of the related employment taxes as a business expense.
Even if your business is incorporated, hiring your child can still make tax-savings sense. In this scenario, the child's wages are subject to Social Security, Medicare, and federal unemployment taxes regardless of his or her age. The good news: The child's standard deduction still provides an income tax shelter for the child, and you can claim business deductions for the wages and employer's share of the employment taxes.
Please contact us if you have questions or want more information about this strategy!
Your under age 18 child's wages are exempt from Social Security, Medicare, and federal unemployment taxes. In addition, your child can use his or her standard deduction to shelter up to $5,590 of 2012 wages from federal income tax (for 2011, the standard deduction was $5,800). Under this arrangement, your child will probably owe absolutely zero federal taxes on the first $5,590 of wages (for 2012). Your child can set aside some or all of the wages and invest the money. Hopefully, the cash stash will eventually be used to help pay for college, which means less stress for you.
Meanwhile, you can deduct the wages paid to your child as a business expense, as long as they are reasonable for the work performed. The write- off will cut your income tax bills and your self-employment tax bill (if applicable). The write- off will also lower your adjusted gross income, which will lower the odds of getting hit with unfavorable phase-out rules that can reduce or eliminate various tax brackets.
After your child reaches age 18, Social Security and Medicare taxes will kick in, however no federal unemployment tax will be due until age 21. The child's standard deduction will still shelter up to $5,950 (for 2010) from federal income tax. And, you can deduct the wages and employer's share of the related employment taxes as a business expense.
Even if your business is incorporated, hiring your child can still make tax-savings sense. In this scenario, the child's wages are subject to Social Security, Medicare, and federal unemployment taxes regardless of his or her age. The good news: The child's standard deduction still provides an income tax shelter for the child, and you can claim business deductions for the wages and employer's share of the employment taxes.
Please contact us if you have questions or want more information about this strategy!
Monday, December 19, 2011
R. Lawrence Meck & Company Receives 2011 Austin Award
The USCA “Best of Local Business” Award Program recognizes outstanding local businesses throughout the country. Each year, the USCA identifies companies that they believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and community.
Wednesday, November 9, 2011
Welcome Kimberly Noonan, CPA!
R. Lawrence Meck & Co., CPAs is proud to announce that Kimberly Noonan, CPA has joined the firm. Prior to joining our firm, Kimberly worked for PricewaterhouseCoopers in the tax division. Kimberly will be a valuable asset to our firm, and we are excited that she is part of our team!
Monday, July 11, 2011
Beware of Emails Claiming to be from the IRS
Bogus email scams are resurfacing, including one involving payments allegedly rejected by the Electronic Federal Tax Payments System. The email has a link that may download malicious software.
If you get an email claiming to be from the IRS do not open it. The IRS has information about phishing scams on there website. Click here for more information.
MeckCPAAustin
If you get an email claiming to be from the IRS do not open it. The IRS has information about phishing scams on there website. Click here for more information.
MeckCPAAustin
Thursday, July 7, 2011
Summer Day Camp Expenses May Qualify for a Tax Credit
Many parents who work must arrange for care of their children under 13 years of age during school vacation.
Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.
1. The cost of day camp may count as an expense towards the child and dependent care credit.
2. Expenses for overnight camps do not qualify.
3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
4. The credit can be up to 35 perfect of your qualifying expenses, depending on your income.
5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
Let us know if you have any questions about the Child and Dependent Care Credit.
MeckCPAAustin
Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.
1. The cost of day camp may count as an expense towards the child and dependent care credit.
2. Expenses for overnight camps do not qualify.
3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
4. The credit can be up to 35 perfect of your qualifying expenses, depending on your income.
5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
Let us know if you have any questions about the Child and Dependent Care Credit.
MeckCPAAustin
Tuesday, July 5, 2011
Change in Mileage Rates
The IRS drives up the standard mileage allowance for business vehicle usage. The rate will be 55.5¢ a mile for the final six months of 2011, a 4.5¢ hike. IRS raised the rate due to the gas price spike earlier this year, even though prices are falling now. The mileage rate for 2012 will be officially announced in the fall.
The mileage rate for medical and moving expenses also increases by 4.5¢ to 23.5¢ a mile, but the rate used when driving for charity stays at 14¢ per mile.
Wednesday, June 1, 2011
Prepare for Hurricanes, Disasters by Safeguarding Tax Records
The 2011 hurricane season starts today, and individuals and businesses can safeguard themselves against natural disasters by taking a few simple steps.
Create a Backup Set of Records Electronically
Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.
Keeping a backup set of records - including, for example, bank statements, tax returns, insurance policies, etc. - is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.
Document Valuables
Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.
A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.
Check on Fiduciary Bonds
Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the even of default by the payroll service provider.
For More Information:
Create a Backup Set of Records Electronically
Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.
Keeping a backup set of records - including, for example, bank statements, tax returns, insurance policies, etc. - is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.
Document Valuables
Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.
A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.
Check on Fiduciary Bonds
Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the even of default by the payroll service provider.
For More Information:
- Publication 552, Recordkeeping for Individuals
- Publication 583, Starting a Business and Keeping Records
Monday, April 18, 2011
1099s
Good news! The recent expansion of the 1099 reporting rules are officially repealed. President Obama has signed the legislation which scraps the requirement that businesses issue 1099s when paying $600 or more to corporation or for goods. Also gone is the rule making owners of rental properties file 1099s on payments of $600 or more for goods and services. Businesses, landlords and lobbying firms complained that the increased reporting was a hassle, and the lawmakers heard them.
MeckCPAAustin
MeckCPAAustin
Thursday, March 10, 2011
March Newsletter
Tax season is in full swing around the office. Be sure you stay up to date on tax issues by checking out our March Newsletter.
March Newsletter
MeckCPAAustin
March Newsletter
MeckCPAAustin
Thursday, February 10, 2011
February Newsletter
Our February Newsletter is now online. Check it out for great tax and financial tips.
Be sure to subscribe to get our monthly updates sent directly to your inbox.
MeckCPAAustin
Be sure to subscribe to get our monthly updates sent directly to your inbox.
MeckCPAAustin
Monday, January 17, 2011
Eight Facts About Filing Status
The first step to filing your federal income tax return is to determine which filing status to use. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child.
Here are eight facts about the five filing status options the IRS wants you to know so you can choose the best option for your situation.
- Your marital status on the last day of the year determines your marital status for the entire year.
- If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
- Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
- A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
- If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
- A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
- Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
- You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 & 2009, you have a dependent child and you meet certain other conditions.
As always, there are many different factors that can determine the most advantageous filing status for your particular situation. Please call us if you have any questions.
Meck CPA Austin
Wednesday, January 12, 2011
1099 Reporting Updates
A trio of 1099 reporting requirements take effect this year:
1. Landlords must file 1099s if they pay a service provider $600 or more in 2011. Filings are due in early 2012. Landlords with low amounts of rental income are exempt from these rules, but the IRS hasn't announced what the threshold will be.
2. Brokers must list on 1099-B forms the tax basis of stock sold by customers. This reporting requirement applies only for shares that are purchased after 2010.
3. Credit card and debit card companies will issue 1099s on payments made in 2011 to merchants. Third-party networks, such as PayPal will have to give 1099s to payees with over 200 sales transactions and more than $20,000 in sales volume annually.
Meck CPA Austin
1. Landlords must file 1099s if they pay a service provider $600 or more in 2011. Filings are due in early 2012. Landlords with low amounts of rental income are exempt from these rules, but the IRS hasn't announced what the threshold will be.
2. Brokers must list on 1099-B forms the tax basis of stock sold by customers. This reporting requirement applies only for shares that are purchased after 2010.
3. Credit card and debit card companies will issue 1099s on payments made in 2011 to merchants. Third-party networks, such as PayPal will have to give 1099s to payees with over 200 sales transactions and more than $20,000 in sales volume annually.
Meck CPA Austin
Tuesday, January 11, 2011
January Newsletter
Our January newsletter contains great tax tips and information about the 2010 Tax Relief Act. Click the link below to read more, or follow the link and subscribe to get this great resource delivered straight to your inbox every month!
January Newsletter
January Newsletter
Monday, January 10, 2011
Tax Updates: Estate Tax & Energy Credits
ESTATE & GIFT TAXES
The rejuvenated estate tax tops the list of new tax law changes. The exemption for 2011 rises to $5 million, with a 35% flat rate. That is significantly better than the $1 million exemption and 55% maximum rate that would have applied for this year if Congress had not acted.
Heirs also get to use the date-of-date value for assets inherited in 2011. The modified carryover basis rules that estates could elect to use in 2010 don't apply.
The estate tax exemptions are portable, so that when one spouse dies, the unused amount can go to the surviving spouse for use at his or her death.
The special estate tax valuation of real estate is revived as well for 2011. Up to $1,020,000 of realty used for farming or business can get discount valuation.
ENERGY CREDITS
The tax credits for energy saving home improvements is less juicy in 2011. The credit is now just 10%, down from 30%, and the previous $1,500 ceiling falls to $500. There are also caps on many items: No more than $150 can be claimed for furnaces adn water heaters, $200 for windows and $300 for biomass fuel stoves. The credit is no longer allowed for payments financed with state or federal subsidies. Credits claimed in prior years, including 2009 and 2010, will count against the $500. The 30% credit for alternative energy systems, such as solar panels, is not cut back.
Meck CPA Austin
The rejuvenated estate tax tops the list of new tax law changes. The exemption for 2011 rises to $5 million, with a 35% flat rate. That is significantly better than the $1 million exemption and 55% maximum rate that would have applied for this year if Congress had not acted.
Heirs also get to use the date-of-date value for assets inherited in 2011. The modified carryover basis rules that estates could elect to use in 2010 don't apply.
The estate tax exemptions are portable, so that when one spouse dies, the unused amount can go to the surviving spouse for use at his or her death.
The special estate tax valuation of real estate is revived as well for 2011. Up to $1,020,000 of realty used for farming or business can get discount valuation.
ENERGY CREDITS
The tax credits for energy saving home improvements is less juicy in 2011. The credit is now just 10%, down from 30%, and the previous $1,500 ceiling falls to $500. There are also caps on many items: No more than $150 can be claimed for furnaces adn water heaters, $200 for windows and $300 for biomass fuel stoves. The credit is no longer allowed for payments financed with state or federal subsidies. Credits claimed in prior years, including 2009 and 2010, will count against the $500. The 30% credit for alternative energy systems, such as solar panels, is not cut back.
Meck CPA Austin
Monday, January 3, 2011
2011 Standard Mileage Rates
Beginning 1/1/2011, the standard mileage rates for using a vehicle will be 51 cents per mile for business purposes, 19 cents per mile for medical or moving purposes, and 14 cents per mile for charitable purposes. A taxpayer using the business mileage rate treats 22 cents per mile as depreciation in 2011. However, a taxpayer cannot use the business mileage rate in certain situations (for example, when five or more vehicles are used simultaneously) or if the vehicle was previously depreciated using a method other than straight-line (such as MACRS, the Section 179 deduction, or bonus depreciation).
Meck CPA Austin
Meck CPA Austin
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