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Topics covered on this page
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Meals and Entertainment
Employee vs. Sub Contractor
Kids and Taxes

My Risk of Audit?
Fixed Assets
Inventory - Why Count?

Sales Tax - Use Tax
Hobby or Business

Non-Cash Contributions
Are You Wealthy?

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Entertainment is no longer a deduction - period - it's gone!
Meals, still an option if you are diligent:


Record keeping requirements
* Business meal receipts must have documentation of:
- Cost
- Attendees
- Purpose (must create a reasonable expectation on increasing revenues, etc)

Not all expenses qualify for deduction
* Eating at work does not make it a deduction
* Talking about or mentioning work issue does not make it a deduction
* Out-of-town meal per diems are prorated for travel times
Various limitations
* Typically only 50% of deduction is allowable
* Transportation industry has a higher percent allowable
Not all expenses are subject to limitation

* 2018 CHANGE - Employee meals on work site, for benefit of employer are NOW limited to 50%
* Holiday or special event gatherings
* Office snacks and drinks

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Employee vs. Sub Contractor


If your subcontractor tells their preparer they were an employee but you failed to hold and pay taxes, there is a form they can complete that will allow them to only pay 1/2 (employee share) of FICA and the IRS will come back on you for your share PLUS penalties and interest.

The IRS has many factors used in the determination of classification, such as:

- Freedom of choice on accepting assignment
- Risk of loss if job is not completed as expected
- Schedule control
- Provider of tools and supplies
- Level of instruction and oversight of how work is performed
- Classification of others doing same activities
- Is worker allowed to delegate
- Number of "people" the worker earns money from

If you are on the losing end of a reclassification by the IRS, expect NO MERCY.

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Kids and Taxes


Kiddie Tax now reaches up to 18 years old
Students up to 24 may still be impacted by Kiddie Tax
Earned income may not protect against Kiddie Tax
Children can have IRA's, including Roth's as soon as they have earned income

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My Risk of Being Selected For Audit?

With us on your team, your odds of audit drop! We work to maximize your tax savings while staying tax compliant!

There are two primary ways tax returns are identified for audit:

random and return based

While random selection is out of your control it's rare. The information on the return and it's preparation are the typical determinants and are completely within your control.

The following items are top flags in the IRS system - these items should not be avoided, but carefully handled and detailed records maintained, actual figures, not estimates must be used:

- Claiming 100% business use of vehicle
- Large deductions for Business Meals
- High/unusual outside service or sub-contractor cost
- Excessive business losses - is it really a Hobby
- Earned Income Tax Credit
- Not reporting all income (reported to IRS)
- Higher than average deduction for your income
- Non-cash contributions over $500
- Investment income discrepancies
- Math errors
- Rental losses
- Business use of your car with high miles/expenses claimed
- Home office deduction with high % of business use


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Fixed Assets


Correct asset depreciation life - one of most common errors on tax returns
Repairs vs. Capital improvements
New auto limitations
Contributed assets have special basis treatment

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Inventory - Why Count?

Property tax
Insurance
IRS

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Sales Tax - Use Tax


If sales tax is included in the price, it must be stated at the time of sale
New exemption certificates are required each year
Audits require certificates to cover the year being reviewed
Just because tax is not charged does not mean you don't owe it
* Paying Sales tax is your responsiblity, failing to pay results in Use Tax Liability
Indiana holds purchaser responsible for
* Magazines
* Ebay and/or internet purchases
* Maintenance agreements
* Out of state purchases

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Hobby or Business - The IRS Will Decide


IRS is hot on this. If you make money from a hobby, losses are limited to the income made and only deductible for Federal (and only if you itemize), not Indiana, but income is taxable to both.

Commonly reviewed types:
* Racing
* 4-H farming
* Flea-marketing sales
* Internet sales of personal items
Making money does not make it a business
Do you have reasonable expectation of activity providing your financial support
Would you continue activity even if you knew you would not make money
Do you operate it as a business

Check out more info on this on:
Business vs. Hobby

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Non-Cash Contributions


Must have a detailed receipt showing
* Separately listed items
* Acknowledging condition of each item
* Value of each item
Clothing & household items must be in good or better condition

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Are You Wealthy?

According to the Government, what % of income are you in? See information on our Facebook page.