You’re Invited!! Can You Deduct your Wedding Expenses?

Getting married soon?  I bet you wish you could deduct your Wedding Expenses.  Well, you kind of can, if you follow some important rules.  But, as always, discuss it with your tax professional.

Let me give you the run down of how you may be able to deduct those wedding expenses.  First, if you do not itemize on your tax return, then there’s no need to read any further.  But, if you do then proceed.

wedding beach

1. DONATE EVERYTHING AFTER YOUR EVENT IS OVER!  

  • Flower and Food
  • Gowns
  • Wedding Favors
  • Gift Registry – process of charitable gift-giving for guests and make gifts trackable the way they are in a regular registry for couples – Here are some examples  the Good Beginning,  Blueprint RegistrySimpleRegistry and JustGive, allow charities to be added to wedding registries.

2. THE VENUE.   If you are having your reception or getting married at a historical garden, museum or homestead, or even a state or national park, the fee you pay may be deductible as a donation.  Check with the venue for more details.  If you’re having your wedding at  A CHURCH and you are paying a ceremony fee, it may be tax deductible.   If not, ask whether the church waives ceremony fees for members who donate at a certain level.   It may be worth upping your donations for the year to get a triple benefit: a fee waiver, a tax write off, and a warm glow from donating to a good cause.

Again if you have any questions you can contact me or contact your tax professional for more information on deducting your wedding expenses.

Meals and Entertainment Changes Under the Tax Cuts and Jobs Act

office holiday party

OH NO! Are the HOLIDAY PARTIES still DEDUCTIBLE?
In general, the new Tax Act provides for stricter limits on the deductibility of business meals and entertainment expenses. Under the Act entertainment expenses incurred or paid after December 31, 2017 are nondeductible unless they fall under the specific exceptions in Code Section 274(e).  One of those exceptions is for “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees”  (i.e. office holiday parties are still deductible).

Business meals provided for the convenience of the employer are now only 50% deductible whereas before the Act they were fully deductible. Barring further action by Congress those meals will be nondeductible after 2025.


Businesses should keep the new rules in mind as they plan their 2018 meals and entertainment budgets. 

2018 Expenses – New Rules

  • Office Holiday Parties – 100% deductible
  • Entertaining Clients – Meals 50% deductible / No deduction for entertainment expenses
  • Employee Travel Meals – 50% deductible
  • Meals Provided for Convenience of Employer – 50% deductible (nondeductible after 2025)

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Will Trump Sign the Newly Passed Tax Bill before Christmas as Promised?

Will this still be an early Christmas Gift for the Taxpayers?

new years at white house

Trump may wait until January to sign the tax bill into law.   The reason this may happen is because once this tax bill goes into law it will add to the deficit and when that happens it will trigger a 2010 law known as “PAYGO,” or “pay-as-you-go.”   Once this happens the budget law will require spending cuts to Medicare and other programs.  The reductions would cut spending on Medicare by $25 billion in 2018, according to the Congressional Budget Office.

If Trump signs the tax bill into law in January it would likely defer those spending cuts until 2019,  giving Congress almost a year to come up with a solution.

So what will the Taxpayers get out of the tax saving plan.  Well, let’s see!

In 2018, taxpayers earning less than $25,000 would receive an average tax cut of $60, the nonpartisan Tax Policy Center found.  Those earning between $49,000 and $86,000 would get an average cut of about $900; those earning between $308,000 and $733,000 would receive an average cut of $13,500; and those earning more than $733,000 would receive an average cut of $51,000.

And in 2025 these tax cuts will expire for individuals but the corporations tax cuts will remain permanent.

Happy Holidays Everyone!!!!

 

The Christmas Tax Bill

 

Senate Republicans passed President Donald Trump’s tax plan on December 2, 2017. Republicans still have a lot of differences between the House and Senate tax bills to compromise on.   The House and the Senate have to pass the “same” tax bill.   So which one would be “better.”   Better for whom, would be the question to ask.

I’m going to keep this simple for now.   After this bill is put into law that’s when things will get complicated.    But for now I will go over just a few things that make the House tax bill and the Senate tax bill different.

Family and Child Tax Credit
The House bill expands the credit to $1,600 per child and begins to phase it out for married couples making more than $230,000.   The Senate bill expands the credit to $2,000 per child, with a phaseout beginning at $500,000 of a couple’s income.

Mortgage interest deduction
The Senate bill keeps the limit for the mortgage interest deduction in place for homeowners  for  the first $1 million of home debt.   While the House bill caps it at the first $500,000 of debt.

Medical and Student Loan Deductions 
The House bill eliminates deductions for high medical expenses and student loan interest.  The Senate bill would leave the aforementioned deductions, intact.

The Affordable Care Act (ObamaCare)
The Senate bill repeals the Affordable Care Act requirement that individuals buy health insurance coverage.   Currently, the mandate is enforced via a tax penalty for people who fail to purchase coverage.  The House bill does not touch the mandate.

Trump predicts final passage before Christmas…..

Tax Free Weekends 2017

BACK TO SCHOOL

It’s that time of year again to start that back-to-school shopping spree.  Back-to-school shopping is one of the biggest shopping seasons for most retail stores. Some states like Maryland and South Carolina just to name a few like to help their fellow residents out by giving them what they call a tax-free holiday weekend.  There are 16 states that are participating in this tax-free holiday weekend, which means you won’t have to pay sales tax on certain items purchased. For the other states that choose not to participate, I would assume that their thought on this tax free holiday weekend didn’t sound to economically appealing. 

Having 16 states that are participating in this tax-free holiday gives you the option to cross your state borders and go shopping, so there is no need to worry.  Stay updated by visiting their state website located on the table below.

Do you know when your state’s 2017 tax-free weekend starts? Well below you’ll find the information needed to prepare your day for shopping.  There are links to each states website to give you more info if needed.  Do your research on layaways, online shopping and using discount coupons in combination with this tax free holiday weekend.

Happy Shopping!

State Dates Eligible Items / Max Cost
Alabama July 21 – 23 Clothing: $100
Computers: $750
School supplies: $50
Books: $30
Arkansas August 5 – 6 School supplies: No limit
Clothing: $100
Clothing accessories and equipment: $50
Connecticut August 20 – 26 Clothing and footwear: $100
Florida August 4 – 6 Clothing: $100
Computers: $750
School supplies: $50
Iowa August 4 – 5 Clothing and footwear: $100
Maryland August 13 – 19 Clothing and footwear: $100
Massachusetts August 12 – 13 Clothing and footwear: $100
Mississippi July 28 – 29 Clothing and footwear: $100
Missouri August 4 – 6 Clothing: $100
School supplies: $50
Computer software: $350
Computers: $1,500
Computer peripherals: $1,500
Graphing calculators: $150
New Mexico August 4 – 6 School supplies: $30
Clothing: $100
Computers: $1,000
Computer equipment: $500
Ohio August 4 – 6 Clothing: $75
School supplies: $20
School instructional material: $20
Oklahoma August 4 – 6 Clothing: $100
South Carolina August 4 – 6 Clothing and accessories: No limit
School supplies: No limit
Computers and accessories: No limit
Bed and bath items: No limit
Tennessee July 28 – 30 Clothing: $100
School supplies: $100
Computers: $1,500
Texas August 11 – 13 Clothing and footwear: $100
Backpacks: $100
School supplies: $100
Virginia August 4 – 6 Clothing and footwear: $100
School supplies: $20

Visit our website at www.dmtbookkeeping.com

MUSICIANS ARE YOU RUINING YOUR TAX RETURN BY FILING YOURSELF?

ladygaga

To all my future musician clients, I know you’ve tried saving money by using TurboTax or some other DIY tax website and you’ve probably made a few mistakes. The problem with these DIY tax programs are that they don’t ask the right questions specific to you as an artist, so you wind up with the wrong answers.

Here’s an example of a mistake that I’ve seen musicians make — YOUR CLOTHES, HAIR, AND MAKEUP AREN’T DEDUCTIONS, unless your “on stage outfit” is a costume, it’s not deductible for tax purposes.

Here are a few other tax items you may be missing or not.

#1 – 1099-MISC INCOME WAS MISSING

You forgot to include the 1099-MISC you received from a venue, artist, record label, or publishing rights organization. The IRS knows you got the money, and they’ll be contacting you soon, because the person who paid you reported the income because it is required for them to report it if it was $600 or more…you are still responsible for reporting ALL income received even if you did not receive form 1099-Misc

#2 – YOU DIDN’T SEND FORM 1099-MISC TO THE APPROPRIATE PARTIES, BUT TOOK A TAX DEDUCTION

Anyone you pay $600 or more should be rewarded with a Form 1099-MISC. If you don’t send them a 1099-MISC by January 31, the penalty is $30-$100 per form! So, ensure you send those out on time. Taking the deduction without sending the proper forms is a red flag.

#3 –  YOU DEDUCTED “FREE” SHOWS TO NON-PROFITS AS A CHARITABLE DEDUCTION

Wrong! Your free show was free; you don’t get to deduct what you would have made if you had charged the charity. The actual deduction you could take would be the mileage deduction for driving to and from the event at the charity mileage rate.

There’s no shame in pinching the pennies to do your own taxes, but make sure you don’t make mistakes and ruin your tax return. If you’d rather play it safe, hire a professional like us so that you can fix it before it’s too late to receive a refund or costlier in interest and penalties!

What Do You Do? I Sell Time…

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the-two-most-powerful-warriors-are-patience-and-time-quote-patience-quotes-for-you-580x580I Had an “Aha!” Moment.

As always I was watching an “Informational” video, and on this particular day it was a Gary Vaynerchuck video where he was at a college speaking on entrepreneurship.  Now if you don’t know who Gary is you may want to Google him he’s very unintentionally motivational.  Anyway, he had stated that you cannot teach someone how to be an entrepreneur, which I agree 100%.  You either are, or you’re not.  I would like to consider myself an entrepreneur because the thought of only working for someone else drives me insane.  As he was speaking he said something very interesting which was…”The #1 Asset to everybody in the world is TIME.” I had an “AHA” moment, because after he said that he went on to saying, “if you can figure out how to sell it and buy it back that’s a big coo.”  Now if you don’t know already I have a business where I do Bookkeeping, Taxes, Payroll, Business Formation, IRS resolutions and some additional “business related” stuff.  The one thing that I’ve always dreaded about going to conferences and networking events are the people who walk over to me and ask  “What do you do?”  Thinking to myself, should I tell them EVERYTHING that I do or just mention some or one thing that I do.  So I end up just telling them, “I do taxes and bookkeeping.” And their response is usually “Oh, ok that’s great.”

Now, with Gary V saying what he said about time, reminded me of a TED talk that I watched a while back featuring Simon Sinek who spoke on somewhat the same lines.  His thing was people don’t buy What you do they buy Why you do it. This was the one thing I have always struggled with because I didn’t want to sound like everybody else…At first, I had always thought my WHY to WHAT I DO was to make people’s lives a little less complicated, but at that “AHA” moment I tapped into the #1 Asset that everybody in the world was wanting according to Millionaire Gary V and that was TIME.  I sell TIME.  For example, if you run a business and the majority of your TIME is consumed by doing the bookkeeping, the payroll and the monthly, quarterly and  year-end reports or even worse dealing with those annoying letters coming  from the state and federal agencies because of some discrepancy that was made.  Just think about it, aren’t  you losing time?  Now, wouldn’t it be nice if you could get back that time so you could focus on growing your business or your artistry which will in turn result in increasing your revenue.  As they say, TIME IS MONEY.   So, with all that said, doesn’t  it make sense how providing my professional services can ultimately give a business back its TIME?

Now when I get the opportunity to go to a conference, or a networking event, and I am asked the question, “What do you do?” Guess what my response will be…you got it…I SELL TIME! And instead of them saying the usual “Oh, okay that’s great,” and then walking away. They will be more curious and interested in what I do. Because who doesn’t want their TIME back, even if you have to pay for it.

So, What Do You Do?

Protecting Americans from Tax Hikes Act of 2015

Photographer: Alex Beadon

Congress has reached a bipartisan agreement on tax extenders, which has been named “Protecting Americans from Tax Hikes Act of 2015”. Much to everyone’s surprise, some were made permanent while others were only extended for a period of time. Congress also modified several provisions and added new ones to reduce tax fraud. Here is a look at some of the key provisions included in the legislation that pertain to individuals, small businesses, and certain energy-related provisions: 

INDIVIDUAL PROVISIONS: 

Child Credit – This credit was made permanent; it provides a $1,000 credit for each dependent child who is under the age of 17 at year’s end, who lived with the taxpayer for over half of the year and who meets the relationship test. The credit phases out for higher-income taxpayers, and a portion of the credit is refundable for lower-income taxpayers. The changes also include program integrity provisions that prohibit an individual from retroactively claiming the child credit by amending a return (or filing an original return if he or she failed to file) for any prior year in which the individual for whom the credit is claimed did not have an ITIN – generally a Social Security number). After 2015, when a taxpayer improperly claims the credit, the legislation includes a disallowance period when no credit is allowed. For fraud, the disallowance period is 10 years, and for reckless or intentional disregard of rules and regulations, the disallowance period is 2 years. 

American Opportunity Credit (AOTC) – This credit, which was due to expire after 2017, has been made permanent. This is a tax credit equal to 40% of the cost of tuition and qualifying expenses for higher education, with a maximum credit of $2,500. The credit applies to 100% of the first $2,000 and 25% of the next $2,000 of qualifying expenses. The credit offsets any tax liability, and 40% of the credit is refundable even if the taxpayer does not have any tax liability. It also phases out between $160,000 and $180,000 for married taxpayers filing jointly and between $80,000 and $90,000 for others – except for married taxpayers filing separately, who get no credit. 

After 2015, when a taxpayer improperly claims the credit, the legislation includes a disallowance period when no credit is allowed. For fraud, the disallowance period is 10 years, and for reckless or intentional disregard of rules and regulations, the disallowance period is 2 years. 

A provision was added that prohibits an individual from retroactively claiming the AOTC by amending a return or filing a late original return for any prior year when the individual or a student for whom the credit is claimed did not have an ITIN (generally a Social Security number). 

Earned Income Tax Credit (EITC) – The EITC is a refundable credit allowed to certain low-income workers who have W-2 wages and self-employed income. The credit is larger for taxpayers with children. The credit for taxpayers with children is based upon the number of children; those with three or more children receive the highest credit – as much as $6,269 in 2015. The higher credit for three or more children, which was a temporary provision that was set to expire after 2017, has been made permanent. 

The changes also include added program integrity provisions that prohibit an individual from retroactively claiming the AOTC by amending a return (or filing an original return if the individual failed to file) for any prior year in which the individual for whom the credit is claimed did not have an ITIN (generally a Social Security number). The changes also reduced the marriage penalty by increasing the income phase-out for those filing jointly. 

Teachers’ $250 Above-the-Line Deduction – This provision, which was available from 2002 through 2014, allows teachers and other eligible educators (levels kindergarten through grade 12) to take an above-the-line deduction of up to $250 for unreimbursed expenses incurred as part of their educational work. This deduction has been made permanent and modified by adjusting the $250 for inflation in years after 2015. In addition, professional development expenses were added to the qualified expenses allowed as part of the $250 deduction. 

Transit Pass & Parking Fringe Benefit Parity – From 2010 through 2014, the monthly exclusion amount for employer-paid transit passes and qualified parking were temporarily the same. The parity of these two fringe benefits has been made permanent. Thus, for 2015 they will both be $250.  

Optional Deduction of State and Local General Sales Taxes – Since 2004, taxpayers who itemized their deductions have had the option to deduct the Larger of (1) state and local income tax paid during the year, or (2) state and local sales tax paid during the year. This provision, which had been previously extended through 2014, provides the greatest benefit to those taxpayers who reside in a state that has no income tax (which include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming). This election has been made permanent. 

Above-the-Line Deduction for Qualified Tuition and Related Expenses – This above-the-line deduction for qualified higher education tuition and related expenses had been available from 2002 through 2014. The deduction includes adjusted gross income (AGI) limitations; it is not allowed for joint filers with an AGI of $160,000 or more ($85,000 for other filing statuses). This deduction has been retroactively extended through 2016. 

Tax-Free IRA Distributions For Charitable Purposes – This provision was temporarily added in 2004 and originally expired in 2011; it was not extended until late in the year during the years 2012, 2013 and 2014, thus limiting its application in those three years. The provision allows taxpayers age 70.5 and over to directly transfer (not rolled over) funds from their IRA accounts to a qualified charity. The distribution is not taxable, but it does count toward the individuals’ required minimum distribution (RMD) for the year. The maximum allowable transfer is $100,000 per year. No charitable deduction is allowed, as the distribution is not taxable. This provision has been made permanent; it provides four potential tax advantages: 

  1. The distribution is not included in income, thus lowering the taxpayer’s AGI, which in turn helps to avoid various AGI phase-outs and limitations. 

  2. Keeping the AGI lower also helps to minimize the amount of Social Security income that is subject to tax for some taxpayers. 

  3. Taxpayers using the standard deduction cannot get a charitable deduction, but they are essentially deducting the charitable deduction from their gross income when making contributions this way. 

  4. The transferred distribution counts towards the taxpayer’s RMD for the year. 

Discharge of Qualified Principal Residence Indebtedness – When an individual loses his or her home to foreclosure, abandonment or short sale or has a portion of his or her loan forgiven under the HAMP mortgage reduction plan, that person generally will end up with cancellation of debt (COD) income. COD income is taxable unless the taxpayer can exclude it. A taxpayer can exclude the COD income in the extent that he or she is insolvent (with debts exceeding assets immediately before the event occurs) using the insolvency exclusion.

Due to the housing market crash, in 2007, Congress added the qualified principal residence COD exclusion, which allowed taxpayers to exclude COD income to the extent that it was discharged acquisition debt. Acquisition debt is debt originally incurred to acquire a home or substantially improve it – not debt used for other purposes, which is called equity debt. However, equity debt is deemed to be discharged first, thus limiting the exclusion when both equity and acquisition debt are involved in the transaction. 

The qualified principal residence COD exclusion had been previously extended but had expired at the end of 2014. This exclusion has been retroactively extended through 2016 (a two-year extension). 

Mortgage Insurance Premiums – For tax years 2007 through 2014, taxpayers could deduct (as an itemized deduction) the cost of premiums for qualified mortgage insurance on a qualified personal residence (first or second home). To be deductible, the premiums must have been related to acquisition debt incurred after Dec. 31, 2006. However, this deduction phases out for higher-income taxpayers (generally those whose AGI exceeds $100,000). This provision, which had expired after 2014, has been retroactively extended through 2016, a two-year extension.

BUSINESS PROVISIONS: 

Research Credit – Tax law provides a tax credit of up to 20% of qualified expenditures for businesses that develop, design or improve products, processes, techniques, formulas or software (and similar activities). The credit has been available off and on since 1981 without being made permanent. It had been extended several times but had expired at the end of 2014. This credit has been retroactively made permanent. In addition, it is not a tax preference for small businesses. 

100% Exclusion of Gain – Certain Small Business Stock – Previously, for stock issued after September 27, 2010, and before January 1, 2015, non-corporate taxpayers could exclude 100% of any gain realized on the sale or exchange of “qualified small business stock” held for more than 5 years. In addition, there was no alternative minimum tax (AMT) preference when the exclusion percentage was 100%. Generally, the term “qualified small business” means any domestic C corporation with assets of $50 million or less. This provision has been made permanent. 

Differential Wage Payment Credit – Through 2014, eligible small business employers – generally those that have an average of fewer than 50 employees and that pay a individual called into active duty military service all or part of the wages that they would have otherwise received from the employer – can claim a credit. This differential wage payment credit is equal to 20% of up to $20,000 of differential pay made to an employee during the tax year. This credit has been retroactively made permanent; for years after 2015, the credit will apply to any size employer.

Work Opportunity Tax Credit (WOTC) – Through 2014, employers could elect to claim a WOTC for up to 40% of employees’ first-year wages for hiring workers from targeted groups – not exceeding wages of $6,000 (a maximum credit of $2,400). First-year wages are wages paid during the tax year for work performed during the one-year period beginning on the date when the employee begins work for the employer. This credit has been retroactively extended for five years through 2019; it applies to veterans and non-veterans and adds qualified long-term unemployment recipients to the list of targeted groups for years after 2015. 

Section 179 Election – Since 2003, the Section 179 election has been temporarily increased from its statutory limit of $25,000 to between $100,000 and $500,000. Since 2010, the expense cap has been $500,000 (or $250,000 on a married-filing-separate tax return), and the investment limit has been $2 million. However, the last extension expired after 2014; without an extension, the cap would have returned to the statutory $25,000 limit in 2015. The statutory expensing limit of $500,000 and the $2 million investment limit have both been made permanent.

The application of the Section 179 election to “off-the-shelf” computer software, qualified leasehold improvements, qualified restaurant property and qualified retail improvements has also been made permanent. 

Leasehold and Retail Improvements and Restaurant Property – The class life for qualified leasehold and retail Improvements and restaurant property had been temporarily included in the 15-year depreciation class life, as opposed to the 31-year category. Qualified leasehold and retail Improvements and restaurant property have been retroactively and permanently included in the 15-year MACRS class life. 

Bonus Depreciation – As a means of stimulating the economy, a 50 percent bonus depreciation was temporarily implemented in 2008 and subsequently extended through 2014. For the period between September 8, 2010, and before January 1, 2012, it was even boosted to 100 percent. Bonus depreciation applies to personal tangible property placed in service during the year for which the original use began with the taxpayer. 

The 50% bonus depreciation has been extended for 2 years (through 2016) for property placed in service before January 1, 2017. This generally applies to property with a class life of 20 years or less, to qualified leasehold improvements and to certain plants bearing fruits and nuts that are planted or grafted before January 1, 2020. 

Enhanced First – Year Depreciation for Autos and Trucks – This is the so-called “luxury limit” on the deprecation deduction of passenger automobiles and light trucks used for business. For such vehicles placed in service in 2015, the limits are $3,160 and $3,460, respectively. In the past, the bonus depreciation had increased the first-year luxury limits by $8,000. Under the new law, the bonus depreciation applicable to luxury vehicles will be phased out through 2019. Thus, the luxury auto rates will be increased by the following bonus depreciation rates: $8,000 for 2015 through 2017, $6,000 for 2018 and $4,800 for 2019. 

ENERGY PROVISIONS: 

Residential Energy (Efficient) Property Credit – From 2006 through 2014, a nonrefundable credit had been available for qualified improvements to make the taxpayer’s existing primary home more energy efficient. Qualified improvements generally included insulation, storm windows and doors certain types of energy-efficient roofing materials, and energy-efficient air conditioning and hot-water systems. The credit was equal to 10% of the improvement’s cost (not including installation), with a lifetime credit of $500. The credit has been retroactively extended through 2016 (two years). 

Credit for Fuel-Cell Vehicles – Through 2014, a taxpayer could claim a credit for vehicles fueled by chemically combining oxygen with hydrogen to create electricity. Generally, the credit was $4,000 for vehicles weighing 8,500 pounds or less (and up to $40,000 for heavier vehicles, depending on their weight). An additional $1,000 to $4,000 credit was available for cars and light trucks to the extent that their fuel economy exceeded the 2002 base fuel economy set forth in the Internal Revenue Code. This credit has been retroactively extended for two years through 2016. 

If you have questions related to these or other, less commonly encountered provisions of the new law (Protecting Americans from Tax Hikes Act of 2015), please send us an email. Benefiting from some of these provisions for 2015 will require taking action before year’s end.

“Obamacare”: Love It or Hate It

Photo by: Jonathan Velasquez

Obamacare – Unconstitutional!!! You shouldn’t be forced to purchase something you don’t want!  I’ve heard and seen these statements over and over and over and over again.  First let me clear up a few things before I go into what I really wanted to share with you about the Affordable Care Act – specifically the individual shared responsibility provision.   Ok here it goes … First “Obamacare” is NOT I repeat is not a health care plan.  Obamacare aka The Patient Protection and Affordable Care Act (PPACA), and commonly called the Affordable Care Act (ACA) is a United States federal statute signed into law by President Barack Obama on March 23, 2010. It represents the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.

The ACA was enacted with the goals of increasing the quality and affordability of health insurance, lowering the uninsured rate by expanding public and private insurance coverage, and reducing the costs of healthcare for individuals and the government. It brought about mandates, subsidies, and Insurance exchanges which were intended to increase coverage and affordability.   The law also has required insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex.  The United States Supreme Court upheld the constitutionality of the ACA’s individual mandate as an exercise of Congress’s taxing power on June 28, 2012.

Love It or Hate It – It does not matter because it is a law and with any law comes consequences if you do not abide by them.  My purpose today is not to debate whether you should love it or hate it my purposes today is to educate you on the individual shared responsibility provision of the ACA and give you the resources to get through this process since 2014 tax year is when individuals were/are required to have qualifying health care coverage (called minimum essential coverage), qualify for an exemption, or make an individual shared responsibility payment, or SRP (penalty), with your Federal income tax returns.

If you’re required to have coverage, you’ll be charged a tax penalty by the government if you go without insurance for 3 consecutive months or longer. You won’t be charged the tax penalty if you are uninsured for less than 3 consecutive months. The penalty is $95/per adult and $47.50/per child for the first year or 1% of your AGI, whichever is greater (Maximum is up to $285 per family). If your household income is above 400% of the federal poverty level then you may be exempt from paying the penalty or if insurance in your area cost more than 8% of your taxable income (taking into account employer contributions or tax credits).  These amounts above are for the 2014 tax year.  On the chart below you will see how the penalties will go up in future years.

obama care penalty chart

See that was simple and painless.  I promised you some resources and you can definitely get them at www.dmtbookkeeping.com and click on the “Get Started” posted note or click on the one below and there you will find the calculators, exemptions forms and much more.

getstartednote

Bookkeeping for Bloggers – Contests, Lotteries and Sweepstakes

CONTESTS

Hosting a giveaway (technically not a legal term, but it’s used interchangeably with the term sweepstakes) is not only a great way to promote your blog or a product, but also it’s a great way to build followers and build great relationships with sponsors. As a host it’s your responsibility to make sure your sweepstake is legally set up. You definitely want to avoid turning your sweepstake into a lottery. The laws governing the sponsorship and hosting of social media promotions are widely overlooked or misunderstood. Below is a brief overview of the laws and tax implications you need to know to avoid placing your business at legal risk.

Generally speaking, there are three types of online promotions:

  1. Lotteries
  2. Sweepstakes
  3. Contests

Beginning with lotteries which are random drawings for prizes wherein participants have to pay to play. Let’s look at the three components of a lottery: 

 1.) Prize, what you are giving away
2.) Chance, the element of luck involved in winning the prize, and
3.) Consideration, something of value.

For example from a bloggers standpoint, if you require someone to follow you or like your blog or page (consideration) for the probability (chance) to win a tablet (prize) that would place your giveaway into the lottery category which is so much more highly regulated (with the exception of state‐run lotteries and authorized raffles). You also cannot charge a fee or make someone purchase something for someone to enter your promotion or it will be considered a “lottery.” You must make certain that your giveaway does not contain all three of these components. Of course hosting a giveaway you will be expected to have a prize and a chance, so you need to avoid having those who enter exchange consideration for the chance to win. So before considering having a “giveaway” you may want to consult with a legal consultant or check with your state to ensure compliance with their laws as well as with federal agencies.

The majority of bloggers usually run what you would call sweepstakes, meaning they give prizes away by choosing the winner by random drawings or chosen predominately by chance. Then you have contests, which is a promotion in which entrants win a prize based on merit or skills and prizes are awarded based on a judging panel or a voting process (for example, the best poem or the winner of a trivia game). No matter which option you choose whether it’s a Sweepstake or a Contest you must have official rules. Two of the most used statements in the rules are “no purchase necessary” and “void where prohibited by law.” Check out this link via SBA.gov: How to Use Contests, Sweepstakes, and Giveaways as Marketing Tools – While Staying Within the Law. Now as you know I am an EA and not an attorney so the information contained herein is not intended to constitute legal advice or a legal opinion as to any particular matter and I urge you to consult with an attorney concerning your own situation and any specific questions you may have. The contents are intended for general information purposes only from my own experience dealing with clients, by preparing the correct tax forms to send to the recipients of the winnings/prizes and assisting the business in filing their own forms to the correct agencies.

Knowing which social media promotion you are running or hosting, whether it be contests, sweepstakes, raffles, drawings, giveaways, or freebies will have tax implications.

Sponsors of lotteries, sweepstakes, drawings and raffles that are considered gambling must send the recipient a W-2G if the recipient’s cash winnings and/or the Fair Market Value (FMV) of prizes such as cars and trips are $600 or more and at least 300 times the amount of the wager. Also, you must withhold at a 25% rate if the winnings minus the wager are more than $5,000 of gambling winnings for federal income tax.

Sponsors of contests and sweepstakes are required to send the recipient a 1099-Misc if the recipient’s cash winnings and/or the Fair Market Value of merchandise won are $600 or more and do not involve a wager. 

Eligibility might be further limited to particular states within the United States that have relatively more rigorous legal requirements, which includes:

  1. Florida – sponsors of promotions in which the total value of the prize exceeds $5,000 must file a copy of the rules and a list of all prizes at least seven days before the promotion begins and submit proof of either a trust account or surety bond equivalent to the sum of the prizes offered. Promotions based in other states must be filed if they are open to Florida residents and have prizes valued at more than $5,000.
  2. New York – the filing requirement are an issue when the total value of the prize exceeds $5,000. If that is the case the sponsor must file with the Secretary of State at least 30 days prior to the start of the promotion along with a statement setting forth the official rules and regulations and create a trust account, certificate of deposit or surety bond in the amount of the offered prize.
  3. Rhode Island – the filing requirements begin when the promotion is offered at a retail establishment and the value of the prize exceeds $500. Rhode Island does not require the posting of a bond.

There may be filing fees associated with submitting the required information to these states along with other professional fees needed in the assistance of completing these tasks (lawyers, brokers, etc.) – these fees are considered business expenses, so they can be deductible on your tax return.

In addition to structuring sweepstakes and contests to comply with federal and state laws, companies must pay attention to the promotion terms and conditions of social media networking sites. Check out their promotion guideline agreements.

 

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I hope the information that I’ve shared was helpful.   Again, the information contained herein is not intended to constitute legal advice or a legal opinion as to any particular matter and I urge you to consult with an attorney or your state/federal regulators concerning your own situation and any specific questions you may have.

 

Debbie Thomas, EA, NRB