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.

 

LinkedIn

Google+

Twitter

Facebook

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

 

I’m Blogging and I’m Making Money Doing It….What Do I Do Now?

Bookkeeping for Bloggers

I‘m Blogging and I’m Making Money Doing It….What Do I Do Now?

As an EA and a certified bookkeeper I get asked questions like, “what do I do now that I am making money from blogging?” Or, “what information should I keep for filing my taxes?” I had no idea that people were making a living from blogging. These online diaries known as weblogs or ‘blogs’ have morphed into a cutting-edge phenomenon that has provided a platform for the internet’s next wave of innovation and moneymaking opportunities. For those of you who are thinking about getting into blogging and are wondering some of the ways bloggers are making money from this well here are some of the ways they’re doing it. They are putting advertisements on their blog like Google AdSense which is an easy non-technical way of generating income. All you need to do with AdSense is copy a code and paste it on your website. Another way is to be in an affiliate program which allows you to post a link to the company’s product on your blog and if someone clicks through your blog to their site and orders, you would get a portion of the sale. Also, you can make money from private sponsorships and when your blog becomes really established with readers you can expand by offering memberships to your website to gain access to exclusive content on your blog. There are a lot more ways to generate money by having a blog but those mentioned are the most popular. However I’m not here to tell you how to make money I’m here to explain what to do when your blog starts to generate money and to give you some resources to help you navigate through the process.

business or hobby

Well as I stated earlier you can make pretty good money blogging. As you start making money your blog becomes your business and the way it works is this: For tax purposes, a business is any activity in which you regularly engage primarily to earn a profit. You don’t have to show a profit every year to qualify as a business. As long as your primary purpose is to make money, your blog should qualify as a business (even if you show a loss some years). Your blogging business can be full time or part time, as long as you work at it regularly and continuously. However, if your primary purpose is something other than making a profit—for example, to communicate with your friends or make your opinion known—the IRS will find that your blog is a hobby rather than a business.

Keeping good books and other records and carrying on in a professional manner can constitute that you are running your blog as a business. Working on a regular basis and earning a substantial profit, even after you’ve had some losses in the past will help show that you are serious about trying to make it a success. As a business, you now have to claim all income; even the free stuff you get, unless it’s labeled as a gift or corporate sample, is considered income. If your blog qualifies as a business, you’ll be able to deduct your business expenses from the income you earn from the blog. If you have a loss, you’ll be able to use it to reduce your taxable income from other sources such as wage income and investment income. It’s also worth noting that your expenses shouldn’t really outweigh your income (although sometimes it’s unavoidable in your first years of business, taking into account start-up costs and so forth). Keeping receipts, a separate bank account and all other documentation is a great start for getting your business organized for tax time. It also shows that you are running your blog as a legitimate business. Once you’ve established that you are running a business, it is now time for you to set up an entity structure (LLC, S-Corp, C-Corp).  I do not recommend that you be set up as a Sole Proprietorship.  I do encourage you to speak to your tax professional about the tax implication of each entity and what will work for you.  Check out this link for more information on whether you’re considered a business or a hobby.

deductions3

So then what things can a blogger deduct? Just about anything that is directly related to your blogging business and is necessary and reasonable in amount. Below are some categories and expenses a blogger could deduct.
Internet fees
Website hosting fees
Domain name cost(s) and renewals
Business Travel

Transportation costs: car mileage; airline tickets; taxis; buses; trains
Hotel costs for business trips
Costs of conferences, plus all related expenses
Continuing Education
Further education classes
Webinars
Business podcasts
Meals
Meals are only deductible as an entertainment expense when provided to a customer or client. In general, only 50% of the cost of the business meal can be deducted; other rules limit “lavish or extravagant” meal and other expense deductions
Depreciation
Fax/scanner/copier equipment
Computer equipment/Laptop
Furniture
Supplies
DVDs and CDs related to your blogging
Movie or theater tickets, etc., if related to your blogging
Stock photo purchases for your blog
Film, Web & Digital cameras
Props
Dues & Subscriptions
Books and magazines used for research
Research sites that require a subscription
Memberships to professional clubs and affiliations
Advertising
Business logos and graphic design fees
Business cards, letterhead and other stationery
Online self-promotion fees (that includes banners and AdWords costs)
Legal and Professional Services
Search Engine Optimization services and fees
Website design and/or maintenance fees
Tax preparation/Bookkeeping fees
Business incorporation costs
Costs for Trademarks or Copyrights
Home Office Deduction
You can deduct the part of your home you use exclusively for blogging as an expense, including a portion of the rent, water, heating bills, insurance and so on.
Office Expenses
Business equipment rental
Tax and accounting software
Postage costs
PayPal and Bank fees
Post Office Box fees
Prizes and giveaways
For more information on deducting business expenses check out this link.

keeping track3So now you know what you have to do, here are a few options you have for keeping track of your income and expenses.

First, hire a bookkeeper. Of course I would tell you to do this because I’m a bookkeeper (wink). Some may think it’s too expensive which is understandable if you’re not really making a substantial amount of revenue, but for those making a living at this may want to consider it because in the long run you could save a lot of time and money when it comes tax time. It is definitely the easiest way to go because you can just drop off a box of receipts to a bookkeeper and pay them to organize, align and produce a package that will help you file your taxes or even pay them to do your taxes if they are also licensed tax professionals.  A bookkeeper will have complete and up to date records of all your business interactions, produce professional reports and ensure your books are accurate. If you don’t have the funds at this time to hire a bookkeeper there are other ways to keep track of your activities: For example you can use Microsoft Excel to keep track of your business income and expenses.  It’s much easier to keep track of every activity if you have a separate bank account for your blogging business.  Another way would be to use an online accounting program; I’d recommend using Wave Accounting or FreshBooks.  These online programs usually have bookkeepers or accountants, as their advisors. These folks can help you if you get stuck or have questions or just want advice and it’s FREE.  FreshBooks have limitations but you can upgrade if need be. When you decide you’re ready to purchase software you can always contact a QuickBooks ProAdvisor and they can help you choose the correct QuickBooks package and give you special discounts. Most of the QuickBooks ProAdvisors can be contacted via email or phone to help answer any questions you may have with your QuickBooks. Click this link to find a QuickBooks ProAdvisor

This quick introduction definitely does not compare to meeting with or speaking to a certified bookkeeper, accountant or enrolled agent (EA). It is only meant as a quick guide to get you started with keeping track of your business activities. If you are able to meet with a bookkeeper, I highly encourage you to do so; they can be great resources to have.

If you have any questions please email me and I’ll be glad to answer any of your questions.

Debbie Thomas, EA, NRB

Don’t Judge A Book By Its Cover

whos

Where’s the best place to get your taxes done? 
That is the question.

Well let me give you something to think about when deciding.  It all started when I moved from my home state of WV to the good ole state of Maryland.  I had just received my degree in Accounting and IT and was ready to look for a new career.  I had already been working for the last ten years as a librarian where I so envied the VITA volunteers who came every year to provide free tax services to the community and I so wanted to one day be involved with that.  If you don’t know what VITA is, well it stands for Volunteer Income Tax Assistance which is a program regulated by the IRS to provide free tax assistance to taxpayers.  Anyways, before moving from WV I applied for a job at a CPA firm and after a week I got a call about the position stating that it had already been filled, boy did I start to worry that I would never find a job opportunity like that again being how we lived in a small town.  I was really hoping to land something before I actually moved to Maryland.  If you’re wondering why I was moving well it’s because my fiancé had been offered a job there so I decided I was going to move myself and my three boys there to start a new life.  Sounds exciting doesn’t it.  Well it was!

So there I was getting ready to take that last drive to Maryland where I thought I’d have a job but, NOTHING.  So about a month later I received a call from the CPA firm that I had applied for and lo and behold I got the job.  So there I was working for a CPA firm learning so much.  I quickly learned that what you are taught in college does not prepare you for what you will actually be doing.  I mean I was doing payroll, bookkeeping, financial statements for home building contractors, doctors, apartment buildings, you name it I did it. All this prepared me for the task of preparing taxes for corporations, partnerships and individuals. I was calculating depreciation and loan interest as well.  So I thought maybe I should expand my skills and go to an H&R Block class and maybe prepare taxes there.  I mean they are well-known so they must be good at what they do.  I told my boss what I was doing and he kind of giggled under his breath.  I went back into my office wondering why he giggled as if I was joking about taking the tax class at H&R Block and maybe working there for some more experience.

Ok, well here is where I discovered why he giggled.  As I walk into the class I found a table way in the back and took a seat.  Looking around at the few people who were already sitting at the other tables I wondered what their stories were.  Then in walks the instructor (or should I say a “wanna” be comedian) and class is about to begin until a few more people start rushing in.  Ok, finally he’s ready to explain the program and go over everything.  I was so excited until it was that time for everyone to introduce themselves.  Here we go, the start of the introductions and it seems everyone in the room was interested in the same thing, a part-time job to make a little extra money.  Let me just tell you after the whole “getting to know you” thing I found out that out of the 15 people in the class I was the only person with a degree and/or any type of background in accounting, taxes or business.  There were housekeepers, store clerks, restaurant cooks, cashiers … you get where I’m going.  So now I’m wondering how does an H&R Block tax preparer get qualified.  Well come to find out after taking the 6 week basic tax course all you need to do is take a test and pass with a 80%.  The instructor told us that the tax software that is used is fools proof – meaning that any idiot should be able to put numbers into the program and unless an error comes up, you are good.  They are not required to ask for any additional info from the client or anything.  So I’m thinking this is easy money to be earned.  This brings me to my next “Say What” moment.  How much do we get paid?  At that time it was $7.25.  Yes folks, $7.25 – hold up. They charge clients outrageous prices to get a simple tax return prepared and the preparer gets $7.25/hr.  It’s called overhead ya’ll.  I forgot to tell you earlier that you also pay for your tax training class as well.

No more was I wondering why my boss giggled when I told him my plans on furthering my learning.  As I walked into work after completing my course at H&R Block he asked me how it was going and I told him that it wasn’t for me and I don’t think I will be going back and then I giggled.

So fast forward to where I am today an Enrolled Agent and a business owner a CE course author and of course I finally got to volunteer for VITA as an Advanced Certified preparer.  I can say that when I hear people say that they are going to one of those tax franchises to have their taxes prepared I kind of cringe.  Not because of the experience I had but because they aren’t educated enough to know what to look for in a preparer.  It’s not necessarily the place you’re going to get your taxes done but who is preparing your taxes.  Don’t get me wrong there are some good tax preparers working in these offices – as I could have been one, but you also have some that just do the basic data entry.  My advice to you is to ask your preparer questions about your return or make sure they know your situation so that you can get the best tax service for your money and see if they will be around after the current season to prepare you for the next tax season in case you have any questions.

To help you with some of the questions or concerns just follow my blog and social media sites.  The info posted to these sites will guide you when it comes to making sure you’re getting your taxes prepared correctly.  Remember these are big corporations just wanting to get your money so it’s your job to make sure you’re not getting taken advantage of.  In the end you are responsible for your tax return no matter who prepares it.

businesswoman

 

I hope sharing this story with you gave you a little insight on deciding what to do when choosing the right place to get your taxes prepared. What are some of your experiences and what are your concerns, please leave a comment and share.

Have a wonderful day!

Debbie Thomas, EA

Claim Your Sweetheart on Your Taxes

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Most of you don’t know that you can actually claim your wonderful significant other on your tax return as a dependent.

Yes, you heard me right.  You can claim that broke boyfriend or girlfriend on your taxes.  I mean didn’t reading those first two sentences put a smile on your face after thinking about how you come home every day from work seeing that “soul mate” sleeping on the couch with “your” empty bag of chips laying on the floor beside them.  Instead of seeing that list of potential jobs written down on the pad of paper you had placed on the coffee table before you left out to go to work that morning (hint, hint).  You bust your butt every day to provide a comfortable place for the both of you to live and eat, don’t you think you deserve a break.  Don’t get me wrong there are those of you who have wonderful significant others who you adore and they are trying so hard to find a job while helping you out by cleaning the house and having dinner ready when you get home – Now that’s a Sweetheart!  Both of these scenarios are very common and both can give you a little tax relief at tax time.

Unfortunately a lot of taxpayers are missing out on this opportunity to claim your boyfriend or girlfriend on your tax return because you do not know a lot about the tax laws or because you go to one of those “tax franchises” that get you in and out with their basic training. I had posted a link on our FB Page stating “Ten Reasons Why You Still Need A Tax Pro” which this would be a good reason to use one.  Check out the info graphic from SmartCenter on the article.

Anyways, back to the subject of taking an exemption for the love of your life.  A federal exemption is earnings that get subtracted from a taxpayer’s adjusted gross income (AGI). They are often applied when claiming children or qualifying relatives as dependents.  Each year the exemptions increase; for 2013 it was $3,900 and now for the coming tax year 2014 it will be $3,950.

There are necessary criteria in order to be able to claim a boyfriend or a girlfriend on your taxes and you must ensure you take precautions when doing so.  Make sure you have documents that show proof of your financial support like receipts or bank statements showing those items.  If you don’t have proof of residency you may want to get a notarized letter from your landlord or neighbor, but if the person has mail or other proof of residency then that will work as well.

The Internal Revenue Service (IRS) have tests that needs to be met before you are able to claim the significant other on your return.

  • Support Test – You provided more than half of his/her support
  • Relationship Test – He/she must have lived with you throughout the entire year as a member of the household
  • Non-Qualifying Child Test – She/he cannot be a qualifying child
  • Income Test – The significant other (boyfriend/girlfriend) cannot have made more than $3,900 (2013), $3,950 (2014)

Here are some other facts to consider:

  • You cannot be claimed as a dependent by anyone else
  • The person must be a U.S. citizen
  • Your relationship cannot violate local laws
  • Both of you cannot not file taxes jointly

I hope this information was helpful and I would advise you to speak to your tax pro for guidance to make sure you get the most out of your tax filing year.  Feel free to leave a comment or email me at debbie@dmtbookkeeping.com for any further questions or comments.  Also, don’t forget to check out our website at www.dmtbookkeeping.com.

Have a wonderful day!

Debbie Thomas, EA

It’s Spring – Let’s Get Organized!

SPRING CLEANING

Are you ready?  Well then let’s get started!

I hope you’re energized and ready to start clearing out all of those old documents that you have accumulated over the years. Putting your financial matters in a nice organized manner will give you peace of mind.  Did you not feel good when you finally finished  your “household” spring cleaning … everything now is where it belongs, the smell of bleach and lemon filling the air of the once cluttered rooms and that sense of relaxation after relieving that big inhale.   Now picture that same feeling (minus the smell of bleach and lemon) when it comes to getting your paper work in order.  No more asking yourself, “where is that form, I just had it the other day,” or misplacing your child’s field trip form that was supposed to have been signed a week ago.  On a serious note though folks, let’s just say you get audited – which means you’re going to have to pull out your tax returns along with all the information that was used to prepare that return – well do you know where it is?   Exactly.   Wouldn’t you feel a little relieved knowing that if anything like that ever happened that you would be more than ready?   Also, with the New Year and the start of Spring you may want to consider getting your finances together maybe start a wealth planning program or just get yourself on a budget.  With your paperwork in order it will make the process a whole lot easier.

Now, no one said this is going to be easy but having a checklist and a guide can take a lot of pressure off of having to do it yourself. Think of it as having your own personal assistant.  Now just like starting a business you have to start with a business plan.  You have to know where to start by knowing what you will need to make this process successful.  So to start off, below is a list of things you will need.  How cool is that!!

spring cleaning-page1

I suggest that you take 4 days to do this 4 step process.  But if you think you can get it done in one day go for it.   OK, here we go!

Step 1 – Gather ALL of your documents – (including unopened mail, receipts, bills, etc…).

Step 2 – Set up a filing system –  click here for a list of folder names that you can choose from depending on what you have.  This is where the labels come in handy.  Start writing the names on the tabs so you can later put them on the file folders or if you are going to scan just check mark the the folder tab names on the list so you can later entered them into your computer program.

Step 3 –  Separate – Now it’s time to get your posted notes out and label them with the following:  (1.)  File/Scan  (2.)  Bills To Pay  (3.)  Review  (4.)  Shred.  Spread the posted notes out and start separating your paperwork into the 4 piles.   If you do not know what papers to keep click here for the records retention schedule

Step 4 – File/Scan – It’s time to grab those labels (tabs) you previous made and start putting them on the filing folders (or start creating digital folders with the names you checked on the list into your computer program).  Once that is complete start filing/scanning.  Grab the papers in your “file/scan” stack and start separating them into the appropriate tabbed folders or start scanning them into the labeled digital folders in your computer program.   Next, grab your “bills to pay”  stack and put those in the “Bills to Pay” folder.   Now grab your “review”  stack and put them in the “Review” folder.     After you’ve put the documents in the correct folders it’s time to file them away into a file box or filing cabinet.  If you scanned your documents you can now  save the files onto your flash drive.   Finally, we come to the best part, the “SHRED” pile.  No need to explain that one but I’m going to: Shred with your shredder or burn in your fire pit whichever works best for you.  Just don’t throw them in the trash without being shredded (the trash bag is only to be used for the papers already shredded).   DON’T BE A VICTIM OF IDENTITY THEFT.

OK, you did it!  [High Five] Now don’t you feel GOOD!  I’m so happy for you.  This is the first step of getting your finances in order.

Well it’s been great sharing this information with you.  Until next time relax and have a wonderful day!

Debbie