“Flipping” Homes – A Reviving Trend in Real Estate

Prior to the recent economic downturn, flipping real estate was popular. With mortgage interest rates low and home prices at historical lows, flipping appears to be on the rise again. House flipping is, essentially, purchasing a house or property, improving it, and then selling it (presumably for a profit) in a short period of time. The key is to find a suitable fixer-upper that is priced under market for its location, fix it up, and resell it for more than it cost to buy, hold, fix up and resell it. If you are contemplating trying your hand at...

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Worker Misclassification Under Congressional Scrutiny

A Congressional research report titled "Tax Gap: Misclassification of Employees as Independent Contractors," focused on the tax gap created by misclassifying workers as independent contractors rather than employees and the problems associated with enforcing proper classifications.Businesses must withhold tax and pay Social Security, Medicare and unemployment tax on wages paid to employees. On the other hand, they don't withhold or pay taxes on payments to independent contractors. An IRS study found that workers misclassified as independent contractors...

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Thinking of Making Home Improvements?

There is currently a 30% tax credit (maximum $1,500 for the combined 2009 and 2010 tax years) for certain home energy-saving improvements. That credit expires at the end of 2010. Examples of qualifying improvements include high-efficiency heating and AC systems, energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit. Call our office for detail...

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Maximizing Medical Deductions Before 2013

Medical expenses are deductible if you itemize your deductions. However, there is a limit on how much of those medical expenses can be deducted based upon your income for the year. Currently, only medical costs that exceed 7.5% (10% if you are subject to the alternative minimum tax) of your adjusted gross income (AGI) can be deducted.For example, you have wages of $50,000, interest income of $1,000, and no adjustments to your income. Your AGI is $51,000 and 7.5% of the AGI is $3,825. In this case, you would only be able to deduct your medical...

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2010 is the Last Year for the Lean Vehicle Credit

2010 is the final year during which taxpayers can purchase an advanced lean burn technology vehicle and claim a tax credit for the purchase. Unlike the hybrid credit, the lean burn credit is available to vehicles with internal combustion engines that are designed to operate primarily using more air than is necessary for complete combustion of the fuel, incorporate direct injection, and achieve at least 125% of the 2002 model year city fuel economy rating. The table below lists the vehicles currently certified by the IRS as qualifying for the advanced...

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Having a Bad Year? You May Qualify for the Earned Income Credit.

Many individuals find themselves earning less during these troubled economic times than in years past. As a result, they may qualify for a credit that they previously were not entitled to because of income limitations.The Earned Income Tax Credit (EITC) is for people who work, but have lower incomes. If you qualify, it could be worth up to $5,666 for 2010. So, you could pay less federal tax or even be eligible for a refund. The credit is a refundable...

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New Regulations Provide More Insight to Health Care Reform

The Departments of Labor, Treasury and Health and Human Services recently issued regulations to implement a new Patient's Bill of Rights as part of the Health Care Reform Act. The major initial provisions include the following:Insurance for Uninsured Americans with Pre-Existing ConditionsBeginning July 1, 2010, a Pre-Existing Condition Insurance Plan will provide new coverage options to individuals who have been uninsured for at least six months because of a pre-existing condition. States have the option of running this new program in their state....

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Small Business Expenses 101

For small business owners, tax breaks often come in the form of tax deductions – which can offer a nice little instant cash savings – if you know how to navigate tax law and claim the deductions you deserve (not what you believe you are entitled to).Large tax deductions are a notorious red flag for the IRS, with home-based businesses, in particular, facing an increase in tax audits due to suspicious deduction activity on income tax returns.To help you navigate the complex world of business tax deductions, here is some foundational guidance that...

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Report Tips to Employer by August 10th

If you are an employee who works for tips and received more than $20 in tips during July, you are required to report them to your employer on IRS Form 4070 no later than August 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return...

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Homebuyer Credit Closing Deadline Extended to September 30, 2010

The deadline for the completion of qualifying First-Time Homebuyer and Long-Term Homeowner Credit purchases has been extended. Taxpayers who entered into a binding contract before the end of April now have until September 30, 2010 to close on the home.Note- This extension ONLY extends the time by which taxpayers who had entered into a binding contract before May 1, 2010 can actually complete the purchase (close escrow). It does not extend the “before May 1” contract date requirement.The Homebuyer Assistance and Improvement Act of 2010, enacted...

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Tips on the 10 Percent Tax on Tanning Services

Starting July 1, 2010, many businesses offering tanning services must collect a 10 percent excise tax on the tanning services that it provides. This excise tax requirement is part of the Affordable Care Act that was enacted in March 2010. Here are nine tips on the tanning excise tax that providers must collect. Businesses providing ultraviolet tanning services must collect the 10 percent excise tax at the time the customer pays for the tanning services.  If the customer fails to pay the excise tax, the tanning service provider is liable for...

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