Tax

As a small employer, you may be eligible for a tax credit that lets you keep more of your hard-earned money. It’s called the small business health care tax credit, and it benefits employers that:

• offer coverage through the small business health options program, also known as the SHOP Marketplace
• have fewer than 25 full-time equivalent employees
• pay an average wage of less than $50,000 a year ($52,400 in 2017 as adjusted for inflation)
• pay at least half of employee health insurance premiums

Here are five facts about this credit:

• The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
• To be eligible for the credit, you must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace, or qualify for an exception to this requirement.
• The credit is available to eligible employers for two consecutive taxable years beginning in 2014 or later. You may be able to amend prior year tax returns to claim the credit for tax years 2010 through 2013 in addition to claiming this credit for those two consecutive years.
• You can carry the credit back or forward to other tax years if you do not owe tax during the year.
• You may get both a credit and a deduction for employee premium payments. Since the amount of your health insurance premium payments will be more than the total credit, if you are eligible, you can still claim a business expense deduction for the premiums in excess of the credit.

Contact the office today if you’d like more information about the small business health care tax credit.

• By Leon Clinton
• October 25, 2017

Millions of people enjoy hobbies such as stamp or coin collecting, craft making, and horse breeding, but the IRS may also consider them a source of income. As such, if you engage in a hobby that provides a source of income, you must report that income on your tax return; however, taxpayers (especially business owners) should be aware that the way income from hobbies is reported is different from how you report income from a business. For example, there are special rules and limits for deductions you can claim for a hobby.

Here are five basic tax tips you should know if you get income from your hobby:

Business versus Hobby. There are nine factors to consider to determine if you are conducting business or participating in a hobby. Make sure to base your decision on all the facts and circumstances of your situation. To learn more about these nine factors, please call.

Allowable Hobby Deductions. You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. Don’t hesitate to call if you need more information about these rules.

Limits on Expenses. As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.

How to Deduct Expenses. You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. Use Schedule A, Itemized Deductions to report these types of expenses.

Use a tax professional. Hobby rules can be complex, but using a tax professional makes filing your tax return easier. If you need have any questions about reporting income from a hobby, please call.

• By Leon Clinton
• October 22, 2017

If you gamble, these tax tips can help you at tax time next year: Here’s what you need to know about figuring gambling income and loss.

1. Gambling income. Income from gambling includes winnings from lotteries, raffles, horse races, and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips and you must report them on your tax return

2. Payer tax form. If you win, the payer may send you a Form W-2G, Certain Gambling Winnings. This form reports the amount of your winnings to both you and the IRS. The payer issues the form depending on the type of game you played, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.

3. How to report winnings. You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G. If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.

4. How to deduct losses. You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.

5. Keep gambling receipts. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or statements. You should also keep a diary or log of your gambling activity. Your records should show your winnings separately from your losses.

If you have questions about gambling income and losses, don’t hesitate to call.

• By Leon Clinton
• October 20, 2017