Tax

Key tax relief provisions are now available for victims of Hurricanes Harvey, Irma and Maria. This tax relief applies to individuals and businesses anywhere in Florida, Georgia, Puerto Rico and the Virgin Islands, as well as parts of Texas. A key component of this tax relief is that it postpones various tax deadlines. For example, individuals and businesses will have until January 31, 2018, to file any returns and pay any taxes due.

Those eligible for the extra time include:

• Individual filers whose tax-filing extension runs out on October 16, 2017. Because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
• Business filers, such as calendar-year partnerships, whose extensions ran out on September 15, 2017.
• Quarterly estimated tax payments due on September 15, 2017 and January 16, 2018.
• Quarterly payroll and excise tax returns due on October 31, 2017.
• Calendar-year tax-exempt organizations whose 2016 extensions run out on November 15, 2017.

A variety of other returns, payments and tax-related actions also qualify for additional time. Please call the office if you have any questions about this and other tax relief offered by the IRS since these hurricanes began affecting the US mainland and its territories, the US Virgin Islands and Puerto Rico.

In addition to extra time to file and pay, the IRS offers other special assistance to disaster-area taxpayers such as:

• Special relief helps employer-sponsored leave-based donation programs aid hurricane victims. Under these programs, employees may forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before Jan. 1, 2019, to charities providing relief. Donated leave is not included in the employee’s income, and employers may deduct these cash payments to charity as a business expense.
• 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to hurricane victims and members of their families. Under this broad-based relief, a retirement plan can allow a hurricane victim to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or dependent who lived or worked in the disaster area. Hardship withdrawals must be made by Jan. 31, 2018.
• The IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due during the first 15 days of the disaster period. Check out the disaster relief page for the time periods that apply to each jurisdiction.
• Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year) or the return for the prior year (2016). If you need assistance or have any questions about disaster-related losses, please contact the office.
• The IRS is waiving the usual fees and expediting requests for copies of previously filed tax returns for disaster area taxpayers. This relief can be especially helpful to anyone whose copies of these documents were lost or destroyed by the hurricane.
• If disaster-area taxpayers are contacted by the IRS on a collection or examination matter, they should be sure to explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Help is just a phone call away.

Don’t hesitate to call if you would like more information, additional details, or have any questions about tax relief provisions for victims of Hurricanes Harvey, Irma, and Maria.

• By Leon Clinton
• October 18, 2017

Whether you’re self-employed or an employee, if you use a car for business, you get the benefit of tax deductions.

There are two choices for claiming deductions:

1. Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers’ salaries, and depreciation.
2. Use the standard mileage deduction in 2017 and simply multiply 53.5 cents by the number of business miles traveled during the year. Your actual parking fees and tolls are deducted separately under this method.

Which Method Is Better?

For some taxpayers, using the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.

Tip: The actual cost method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here.

The standard mileage amount includes an allowance for depreciation. Opting for the standard mileage method allows you to bypass certain limits and restrictions and is simpler– but it’s often less advantageous in dollar terms.

Caution: The standard rate may understate your costs, especially if you use the car 100 percent for business, or close to that percentage.

Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.

Documentation

Keep careful records of your travel expenses and record your mileage. you can use a log book or if you’re tech savvy, an app on your phone or tablet. Keeping track of the number of miles driven and the total amount you spent on the car is essential because if you don’t, your tax advisor won’t be able to determine which of the two options is more advantageous for you at tax time.

Furthermore, the tax law requires that you keep travel expense records and that you show business versus personal use on your tax return. If you use the actual cost method for your auto deductions, you must keep receipts.

Tip: Consider using a separate credit card for business, to simplify your recordkeeping.

Tip: You can also deduct the interest you pay to finance a business-use car if you’re self-employed.

Note: Self-employed individuals and employees who use their cars for business can deduct auto expenses if they either (1) don’t get reimbursed, or (2) are reimbursed under an employer’s “non-accountable” reimbursement plan. In the case of employees, expenses are deductible to the extent that auto expenses (together with other “miscellaneous itemized deductions”) exceed two percent of adjusted gross income.

Apps for Tracking Business Mileage

There are a number of phone applications (apps) that could help you track those pesky business miles. Most of these apps are useful for tracking and reporting expenses, mileage and billable time. They use GPS to track mileage, allow you to track receipts, choose the mileage type (Business, Charitable, Medical, Moving, Personal), and produce formatted reports (IRS compliant HTML and CSV tax return reports) that are easy to generate and share with your CPA, EA, or tax advisor.

Here are three popular apps that help you track your business mileage:

1. TripLog – Mileage Log Tracker

Works with: Android and iPhone

What it does: Tracks vehicle mileage and locations using GPS

Useful Features:

• Automatic start when plugged into power or connected to a Bluetooth device and driving more than five mph
• Reads your vehicle’s odometer from OBD-II scan tools
• Syncs data between the web service and multiple mobile devices
• Supports commercial trucks including per diem allowance, state-by-state mileage for IFTA fuel tax reports, and DEF fuel purchases and gas mileage

2. Track My Mileage

Works with: Android and iPhone

What it does: Keeps track of mileage for business or personal use

Useful Features:

• Provides mileage rates used to calculate the deductible costs of operating your automobile
• Allows you to group your trips by client
• Tracks multiple drivers and vehicles tracking
• Localized and translated into more than 20 languages

3. BizXpenseTracker

Works with: iPhone and iPad

What it does: Tracks mileage, as well as expenses and billable time

Useful Features:

• Allows you to choose which way you want to track your mileage
• Remembers Frequent trips
• Creates reports in PDF format or CSV for importing into Excel
• Ability to email your reports and photo receipts

Questions?

Call today and find out which deduction method is best for your business-use car.

• By Leon Clinton
• October 16, 2017

With less than three months remaining in the calendar year, now is a good time to double check your federal withholding to make sure enough taxes are being taken out of your pay.

Most people have taxes withheld from each paycheck or pay taxes on a quarterly basis through estimated tax payments. But each year millions of American workers have far more taxes withheld from their pay than is required. In fact, according to the IRS, the average individual income tax refund for Fiscal Year 2016 was about $3,050. As such, taxpayers might want to consider adjusting their tax withholding to bring the taxes they must pay closer to what they actually owe–and put more money in their pocket right now.

On the flip side, is that some workers and retirees still need to take steps to make sure enough tax is being taken out of their checks to avoid penalties they might have to pay. Certain folks should pay particular attention to their withholding. These include:

• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers who do not have valid Social Security numbers
• Retirees who receive pension payments

Whether you’re starting a new job, retiring, or self-employed here is some information to help bring the taxes you pay during the year closer to what you will actually owe when you file your tax return.

Employees

• New Job. When you start a new job your employer will ask you to complete Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use this form to figure the amount of federal income tax to withhold from your paychecks. Be sure to complete the Form W-4 accurately.
• Life Event. You may want to change your Form W-4 when certain life events happen to you during the year. Examples of events in your life that can change the amount of taxes you owe include a change in your marital status, the birth of a child, getting or losing a job, and purchasing a home. Keep your Form W-4 up-to-date.

You typically can submit a new Form W–4 at any time you wish to change the number of your withholding allowances. However, if your life event results in the need to decrease your withholding allowances or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days of that life event.

Self-Employed

• Form 1040-ES. If you are self-employed and expect to owe a thousand dollars or more in taxes for the year, then you normally must make estimated tax payments to pay your income tax, Social Security, and Medicare taxes. You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you are required to pay estimated tax on a quarterly basis. Remember to make estimated payments to avoid owing taxes at tax time.

Questions about withholding? Help is just a phone call away.

• By Leon Clinton
• October 14, 2017