irs

Tax

Filing Amended Returns: The Facts

What if you’ve already filed your return, but realized that you were eligible for a deduction or credit that you didn’t take, or worse–discovered an error and need to “fix it” on your return?

Fortunately, there’s an easy answer: file an amended return. Here’s what you need to know if you’re considering filing an amended federal income tax return.

1. When you need to amend an income tax return, use Form 1040X, Amended U.S. Individual Income Tax Return. You can use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ.

2. An amended return cannot be e-filed. You must file a paper return.

3. Generally, you do not need to file an amended return to correct math errors. The IRS will automatically make that correction. Also, do not file an amended return because you forgot to attach tax forms such as W-2s or schedules. The IRS normally will send a request asking for those.

4. Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.

5. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS campus. The 1040X instructions list the addresses for the campuses.

6. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.

7. If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.

8. If you owe additional 2011 tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.

Give us a call today if you need assistance filing an amended return.

Tax

Turn Your Vacation Into a Tax Deduction

Tim, who owns his own business, decided he wanted to take a two-week trip around the US. So he did–and was able to legally deduct every dime that he spent on his “vacation”. Here’s how he did it.

1. Make all your business appointments before you leave for your trip.
Most people believe that they can go on vacation and simply hand out their business cards in order to make the trip deductible.

Wrong.

You must have at least one business appointment before you leave in order to establish the “prior set business purpose” required by the IRS. Keeping this in mind, before he left for his trip, Tim set up appointments with business colleagues in the various cities that he planned to visit.

Let’s say Tim is a manufacturer of green office products looking to expand his business and distribute more product. One possible way to establish business contacts–if he doesn’t already have them–is to place advertisements looking for distributors in newspapers in each location he plans to visit. He could then interview those who respond when he gets to the business destination.

Example: Tim wants to vacation in Hawaii. If he places several advertisements for distributors, or contacts some of his downline distributors to perform a presentation, then the IRS would accept his trip for business.

Tip: It would be vital for Tim to document this business purpose by keeping a copy of the advertisement and all correspondence along with noting what appointments he will have in his diary.

2. Make Sure your Trip is All “Business Travel.”
In order to deduct all of your on-the-road business expenses, you must be traveling on business. The IRS states that travel expenses are 100% deductible as long as your trip is business related and you are traveling away from your regular place of business longer than an ordinary day’s work and you need to sleep or rest to meet the demands of your work while away from home.

Example: Tim wanted to go to a regional meeting in Boston, which is only a one-hour drive from his home. If he were to sleep in the hotel where the meeting will be held (in order to avoid possible automobile and traffic problems), his overnight stay qualifies as business travel in the eyes of the IRS.

Tip: Remember: You don’t need to live far away to be on business travel. If you have a good reason for sleeping at your destination, you could live a couple of miles away and still be on travel status.

3. Make sure that you deduct all of your on-the-road -expenses for each day you’re away.
For every day you are on business travel, you can deduct 100% of lodging, tips, car rentals, and 50% of your food. Tim spends three days meeting with potential distributors. If he spends $50 a day for food, he can deduct 50% of this amount, or $25.

Tip:The IRS doesn’t require receipts for travel expense under $75 per expense–except for lodging.

Example: If Tim pays $6 for drinks an the plane, $6.95 for breakfast, $12.00 for lunch, $50 for dinner, he does not need receipts for anything since each item was under $75.

Tip: He would, however, need to document these items in your diary. A good tax diary is essential in order to audit-proof your records. Adequate documentation shall consist of amount, date, place and business reason for the expense.

Example: If, however, Tim stays in the Bates Motel and spends $22 on lodging, will he need a receipt? The answer is yes. You need receipts for all paid lodging.

Tip: Not only are your on-the-road expenses deductible from your trip, but also all laundry, shoe shines, manicures, and dry-cleaning costs for clothes worn on the trip. Thus, your first dry cleaning bill that you incur when you get home will be fully deductible. Make sure that you keep the dry cleaning receipt and have your clothing dry cleaned within a day or two of getting home.

4. Sandwich weekends between business days.
If you have a business day on Friday and another one on Monday, you can deduct all on-the-road expenses during the weekend.

Example: Tim makes business appointments in Florida on Friday and one on the following Monday. Even though he has no business on Saturday and Sunday, he may deduct on-the-road business expenses incurred during the weekend.

5. Make the majority of your trip days business days.
The IRS says that you can deduct transportation expenses if business is the primary purpose of the trip. A majority of days in the trip must be for business activities, otherwise, you cannot make any transportation deductions.

Example: Tim spends six days in San Diego. He leaves early on Thursday morning. He had a seminar on Friday and meets with distributors on Monday and flies home on Tuesday, taking the last flight of the day home after playing a complete round of golf. How many days are considered business days?

All of them. Thursday is a business day, since it includes traveling – even if the rest of the day is spent at the beach. Friday is a business day because he had a seminar. Monday is a business day because he met with prospects and distributors in pre-arranged appointments. Saturday and Sunday are sandwiched between business days, so they count, and Tuesday is a travel day.

Since Tim accrued six business days, he could spend another five days having fun and still deduct all his transportation to San Diego. The reason is that the majority of the days were business days (six out of eleven). However, he can only deduct six days worth of lodging, dry cleaning, shoe shines, and tips. The important point is that Tim would be spending money on lodging, airfare, and food, but now most of his expenses will become deductible.

Consult us before you plan your next trip. We’ll show you the right way to legally deduct your vacation when you combine it with business. Bon Voyage!

Business Tax

Tax Due Dates for April 2012

April 2 Electronic filing of Forms 1098, 1099, and W-2G – File Forms 1098, 1099, or W-2G with the IRS. This due date applies only if you file electronically (not by magnetic media). Otherwise, see February 28. The due date for giving the recipient these forms will still be January 31. For information about filing Forms 1098, 1099, or W-2G electronically, see Publication 1220, Specifications for Filing Forms 1098, 1099, 5498 and W-2G Magnetically or Electronically.Electronic filing of Forms W-2 – File copies of all the Forms W-2 you issued for 2011. This due date applies only if you electronically file. Otherwise see February 29. The due date for giving the recipient these forms remains at January 31.
April 10 Employees – who work for tips. If you received $20 or more in tips during March, report them to your employer. You can use Form 4070.
April 17 Individuals – File an income tax return for 2011 (Form 1040, 1040A, or 1040EZ) and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, or you can get an extension by phone if you pay part or all of your estimate of income tax due with a credit card. Then file Form 1040, 1040A, or 1040EZ by October 15.Household Employers – If you paid cash wages of $1,700 or more in 2011 to a household employee, file Schedule H (Form 1040) with your income tax return and report any employment taxes. Report any federal unemployment (FUTA) tax on Schedule H if you paid total cash wages of $1,000 or more in any calendar quarter of 2010 or 2011 to household employees. Also report any income tax you withheld for your household employees.

Individuals – If you are not paying your 2012 income tax through withholding (or will not pay in enough tax during the year that way), pay the first installment of your 2012 estimated tax. Use Form 1040-ES.

Partnerships – File a 2011 calendar year return (Form 1065). Provide each partner with a copy of Schedule K-1 (Form 1065), Partner’s Share of Income, Credits, Deductions, etc., or a substitute Schedule K-1. If you want an automatic 5-month extension of time to file the return and provide Schedule K-1 or a substitute Schedule K-1, file Form 7004. Then file Form 1065 by September 17.

Electing Large Partnerships – File a 2011 calendar year return (Form 1065-B). If you want an automatic 6-month extension of time to file the return, file Form 7004. Then file Form 1065-B by October 15. March 15 was the due date for furnishing the Schedules K-1 to the partners.

Corporations – Deposit the first installment of estimated income tax for 2012. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in March.

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in March.
April 30 Employees – Social Security, Medicare, and withheld income tax. File form 941 for the first quarter of 2012. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until May 10 to file the return.Employers – Federal Unemployment Tax. Deposit the tax owed through March if more than $500.
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