Everyone is eligible for an automatic tax deadline extension and the first thing you should do if you missed the tax filing deadline is file for an extension with the IRS.
This gives you until October 15th to file your taxes.
However, you should also know that if you owe the IRS money, it is due on April 15th. So even if you file for a tax deadline extension, you need to send in an estimate of the taxes you owe.
Failure to do so can result in fines or penalties.
There are no penalties or fees for not filing for an extension if you don’t owe the IRS any money.
Why you need to read this article!
Many staffing firms and their clients in New Jersey believe that temporary staffing services are not subject to New Jersey’s Sales Taxes. In the vast majority of situations served by the temporary staffing industry this is true. But not all!
This Legal Resource document has been written specifically with the purpose of pointing out to staffing firms and their clients that New Jersey does apply sales tax liability to the provision of temporary staffing services that fall under certain specific service categories.
Since there is a “cost” to not collecting and remitting sales taxes when required, the document also has a section on who is liable for sales tax payments, the associated record keeping requirements and a brief description of the interest and penalties imposed by the State of New Jersey for failure to report and/or pay sales taxes in a timely and accurate manner.
NOTE especially the section detailing how sales tax liability is not only a firm obligation but also can be a personal liability for owners and managers of the firm as well.
This document has been provided to inform the staffing industry of its sales tax requirements and also to be shared with the client as a resource defending the staffing firm’s position that sales tax applies. References have been provided for the reader to research this subject further.
This document however is designed to be general and informational. Therefore each situation will be case-specific and needs to be evaluated by the firm’s professional advisor to determine the direct sales tax application to the firm and its client.
There is a core difference between how New Jersey treats the sale of tangible personal property and the sale of services for sales tax purposes. New Jersey Statute, N.J.S.A 54:32B-3(a) provides that all retail sales of tangible personal property are subject to sales tax unless specifically exempt and sales of services are exempt unless specifically enumerated as taxable. N.J.S.A 54:32B-3(b) lists the services that are subject to sales tax.
Temporary services are not listed as taxable and therefore appear not to be subject to New Jersey sales tax.
However, the November/December 1990 New Jersey State Tax News specifically addresses “Temporary Service Contractors”. It differentiates between employment agencies that merely refer people and collect a fee and a temporary staffing agency that employs temporary staff and provides them to clients for a fee. Referring people for a fee is exempt from New Jersey sales tax while temporary staffing services could be subject to New Jersey sales tax.
The 1990 notice states: “when an individual is required to perform taxable services, the service contractor is required to collect sales tax on the fee charged to the client.” For example, both a temporary staffing agency and a security firm are required to collect New Jersey sales tax on their fee for supplying a security guard to their respective client since security services are a taxable service in New Jersey.
The following is a list of services subject to New Jersey sales tax. Therefore, a temporary staffing agency that provides temporary staff that performs any of these services is required to collect and remit New Jersey sales tax on the fees associated with such services. This list is general (specific details of requirements need to be researched), subject to change, and is not necessarily all-inclusive.
Taxable Services in New Jersey:
Animal grooming
Answering services
Car washing
Carpet cleaning
Cleaning services (janitorial)
Floor covering installation
Garbage removal (non-contractual)
Information Technology (see below)
Installing personal property
Investigation and Detective services
Landscaping
Lawn mowing
Massage
Pest control treatment
Photographer’s services
Producing personal property
Repairs of personal and real property
Scanning
Security Guard and Patrol services
Snow removal
Window washing
Note that “Installing personal property” and “Repairs of personal and real property” includes the supply of craft labor (mechanics, welders, painters, electricians, plumbers, technicians, and similar job titles) for purposes of installing or repairing production machinery, equipment and/or buildings for clients, irrespective of whether or not the temporary staff is managed by the client.
Information Technology-Related Staffing Services
The following section evaluates the various types of IT related staffing services that are subject to sales tax.
A temporary staffing agency that provides temporary staff to a client is required to collect and remit New Jersey sales tax if the temporary staff performs one of the following services:
Software installation
Hardware repair and maintenance
Software maintenance contracts that include delivery of taxable software via tangible storage media
Software maintenance contracts that include delivery of taxable software electronically unless used directly and exclusively in conduct of purchaser’s business.
A temporary staffing agency that provides temporary staff to a client is NOT required to collect and remit New Jersey sales tax if the temporary staff performs one of the following services:
Computer consulting
Training
Data processing
Creation or modification of software
Software maintenance contracts (training, consultation, customer support only, no software provided)
Sales for Resale or Other Exemptions
Sellers may discharge their liability for collecting the sales tax due from their customers by taking a sale-for-resale certificate (NJ Form ST-3) or other exemption certificate. An exemption is allowed for services purchased with the intention to resell them in the form purchased or as a component of other services. The tax does not apply at the time of the purchase for resale, but does apply at the time the services are resold at retail. The Seller who accepts the certificate must maintain a record that associates the sale for resale with the exemption certificate on file.
For example, if a temporary staffing agency provides a temporary security guard to a security firm (that provides security services to corporations), the security firm is permitted to provide the temporary staffing agency with a sale for resale exemption certificate thereby relieving the temporary staffing agency from collecting and remitting sales tax on the taxable services of the security temporary staff. The security firm is required to collect and remit sales tax on its taxable security services that it provides to its corporate customer. On the other hand if a temporary staffing agency assigned an individual as a security guard to a client (i.e. a manufacturing plant), then the temporary staffing agency is required to collect and remit New Jersey sales tax on such services.
Liability for Sales Tax Payments and Penalties and Interest
Obligation of the Seller (Temporary Staffing Agency)
New Jersey sales tax is imposed on purchasers of goods and services (hereafter “customers”) but collected by Sellers who have “nexus” in the State. Nexus is defined as the minimum level1 of business activity that allows a state to impose taxes on such business activity or require the entity to collect and remit sales/use tax. All New Jersey Sellers (i.e., both New Jersey based and out-of-state Sellers) that meet the nexus threshold are required to file a Certificate of Registration with the New Jersey Division of Revenue and obtain a Certificate of Authority which empowers the Seller to collect and remit sales tax in New Jersey. A Seller’s failure to obtain a Certificate of Authority does not relieve the Seller of the obligation to collect and remit the tax.
Obligation of the Customer (Client)
N.J. Rev. Stat. §54:32B-12(a) provides that Sellers are to collect New Jersey sales tax from the customer when collecting the sales price to which the tax applies. Customers that fail to pay the Seller the applicable New Jersey sales tax are required to pay the tax directly to the State. N.J. Rev. Stat. §54:32B-14(b). New Jersey can legally recover the sales tax due from either the Seller or the customer. A contract between the Seller and the customer, delegating the sales tax liability to one party, does not preclude the State from legally seeking such liability from either party.
Sellers have the same legal rights to collect New Jersey sales tax from their customers as if the tax is a part of the purchase price of the service. The State must be joined as a party in any action or proceeding brought by a Seller to collect the tax due from the customer. N.J. Rev. Stat. §54:32B-14(a).
Personal Liability
N.J. Stat. § 54:32B-14(a) states that “every person required to collect any tax imposed by this act shall be personally liable for the tax imposed, collected or required to be collected under this act”. In other words, New Jersey holds “persons required to collect the tax” (at a Seller) personally liable for any uncollected sales tax due from customers on taxable products and services. N.J. Rev. Stat. § 54:32B-2(W) states that “persons required to collect tax” includes any officer or employee of a corporation or of a dissolved corporation who as such officer or employee is under a duty to act for such corporation in complying with any requirement of this act and any member of a partnership. With respect to Limited Liability Companies, all members of such entity (regardless of their involvement in the business) are deemed to be a person required to collect tax, and therefore personally liable for unpaid sales tax.
In Hapag-Lloyd A.G. v. Director, 7 NJ Tax 108 (1984) and Theryoung v. Director, Dkt. No. 02-19-0409-89ST, 1-6-93 (Not Approved for Publication) an officer of a corporation with limited participation in the affairs of the corporation was held to be a responsible officer for purposes of personal liability imposed on persons required to collect taxes. New Jersey Courts have adopted the position that does not permit an abdication of the responsibility for the collection of sales tax and other trust fund taxes. The officer and his wife were owners of 80% of the corporate stock of a company engaged in the construction and set-up of advertising displays. The officer never visited the location of the business during most of the period that the sales tax deficiencies occurred, an arrangement agreed on with the two other shareholders when they purchased the business. The officer was aware of the poor financial condition of the company as a result of off-site meetings held with the other officers. He also had the authority to hire and fire employees and signed the New Jersey CBT-100 as president of the corporation.
Returns and Payments
All Sellers are required to file quarterly sales tax returns and remit the tax due on a quarterly basis. Sellers whose monthly sales tax liability exceeds $500 in the first or second month of any quarterly filing period are required to file a monthly sales tax report and remit the tax due for that month. Quarterly returns and payments are due on or before the 20th day of the month following the close of the quarter. Monthly returns and payments are due on or before the 20th day of the following month.
Record Keeping Requirements
Sellers required to be registered in New Jersey must keep accurate books and records including a true copy of all sales slips, invoices, receipts, statements, etc. issued to customers for a period of 4 years (i.e., statute of limitations). If a Seller’s records are determined to be incorrect or insufficient, any sales tax returns filed on the basis of such records can also be deemed to be incorrect or insufficient. In such case, the State may determine the Seller’s tax liability based on any reasonable methodology or information available.
Interest and Penalties
Sellers that fail to timely remit sales tax collected are subject to interest at the rate of 3% above the prime rate, per month or fraction of a month during which the deficiency remains, from the original tax payment due date until the actual date of payment. Interest is compounded annually. In addition, any amount of New Jersey sales tax that remains unpaid after the due date is considered an underpayment and subjects the Seller to a penalty of 5% of the underpayment.
Sellers that fail to timely file a required sales /use tax return with the State are liable for a late filing penalty of 5% of the tax due per month or fraction of a month during which the sales tax return remains late, but is capped at 25% of the tax due. An additional penalty of $100 per month or fraction of a month during which the return remains delinquent may be imposed. This penalty is imposed on the first day following the original return due date and on the same calendar day of each succeeding month thereafter.
For example, assume an out-of-state Seller began providing taxable services to a New Jersey based customer in October 2009. The prime rate was 5% throughout the entire applicable time period. The Seller should have collected $1,000 in New Jersey sales tax for the customer. The Seller then files and pays the outstanding liability on May 15, 2010. The Seller would now potentially owe New Jersey the following:
$1,000 in tax,
$500 for late filing of a return (sales tax return was due January 20, 2010…..penalty is $100 per month or fraction of a month …..Jan, Feb, March, April, May),
$250 penalty for late filing (5% per month for 5 months),
$50 penalty for late payment of taxes due (5%),
And approximately $35 in interest (balance due x 8% per annum x 5 months)
Total New Jersey sales tax liability is $1,835 including penalties and interest.
Please contact your tax professional for assistance in assessing your specific situation.
Links:
New Jersey Statute, N.J.S.A 54:32B-3 (http://law.onecle.com/new-jersey/54-taxation/32b-3.html)
New Jersey Sales Tax Guide
(http://www.state.nj.us/treasury/taxation/pdf/pubs/sales/su4.pdf)
NJ Technical Bulletin-Taxability of Software
(http://www.state.nj.us/treasury/taxation/pdf/pubs/tb/tb51.pdf)
1 The United States Supreme Court (hereafter, the “Court”) ruled in Quill Corporation v. North Dakota, 504 US 298 (1992), that an entity must have “substantial nexus” with a state before such state can impose a tax on the entity. The Court defined “substantial nexus” in terms of a seller’s physical presence, holding that a state may not require a seller to collect tax from its residents if the seller’s only contact with customers in the state was via U.S. mail or common carrier. In other words, The Court concluded, a company needs to have a physical presence in a state before such state can require the company to collect and remit sales tax. The Court went further and stated that the entity’s in-state physical presence must be more than the “slightest presence”. The Court did not create a bright line test to determine when an entity’s in-state activities exceed the slightest presence test but left it to the states to interpret The Court’s decision. There is divergent authority on whether the Court’s ruling in Quill, which requires a physical presence, applies to non-sales taxes (i.e., income/franchise taxes)
Under IRS definition, an accounting method is a set of rules used to determine when and how income and expenses are reported.
Normally for IRS purposes, the accounting method; cash vs accrual is chosen before you file the first business income tax return. It must then be used on a consistent basis for the life of the business, unless changes in the business occur that statutorily necessitate a change in the accounting method. If you wish to change methods for particular reasons of your own, you must get written permission from the IRS.
When you bill the client, when you actually receive the money and bank it, and when the job and its guarantees reach completion can each define when you have to report the income.
Normally, you calculate your income and expenses by using three major methods: 1) Cash Method; 2) Accrual Method; or 3) Hybrid Method in which select elements of cash and accrual are combined.
The Wall Street Journal
By Laura Saunders
March 5, 2016 1:00 a.m. ET
Working on your tax return? Put your records in order now to cope with a challenge from the Internal Revenue Service down the road.
To see the difference proper proof makes, consider the results of two Tax Court cases released in December. In the first one, the judge ruled that a business consultant owed more than $23,000 in taxes and penalties for 2010 and 2011 because he didn’t have convincing records of write-offs for wages, travel, meals and entertainment.
The same week, another judge ruled that a couple who owned a small business could deduct nearly $7,000 in mileage expenses for business travel in 2010—even though their records were handwritten on index cards, and some were missing.
“The better your records, the less agita you’ll have with the IRS,” says Ed Mendlowitz, a CPA with accounting firm WithumSmith+Brown who is based in New Brunswick, N.J.
The tax rules on record-keeping have a surprising history. In the 1920s, the entertainer George M. Cohan—who wrote the songs “(I’m a) Yankee Doodle Dandy” and “Give My Regards to Broadway”—deducted more than $50,000 for travel and entertainment related to his profession, including “entertaining” drama critics. Mr. Cohan didn’t have receipts for many of the expenses, so the IRS denied them.
In 1930, however, the celebrated jurist Learned Hand ruled that Mr. Cohan’s lack of records didn’t bar him from taking deductions, as long as they had a basis in fact and could reasonably be estimated. His pro-taxpayer decision became known as the Cohan Rule.
Congress has since whittled away Mr. Cohan’s tax legacy by enacting stiff standards for some deductions, especially ones subject to abuse. As for the IRS, its gold standard for write-offs without receipts, such as miles driven in one’s own car for business, is “contemporaneous records.” That means notes made when the expense was incurred, such as a log recording miles driven.
But IRS agents and judges also can accept good-faith estimates and other forms of proof for write-offs. Because the couple in the December case kept timely records on index cards, the judge allowed their testimony regarding some missing cards.
As you make your way to this year’s April deadline, here is record-keeping advice from experts.
Avoid charitable-donation pitfalls. Current law is both clear and rigid: taxpayers who make cash contributions need proper proof of the donation in hand before filing their returns in order to get a deduction. If the taxpayer gets the proof only after filing, the IRS could disallow it.
Proper proof of a cash donation typically consists of a letter from the charity giving its amount, date and the value of anything (such as a tote bag or dinner) received in return. That value must be subtracted from the deduction.
The rules for other types of donations, such as property, are also persnickety about proof. In a famous 2012 case, a California couple lost an $18.5 million deduction for property donated to charity because they didn’t have the correct records. The judge acknowledged that the decision was harsh, but said the law left him no choice. For more on substantiating charitable deductions, see IRS Publication 526.
Take care with T&E. Large deductions for travel, meals, and entertainment are often an audit magnet, so treat them carefully. Taxpayers are supposed to keep records showing who, what, when, where, and why; experts say the one people most frequently forget is the “business purpose” of the activity. Suggestion: when setting up a meeting that will include deductible expenses, record the business purpose at the same time.
For details on travel, meals and entertainment deductions, see IRS Publication 463.
Update records for your home. Did you add a room to your home this year, install new windows, or add a deck? Such investments can increase your “cost basis” in the home, which could lower the tax bill when it is sold.
For example, say a couple bought a home for $100,000 years ago in a high-growth area such as Seattle. If they sell it for $700,000, the law allows them to avoid tax on $500,000 of their $600,000 profit—so they would owe tax on $100,000. If, however, they invested $75,000 in improvements over the years, their cost basis rises by that amount and they would owe tax only on $25,000 of profit.
For more about what qualifies as an investment in a home, see IRS Publication 523.
Know when to toss. How long do you have to keep tax records? The law has various statutes of limitations, but Mr. Mendlowitz offers a rule of thumb: Keep tax returns (plus substantiation) for seven years. And for assets held outside tax-favored retirement plans, keep records of their cost until seven years after the asset is sold. That, of course, can be a very long time.
Source: http://www.wsj.com
Blood pressures are rising at many small businesses now that tax season is underway.
Although many owners hire accountants and attorneys to complete their income tax returns, taxes are a hassle. In a survey released last year by the advocacy group National Small Business Association, nearly 60 percent of the owners surveyed said the administrative burdens were the biggest problems posed by federal taxes. And 85 percent of the more than 675 owners said they relied on a professional to prepare their returns.
Owners can make the process easier by being organized and watching out for tax pitfalls, accountants say. Here are four tax issues small business owners should be thinking about now and year-round:
RECORD-KEEPING MATTERS
Haphazard or incomplete records are one of the biggest problems accountants see at small businesses. Rather than using accounting software year-round, owners stuff receipts and bank statements into file folders and then have to sort them as the tax deadline approaches.
Using accounting software to organize records will ease the process and help guard against costly errors, says Scott Berger, an accountant with the firm Kaufman Rossin in Boca Raton, Florida. He noted that checking accounts can be linked to the software, cutting down on data entry. Financial records can also be linked with tax preparation software, shortening the time it takes to compile a return. It may be too late to get your records into an accounting program for 2015, but owners should get started for 2016 before more time passes, Berger says.
Another reason for keeping good records: Owners need to provide financial numbers for potential lenders or investors.
"It's in their best interest if they want to take their business to the next level," Berger says.
TAX TIME, A TEACHABLE MOMENT
Many owners don't bother to ask for a copy of their tax returns, says Emilio Escandon, an accountant with Morrison, Brown, Argiz & Farra in New York. That's a bad idea — a tax return is like a report card, providing a snapshot of how a business is doing, he says.
"You should go through that report card and see where you can improve," Escandon says.
Reviewing the return and discussing it with an accountant can also help an owner plan for the future. For example, if a business suffers a loss, it may not be a one-year event; the loss can also be carried forward, Escandon says.
"You should always have a forward-looking approach," he says. Owners should also know that their prior-year returns can be amended to take advantage of a loss.
EMPLOYEES AND FREELANCERS
Small businesses that hire freelancers need to be sure these workers are truly independent and shouldn't be classified as employees. Many companies use freelancers because they don't want obligations like Social Security and Medicare taxes or providing health insurance. But under the law, freelancers can't be treated like employees in terms of what they do and how much control a boss has over them. The IRS and state tax officials are paying closer attention to how workers are classified, looking to catch businesses violating the law, says Michael Greenwald, an accountant with Friedman LLP in New York.
Companies must give W-2 forms to employees and 1099s to freelancers detailing their 2015 compensation by Feb. 1. Freelancers, many of whom are small business owners themselves, should be sure they get 1099s from everyone they worked for the previous year. The IRS will match the 1099 copies it gets against the income you've reported, and if you failed to include any income, you'll hear from the agency.
YOUR HOME OFFICE AND CAR
The deduction for using part of your home as an office has long been a point of contention between owners and the IRS. If an owner uses half the family room to run the business, the government won't allow a home office deduction. A home office must be a separate space used solely for business purposes.
"You could theoretically go to the extent of putting up a partition to wall it off," Greenwald says.
But the reality is the IRS won't know whether you have a separate office unless your return is audited and an IRS agent visits your home.
On the other hand, the government recognizes that owners use cars for personal and business use. But owners must keep a diary of how many miles they drive for business each day, and calculate their deduction based on that amount. Many owners as they juggle work and family probably don't keep those records, Berger says. The answer, as in keeping a company's books, may lie in technology; there are smartphone apps like TripLog to help owners track business mileage.
You must keep records to prove the amount of any cash and noncash contributions you make during the year. Which records you must keep depends on the amount you contribute and whether they are cash or property contributions. New recordkeeping requirements were established for all contributions made after January 1, 2007. You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution, bank records (such as a cancelled check or bank statement containing the name of the charity, date and the amount) or a written communication from the charity.
This article discusses which records you must keep.
Cash Contributions
Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. You cannot deduct a cash contribution, regardless of the amount, unless it is substantiated by one of the following:
A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Bank records may include: a canceled check, a bank or credit union statement or a credit card statement.
A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
Payroll deduction records. The payroll records must include a pay stub, Form W-2 or other document furnished by the employer that shows the date and the amount of the contribution, and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization.
Cash Contributions of $250 or More: You can claim a deduction for a contribution of $250 or more only if you have an acknowledgement of your contribution from the qualified organization or certain payroll deduction records. If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions.
To determine whether a contribution is $250 or more, do not combine separate contributions. For example, if you gave to the church $25 each week, your weekly payments do not need to be combined. Each payment is a separate contribution. The acknowledgment must be written and state whether you received any goods or services in return. If something was received in return, a description and good faith estimate of the value of the goods or services must be included.
For payroll deductions, the payroll records must include a pay stub, Form W-2 or other document furnished by the employer that shows the date and the amount of the contribution, and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization. If the pay stub, Form W-2, pledge card, or other document does not show the date of the contribution, you must also have another document that does show the date of the contribution.
Noncash Contributions
For a contribution not made in cash, these general rules apply:
The records you must keep depends on whether your deduction for the contribution is:
Less Than $250
At least $250 but not more than $500,
Over $500 but not more than $5,000, or
Over $5,000.
Amount of contribution. In figuring whether your contribution is $500 or more, combine separate contributions of similar items during the year. If you received goods or services in return, reduce your contribution by the value of those goods or services. If you figure your deduction by reducing the fair market value of the donated property by its appreciation, your contribution is the reduced amount.
Deductions of Less Than $250
If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing:
The name of the charitable organization,
The date and location of the charitable contribution, and
A reasonably detailed description of the property.
A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt. You are not required to have a receipt where it is impractical to get one (for example if you leave property at a charity's unattended drop site).
Additional records. You must also keep reliable written records for each item of donated property. Your written records must include the following information.
The name and address of the organization to which you contributed.
The date and location of the contribution.
A description of the property in detail reasonable under the circumstances. For a security, keep the name of the issuer, the type of security, and whether it is regularly traded on a stock exchange or in an over-the-counter market.
The fair market value of the property at the time of the contribution and how you figured the fair market value. If it was determined by appraisal, you should also keep a signed copy of the appraisal.
The cost or other basis of the property if you must reduce its fair market value by appreciation.
The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed.
Any conditions attached to the gift of property.
Deductions of At Least $250 But Not More Than $500
If you claim a deduction of at least $250 but not more than $500 for a noncash charitable contribution, you must get and keep an acknowledgement of your contribution from the qualified organization. If you made more than one contribution of $250 or more, you can have either a separate acknowledgement for each or one acknowledgement that shows your total contributions.
The acknowledgement must contain the information in items (1) through (3) listed under Deductions of Less Than $250, earlier, and your written records must include the information listed in that discussion under Additional Records.
1. It must be written.
2. It must include:
A description (but not necessarily the value) of any property you contributed,
Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), and
A description and good faith estimate of the value of any goods or services described above. If the only benefit you received was an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in a commercial transaction outside the donative context, the acknowledgement must say so and does not need to describe or estimate the value of the benefit.
3. You must get the acknowledgement on or before the earlier of:
the date you file your return for the year you make the contribution, or
The due date, including extensions, for filing the return.
Deductions Over $500 But Not Over $5,000
If you claim a deduction over $500 but not over $5,000 for a noncash charitable contribution, you must have the acknowledgement and written records described under Deductions of At Least $250 But Not More Than $500. Your records must also include:
How you got the property, for example, by purchase, gift, bequest, inheritance, or exchange.
The approximate date you got the property or, if created, produced, or manufactured by or for you, the approximate date the property was substantially completed.
The cost or other basis, and any adjustments to the basis, of property held less than 12 months and, if available, the cost or other basis of property held 12 months or more. This requirement, however, does not apply to publicly traded securities.
If you are not able to provide information on either the date you got the property or the cost basis of the property and you have a reasonable cause for not being able to provide this information, attach a statement of explanation to your return.
Deductions Over $5,000
If you claim a deduction of over $5,000 for a charitable contribution of one property item or a group of similar property items, you must have the acknowledgement and the written records described under Deductions Over $500 But Not Over $5,000. In figuring whether your deduction is over $5,000, combine your claimed deductions for all similar items donated to any charitable organization during the year.
Generally, you must also obtain a qualified written appraisal of the donated property from a qualified appraiser.
Qualified conservation contribution. If the gift was a "qualified conservation contribution," your records must also include the fair market value of the underlying property before and after the gift and the conservation purpose furthered by the gift.
Out of Pocket Expenses
If you render services to a qualified organization and have unreimbursed out of pocket expenses related to those services, the following three rules apply.
You must have adequate records to prove the amount of the expenses.
You must get an acknowledgment from the qualified organization that contains a description of the services you provided and a statement of whether or not the organization provided you any goods and services to reimburse you for the expenses incurred. If so, the statement must include a description and good faith estimate of the value of any goods or services (other than intangible religious benefits). If the only benefit you received was an intangible religious benefit, you must receive a statement stating this; however, the acknowledgment does not need to describe or estimate the value of an intangible religious benefit.
You must get the acknowledgment on or before the earlier of: (a) The date you file your return for the year you make the contribution, or the due date, including extensions, for filing your return.
Car Expenses. If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. Whether your records are considered reliable depends on all the facts and circumstances. Generally, they are reliable if you made them regularly and at the time you incurred the expense.
Your records must show the name of the organization you were serving and the date each time you used your car for a charitable purpose. If you use the standard mileage rate of 14 cents a mile for 2015, your records must show the miles you drove. If you use actual expenses to complete the deduction, your records must show the costs of operating the car for charitable purposes only.
Questions about recordkeeping requirements for charitable contributions? Help is just a phone call away.
(The author is a Reuters columnist. The opinions expressed are her own.)
By Liz Weston
(Reuters) - I don't make New Year's resolutions. Instead, I resolve every tax season to get a better handle on my paperwork - with mixed results. This year, I turned to three certified public accountants to find out what apps, software and strategies they use to keep track of everything.
Kelley Long, a Chicago CPA and personal financial specialist, tries to generate as little paperwork as possible, opting for electronic records instead.
"The IRS accepts electronic records," said Long, resident financial adviser with Financial Finesse in Chicago. "There's no need to keep paper. That's the one thing they're modern about."
Long keeps a folder on her computer desktop for the current year's tax documents. If a document comes to her in paper form, she scans it, saves it in the folder and shreds the original. She converts emails documenting charitable contributions and other tax-related expenses into PDF files by choosing the "print" function and then "save as PDF."
Long saves copies of her calendar to help corroborate business-related travel, meetings and other costs. At the end of the year, she downloads her bank and credit card statements into the folder.
Banks and brokerages are required to keep those records for at least six years - the longest someone is likely to need them for an IRS audit. But some financial institutions charge fees to access older statements, and not all credit card companies make the documents readily available, so Long opts for the once-a-year download.
Even taxpayers who cling to paper should start scanning their receipts because the ink can fade quickly, rendering them useless in an audit. Long marks each receipt with the relevant information, such as the people present and what was discussed - "the who, what, where, when and why," she said. She then scans it into her system and shreds the original.
Finally, Long maintains a spreadsheet where she logs each business-related expense. Software such as Quicken or QuickBooks can perform a similar function, but she prefers the simplicity of a spreadsheet. She also has the Expensify app on her phone to record receipts and other business-related expenses on the go.
Long backs up her records using an external hard drive, but suggests services such as DropBox or Syncplicity for people who want a cloud-based service that allows them to access their records from different locations and devices.
ShoeBox is another app that can help people keep their tax records together. Clare Levison, a certified public accountant in Blacksburg, Virginia, warns against spending too much time trying out different apps, especially if the learning curve is steep.
"If it's not relatively easy, then it defeats the purpose," said Levison, author of the book "Frugal Isn't Cheap: How to Spend Less, Save More, and Live Better." "You need to come up with a system that works for you, that saves you time and that you'll actually use on a regular basis."
Levison uses a flash drive and Microsoft Cloud for her backups, while CPA Leonard Wright of San Diego recommends Box as a more secure alternative to DropBox.
One app that Wright - who survived four consecutive audits by the IRS - swears by is MileIQ, which automatically tracks the miles you drive based on your phone's GPS. Each trip shows up separately in the app, and users simply swipe left or right to classify each as business or personal.
"We all get busy and you forget to track everywhere you go," said Wright, a personal finance specialist who typically drives more than 70,000 miles a year for his job as a financial adviser with Northwestern Mutual. "This does it for you. It's effortless."
Absent an audit, the only records people really need to keep in physical form are the ones that are a hassle to replace and for which originals may be required, such as birth, death and marriage certificates, Levison said.
Otherwise, look for ways to replace paper with digital copies, opting for electronic statements and receipts when possible.
"I like to have that piece of paper never generated to begin with," Levison said. "That way you don't have to worry about taking care of it afterward."
Original article can be found here: http://www.reuters.com
Do you grab your chest when you open your accountant's/bookkeeper's bills?
We offer low fees.
Do you feel shunned by your bookkeeper/accountant when you call his/her office?
We offer "on call" 24/7 availability.
Tired of seeing a new face handling your account each year?
We offer personal service.
Do you find yourself auditing the work of your bookkeeper?
We offer quality workmanship.
Can't remember the last time your bookkeeper discussed his/her findings?
We offer unlimited consultations.
When you receive your financials, is it already time for next year's?
We offer timely completion.
Do you break out in a cold sweat worrying about an IRS audit?
We offer precision tax preparation.
Allow us to do your bookkeeping so you can do what you do best: your business! Consider the benefits of outsourcing all of your bookkeeping work to us.
Compare our fees to those of other certified bookkeepers and save thousands of dollars every year in accounting/bookkeeping fees!
Kathryn C. Tiffany, LLC
Call Today! 856-803-4651
If you pay weekly or biweekly, you may have an extra pay period in 2015 ... 27 payrolls instead of 26 or 53 instead of 52. The extra payday can have both financial and legal repercussions if not handled correctly.
Most calendar years have 26 biweekly or 52 weekly pay periods. For biweekly payers, this 27th payroll occurs only every 11 years; for weekly payers, the 53rd payroll occurs every 5 years.
But if biweekly payers distribute only 26 biweekly paychecks in Leap Years, they are paying employees for only 364 days, instead of 365 or 366. Therefore, every 11 years, biweekly payers need an additional pay period to cover the unaccounted-for days.
There is generally no problem with hourly employees because they are paid for hours worked. But if you pay exempt employees biweekly, may could end up this year with unintended extra pay because of the extra pay period.
Example: John's salary is $100,000 a year, so his biweekly pay is $3,846. If you don't recalculate his pay, you will pay him $103,842 (27 x $3,846) because of the extra pay period.
What to do
Divide each exempt employee's annual salary by 27 or 53 (instead of 26 or 52). But let employees know ahead of time. If you do not notify employees, they may think that their pay has been cut and that can create morale problems which may lead to legal challenges that are costly even if you win. For instance, in 2015, John would be paid $3,703 each pay period ($100,000/27) instead of his usual $3,846 and may wonder why you cut his pay.
Once you have informed exempt employees, you must still recalculate their biweekly pay on a case-by-case basis, especially if your firm has any employment agreements. These may contain language that prevents the recalculation of payroll period wages.
To avoid potential legal problems, before making any announcements or recalculating any salaries, review employee letters, contracts or other documents that set compensation, When a specific weekly or biweekly amount is stipulated, you may want to consult a labor lawyer.
Alterations made to rental premises in order to customize it for the specific needs of a tenant.
Leasehold improvements include painting, installing partitions, changing the flooring, putting in customized light fixtures and so on.
Leasehold improvements can either be undertaken by landlords, who may offer to do so to increase the marketability of their rental units, or by the tenants themselves.
Temporary leasehold improvements undertaken by tenants can be removed at the end of the lease period, as long as it is stipulated in the lease agreement, and removal would not inflict any damage on the rental premises or building structure.
A leasehold improvement is classified as an asset that can be depreciated by the landlord over time. While the useful economic life of most leasehold improvements is 5 to 10 years, until 2004, the Internal Revenue Code required that depreciation for such improvements occur over the economic life of the building, or 39 years.
Tax legislation enacted in 2004 reduced this depreciation period to 15 years; however, the 15-year depreciation schedule is temporary in nature and must be reauthorized annually.
Yes. As long as your return is transmitted by 11:59 p.m. on the due date, whether by phone or online, it will be considered timely filed. Whether you are paying by EFT, e-check or credit card, if the payment is made by 11:59 p.m. on the due date, it will be deemed timely.
Send Copy B and Copy 2 of the 1099-MISC form to the recipient by February 2, 2015. The due date is extended to February 17, 2015, if you are reporting payments in boxes 8 or 14.
File Copy A of the 1099-MISC form with the IRS by March 2, 2015.
If you file electronically, the due date is March 31, 2015. To file electronically, you must have software that generates a file according to the specifications in Pub. 1220.
Penalty: If you are required to file electronically but fail to do so, and you do not have an approved waiver, you may be subject to a penalty of $50 per return for failure to file electronically unless you establish reasonable cause.
Many small firms - and freelance bookkeeping practices - are run through home offices. The general rule for deducting any expenses associated with that home office is that a deduction is allowed only if you use the home office regularly and exclusively for business purposes. The home office must be a principal place of business or a place to meet or do work for clients or customers in the normal course of doing business. For employees, the home office must be used for the employer's - not the employee's - convenience.
Assuming that you qualify for the home office deduction, you may deduct:
- expenses directly related to the home office (e.g., the cost of painting a room that is used exclusively for business);
- a relative share of some expenses, e.g. real estate taxes, mortgage interest, utilities, insurance, repairs; and
- depreciation of the portion of the home used for business.
Please note: If you sell the home at some point, the amount deducted for depreciation expense over the years is subject to recapture as ordinary income.
Example: For the last 10 years, you have been taking $5,000 a year in depreciation expense for the portion of your home devoted regularly and exclusively to your consulting firm, for the total accumulated depreciation to date of $50,000. In 2015, you must report an added $50,000 in ordinary income on your tax return.
Tip: Before taking depreciation on a home office, consider how long you plan to own the home and if the possibility of recognizing ordinary income in acceptable. Consult your tax advisor.
NEW JERSEY:
For 2015, the taxable wage base for UI, temporary disability and family leave insurance is $32,000 (Dept. of Labor and Workforce Development, Div of Employer Accounts, 2015).
ALBANY, N.Y. (AP) - Thousands of middle-class families in New York will soon receive a $350 check from the state.
The state mailed out the tax rebate checks this week to New York residents who claimed at least one child under age 17 on their 2012 tax return and whose adjusted gross income was between $40,000 and $300,000.
Next month the state will send out property tax rebate checks to homeowners in communities whose school districts stayed below the state's new tax cap.
Eligible taxpayers will receive the checks automatically.
The two rebate programs were approved by lawmakers and Gov. Andrew Cuomo in the past two years, part of an effort to address New York's reputation as a high-tax state.
"This much-needed relief for families is one of many steps taken by Gov. Cuomo to control and reduce taxes," said Richard Azzopardi, a spokesman for the Democratic governor. "As the governor has repeatedly said, New York has no future as the high tax capital of the world."
August 11, 2014
Employees - who work for tips. If you received $20 or more in tips during July, report them to your employer. You can use Form 4070.
September 10 Employees - who work for tips. If you received $20 or more in tips during August, report them to your employer. You can use Form 4070.
Employers - Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2014. This due date only applies if you deposited the tax for the quarter timely, properly, and in full.
September 15 Individuals - Make a payment of your 2014 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2014.
Corporations - File a 2013 calendar year income tax return (Form 1120) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Otherwise, see March 17.
S Corporations - File a 2013 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Otherwise, see March 17. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.
Partnerships - File a 2013 calendar year return (Form 1065). This due date applies only if you were given an additional 5-month extension. Otherwise see April 15. Provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1.
Corporations - Deposit the third installment of estimated income tax for 2014. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.
October 2014
October 10 Employees - who work for tips. If you received $20 or more in tips during September, report them to your employer. You can use Form 4070.
October 15 Individuals - If you have an automatic 6-month extension to file your income tax return for 2013, file Form 1040, 1040A, or 1040EZ and pay any tax, interest, and penalties due.
Electing Large Partnerships - File a 2013 calendar year return (Form 1065-B). This due date applies only if you were given an additional 6-month extension. See March 17 for the due date for furnishing or substituting the Schedules K-1 to the partners.
November 2014
November 10 Employees - who work for tips. If you received $20 or more in tips during October, report them to your employer. You can use Form 4070.
Employees - Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2014. This due date only applies if you deposited the tax for the quarter timely, properly, and in full.
December 2014
December 10 Employees - who work for tips. If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.
December 15 Corporations - Deposit the fourth installment of estimated income tax for 2014. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
Please note that the 2014 Final/2015 Preliminary Tax Bills will be mailed out on Tuesday July 15, 2014.
Just a reminder that 3rd Quarter Taxes must be received no
later than August 11, 2014.
For your convenience the Tax Collector’s
Office will have extended hours as follows:
August 1st -11th on Monday through Thursday 8:30 AM- 8:00 PM
Payments can be made the following ways:
- At Township Offices – 1979 Township Drive, Marlboro, NJ.
- Mail a check using your return payment stub to the Township of Marlboro Tax Collector – 1979 Township Drive, Marlboro, NJ 07746.
- On line through a third party payment processing company using an electronic check or credit card. Select the link at www.marlboro-nj.gov/tax_collector_division_main.html (“Tax
Collector is now Collecting Payments Online”), and using your tax bill,
enter your tax account number and the amount of your quarterly tax.
Please note that these services involve the imposition of fees and
charges (currently Credit Card transactions are assessed a fee of 2.69%
of the payment amount & E- check transactions are $2.00 per check)
by the third party providers. No fees are assessed by Marlboro
Township.
For questions, please call the Tax Collector’s Office at 732-536-0200 ext. 1804 or visit their webpage at http://www.marlboro-nj.gov/tax_collector_division_main.html
Fraud among fly-by-night, seasonal tax preparers who open up shop in vacant storefronts and trailers costs taxpayers billions of dollars each year. It has prompted the IRS to seek to regulate tax preparers by requiring education courses and examinations
Every tax season, Elmer Kilian takes out a wooden homemade shingle that says E.H. KILIAN’S TAXES and puts it out in front of his house in rural Wisconsin. The 82-year-old Korean War veteran has prepared locals’ taxes on his dining room table for the last thirty years, helping around 100 people in the town of Eagle file to the IRS, from the local grocer to the neighbor down the street. He charges $40 for a basic filing and a little extra for the frills.
Kilian is one of more than 600,000 paid tax preparers who are virtually unregulated by the IRS. Many are as scrupulous as Kilian is, but fraud among fly-by-night, seasonal tax preparers who open up shop in vacant storefronts and trailers costs taxpayers billions of dollars each year. “It’s not just one or two bad apples. It’s pervasive,” says Chi Chi Wu, an attorney for the National Consumer Law Center. “And these problems persist.”
Read the full article.
