New Legislation Extends Popular Tax Provisions

In one of its final actions, the 113th Congress passed the Tax Increase Prevention Act of 2014. This legislation extends for one year a host of popular tax provisions (commonly referred to as “tax extenders”) that had expired at the end of 2013. The President is expected to sign the legislation. All of the following provisions were among those retroactively extended, and are now effective through the end of 2014.

 

Deduction for qualified higher-education expenses

You may be entitled to a deduction if you paid qualified higher-education expenses during the year–this includes tuition and fees (for yourself, your spouse, or a dependent) for enrollment in a degree or certificate program at an accredited post-secondary educational institution. The deduction doesn’t include payments for meals, lodging, insurance, transportation, or other living expenses. The maximum deduction is generally $4,000. However, if your adjusted gross income (AGI) exceeds $65,000 ($130,000 if married filing jointly), your maximum deduction is limited to $2,000; if your AGI is greater than $80,000 ($160,000 if married filing jointly), you can’t claim the deduction at all.

 

Deduction for classroom expenses paid by educators

If you’re an educator, you may be able to claim up to $250 of unreimbursed qualified classroom expenses you paid during the year as an “above-the line” deduction. Qualifying expenses can include the cost of books, most supplies, computer equipment, and supplementary materials used in the classroom. Teachers, instructors, counselors, principals, and aides for kindergarten through grade 12 are eligible, provided a minimum number of hours are worked during the school year.

 

Deduction for state and local general sales tax

If you itemize deductions on Schedule A of IRS Form 1040, you can elect to deduct state and local general sales taxes in lieu of the deduction for state and local income taxes. You can calculate the total amount of state and local sales taxes paid by accumulating receipts showing general sales taxes paid, or you can use IRS tables. If you use IRS tables to determine your deduction, in addition to the table amounts you can deduct eligible general sales taxes paid on cars, boats, and other specified items.

 

Tax-free charitable donations from IRAs

If you’re age 70½ or older, you can make a qualified charitable distribution (QCD) of up to $100,000  from your IRA and exclude the distribution from your gross income. The distribution must be made directly to a qualified charity by December 31, 2014, and must be a distribution that would otherwise be taxable to you. QCDs count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA, just as if you had received an actual distribution from the plan. You aren’t able to claim a charitable deduction for the QCD on your federal income tax return.

 

Deduction for mortgage insurance premiums

 Premiums paid or accrued for qualified mortgage insurance associated with the acquisition of your main or second home may be treated as deductible qualified residence interest on Schedule A of IRS Form 1040. The amount that would otherwise be allowed as a deduction is reduced if your AGI exceeds $100,000 ($50,000 if married filing separately), and no deduction is allowed if your AGI exceeds $109,000 ($54,500 if married filing separately).

 

Bonus depreciation

You may be able to claim an additional first-year “bonus” depreciation deduction, equal to 50% of the adjusted basis of qualified property placed in service during the year. The additional first-year depreciation deduction is allowed for both regular tax and the alternative minimum tax.  The basis of the property and the regular depreciation allowances in the year the property is placed in service (and later years) are adjusted accordingly.

 

Expanded IRC Section 179 expensing limits

 Under IRC Section 179, if you’re a small-business owner you can generally elect to expense the cost of qualifying property, rather than to recover such costs through depreciation deductions. The maximum amount that can be expensed for 2014 now remains at $500,000 (the same limit that applied in 2013), rather than dropping to $25,000 had the legislation not passed. The $500,000 limit is reduced by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $2,000,000.

 

Exclusion of gain–qualified small-business stock

 Generally, you’re able to exclude 50% of any capital gain from the sale or exchange of qualified small-business stock provided that certain requirements, including a five-year holding period, are met. However, the temporary increase of the exclusion percentage to 100% that applied in 2013 is now extended to qualified small-business stock issued and acquired in 2014.

 

Other provisions extended

 Other provisions extended by the legislation include:

The ability to exclude from income the discharge of debt associated with a qualified principal residence

  • Provisions related to employer-provided mass-transit benefits
  • Special rules for qualified conservation contributions of capital gain real property
  • Provisions relating to business tax credits, including the research credit and the work opportunity tax credit

IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Summertime Strategies for Your Business

Summer is a great time of year for most businesses to pause for just a little while to take stock, congratulate yourself on what you’ve accomplished so far this year, and make big plans for your future.  Here are five summertime strategies to help you regroup, reassess, and rejuvenate your business.

 

1-     Mid-Year Review

 

If your business runs by the calendar year, 2014 is already half over.  This is a perfect time to stop and reflect where you’ve been, what you’ve accomplished, and where you want to go next.  You can make this process as informal or formal as you want.  Some firms hold complex retreats; you may simply need some quiet time on a weekend where all your family is busy doing something else.

 

If you’ve never done any planning and feel like you need a guide, consider the book, The One-Page Business Plan written by Jim Horan.

 

2-     Take a Vacation

 

There’s nothing better to rekindle your creative juices than to get away from the business for a while.  Summertime is when most people take vacation, so if your business is not having its busy season, this might be a good time to go away for a while.

 

If you’re anxious about being away from your business, you’re not alone.  In your annual planning process, plan for and block out your vacation time way ahead of time.  Book the reservations with no refunds several months in advance so that you won’t chicken out at the last minute.  There is life beyond your business, and you will be a better business owner when you take regular breaks away.

 

3-     Celebrate

 

Take time to pat yourself on the back and congratulate the people around you for the goals you’ve reached and the efforts your team has made on your behalf.  We all could use more praise and more celebrations in our lives.  Perhaps you can organize a party, or if you are not the partying type, a quiet word individually with your team can go a long way, maybe more than you know.

 

4-     Prune Your Projects    

 

Is your plate too full?  Most of us would say “yes” to that question, so the next step is to ask yourself what you can afford to stop doing that doesn’t make sense.  Is there a project or two that can wait?  If so, decide to stop stressing about not getting it done and give yourself permission to put it on the back burner for now.

 

5-     Focus

 

Ask yourself what one thing you could do today that will make all the difference in your profits, revenues, goals, or simply peace of mind.  And get that thing done.

 

Try these five summertime tips to rejuvenate your business.

Does Your Small Business Need a CRM?

Have you ever stayed at a hotel and then returned, finding that they have stocked your room with everything you asked for the last time you were here?  Your special allergenic pillow was already waiting for you, you were asked if you would like a dinner reservation made just like you always do the first night, and there were even extra hangars because you always need extra hangars.  None of this would be possible for the hotel if it didn’t have a CRM, customer relationship management, system in place.

 

Would your clients be impressed if you remembered all of the details about your last conversation, their last purchase, or their preferences?  If so, your business might benefit from a CRM system.

 

Businesses that have more than 30 or so clients may benefit from a system that allows you and your employees to enter detailed information about each client interaction that they have.  It can work for both current and future clients, i.e., prospects.  A CRM is basically a great big customer database at its core.  It contains master file information on a customer or client, such as name, company, address, contact info, and custom fields.  It is also transaction-driven in that you can log activity such as calls, meetings, proposal dates, and more.

 

A good CRM system is also integrated with your other internal systems, such as your accounting or POS system or both.  In some CRM systems, you can see invoice and payment history, so that when a client calls in, you can also peek to see whether they owe you money or what goods they ordered that they may be calling about.

 

There are literally hundreds of CRM systems to choose from.  The gold standard for large companies is SalesForce.com; however, some small businesses use it as well.  SugarCRM is the largest open source CRM, meaning its programming code is available to the public.  ZohoCRM is one of the largest small business CRMs and offers a suite of products for small businesses.  And Act! is also very popular and plays well with social media.

 

Before choosing a CRM, decide what you want it to do and how you will be using it.  One of the most important aspects of profiting from a CRM is to make sure it gets used, and that takes some habit-changing from you and your staff.  Once you have your requirements, you can evaluate the software options available, and choose the one that works best for you.

 

When your clients start talking about how great your service is and how much attention you pay to the details they care about, you’ll know your CRM is paying off for you.

 

ALSO, don’t forget to Subscribe to my newsletter for information to help you make and keep more money.

101+ Small Business Income Tax Deductions

Advertising
Billboard
Brochures /Flyers
Business Cards
Copy Editor Fees
Direct Mall
Email Marketing/Newsletter
Graphic Designer Fees
Internet Ads (Facebook/Google/etc)
Leads/Mailing Lists
Marketing Services
Networking Event Costs
Postcards
Print Ads: Newspapers/Magazine
Promotional Materials
Radio Ads
Signage/Banners
Television Ads
Web Design
Web Hosting & Domain Fees

Continuing Education
Books (Sales Books, Etc)
Continuing Education Seminars
Magazine Subscriptions
Newsletter Subscriptions
Sales Training/Coaching
Textbooks/Reference Books
Trade Publications

Auto
Business Mileage or
Actual Auto Expenses
• Car Washes
• Depreciation/Lease Payments
• Gas
• Insurance
• Interest
• Licenses/Registration
• Maintenance
• Repairs
• Tires
• Parking
• Tolls

Business Travel
Airfare
Car Rental
Dry Cleaning/Laundry (while traveling)
Lodging
Meals
Parking/Tolls
Taxi, Train, Subway, Bus
Tips

Business Meals & Entertainment

Communication
Answering Service
Cell Phone
Fax line / Efax
Internet Service
Office Telephone
Toll Free Number Equipment

Business Equipment
Briefcase
Calculator
Camera
Cell Phone/Smart Phone
Cleaning Equipment (Vacuum)
Equipment Repair
GPS
Hard Drives/Thumb Drives
iPad/Tablet
Laptop
Maps
Printer
Scanner

Employee Wages
Clerical Support
Family Members (Kids/Spouse)
Payroll / Unemployment Taxes
Sales Agents

Insurance
Health
LTC
General Liability
Workers comp

Office or Home Office
Insurance
Mortgage Interest/Rent
Real estate and personal property taxes
Repairs/Maintenance
Security System
Utilities

Office Expenses
Client Refreshments (coffee,water,soda)
Janitorial expenses
Office Furniture
• Desk
• Filing Cabinets
Office Supplies
• Envelopes
• Folders
• Paper
• Pens
• Postage
• Stationary
• Toner/Ink
Office Rent
Online Storage of Business Files
Software

Professional Fees
Association Dues/Fees
• Professional association
• Chamber of commerce
Bank Fees
Bookkeeping Fees
Insurance License
E&O Insurance
Legal fees
CPA / Tax Planning & Preparation

Retirement
Qualified Plans
Defined Benefit Plan
Self Employment Pension {SEP)
Simple lRA
Solo 401k

Start up Expenses
Costs Incurred before going into business.
Costs to setup LLC or Corporation

Fringe Benefits
Section 105 medical expense reimbursement plan
Section 125 cafeteria plan

 

“Stop wasting money on taxes that you don’t have to pay!”
We’re different. We don’t just record history by putting the correct numbers in the correct boxes on your tax return and calling it a day. We help you write history with a complete lineup of court-tested, IRS-approved concepts and strategies to give you the tax savings you really want.
Call (918) 742-2705 for your free “1040 Analysis.” We’ll find the mistakes and missed opportunities that may be costing you thousands, then show you how proactive tax planning can rescue those wasted dollars!

Your Average American Earning $200,000+

News from the desk of Ron Wilburn, CPA
MARCH 27

IRS Reveals How “High Income” Earners Pay No Tax

 

The IRS “Statistics of Income” Division last release for high-income tax returns was SOI Bulletin Spring 2012. While we don’t expect it to challenge the latest John Grisham thriller on the bestseller list, the Bulletin actually appeals to an even bigger audience – anyone who wants to pay less tax!

The big news in this issue was this: in 2009, 3,924,489 Americans reported “adjusted gross incomes” of $200,000 or more. 20,752 of them paid zero federal income tax. Zip. Zilch. Nada.

Paying no tax is hardly remarkable. According to the Washington-based Tax Policy Center, this year 47% of Americans will pay no federal income tax. That’s because their income is so low, or because they qualify for enough exemptions, deductions, and credits to eliminate any liability. But making $200,000 and paying no tax – now, that’s an accomplishment. How did they do it?

According to the IRS, here are the items that produced the largest tax effects on high-income returns:

Interest paid (including mortgage interest and investment interest)
Taxes paid
Charitable contributions
Casualty and theft losses
Partnership and “S corporation” losses
Tax-exempt interest
You probably don’t want to count on “casualty and theft losses” to bail yourself out of a big tax bill. But you can count on one thing. Very few of those 20,752 lucky winners sat down to file their taxes and discovered their zero tax bill by surprise. Almost all of them did it through careful planning.

Do we sound like a broken record with the “P” word? Sorry, but that’s just too bad. Planning really is the key to minimizing your taxes. So, while we can’t promise planning will eliminate your tax entirely, we can tell you it gives you your best shot.

Are your friends, family, or colleagues grumbling about unhappy April 15 surprises? You can be a hero by helping them avoid those surprises. Let them know that we can help, with the right plan and the right concepts and strategies for them. And if you don’t have a plan of your own . . . well, you know where to find us!

Follow us on Twitter at @WilburnCPA and let us know how we’re doing.

Thanks for a great year.

Sincerely,

Ron Wilburn
Wilburn CPA

 

Creating Bank Rules in Xero Beautiful accounting software

There are two types of bank rules in Xero

  1. Spend Money Rule – applies to debit transactions
  2. Receive Money Rule – applies to credit transactions

Spend Money Rule

We will now explain how to create a spend money rule in Xero that will divide an amount between two or more general ledger accounts. 

Let’s say you use your auto in your business and after tracking your mileage for the IRS in a log book, you determine the business use of your automobile is 75%.  Each time you buy gasoline at QuikTrip you don’t want to have to manually code the transaction.  You can setup a spend money rule that will automatically code 25% of the expenditure to owner’s draw, and the other 75% to automobile expense.

Click the “Go to banking” link from the dashboard, then click “Bank Rules”.  Click “Create Rule” and choose Spend Money Rule.

Line 1. When money spent on the bank statement matches [  ANY  ] of the following conditions…

Description,  Contains,  QT

Line 2. Set the contact…

Payee

Line 3. Automatically allocate fixed value line items…

no entry required

Line 4. With the remainder, allocate items in the following ratios…

Description = gasoline,  G/L Account = Automobile expense,  Percent = 75%

Add a new line, and input the following

Description = personal gasoline,  G/L = Owner’s draw,  Percent = 25%

Line 5. Set the reference…

Set this to either “from the reference” or “by me during bank rec”

Line 6. Target a bank account…

Choose your desired business bank account.

Line 7. Give the rule a title…

Name the rule something like “QT gasoline allocation”.

Next time a bank statement item is downloaded with QT in the description field, this rule will automatically code the amount to the correct general ledger accounts and percentages.  You just accept it and you’re done recording and reconciling the transaction.  It should save you at least 50% of the time required to do it manually each time.  You can setup bank rules for numerous scenarios and each time you setup a new bank rule, it saves you time from now on and the reconciliation process gets faster and faster.

Check back often for more ideas to streamline your use of Xero beautiful accounting software, or better yet subscribe to our newsletter.

Want to talk to someone about how Xero can help your business?  Call us at (918) 289-8212.