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Reminder: Highway Use Tax Return is due Aug. 31

WASHINGTON — The Internal Revenue Service recently reminded truckers and other owners of heavy highway vehicles that in most cases their next federal highway use tax return is due Monday, Aug. 31, 2015.

The deadline generally applies to Form 2290 and the accompanying tax payment for the tax year that begins July 1, 2015, and ends June 30, 2016. Returns must be filed and tax payments made by Aug. 31 for vehicles used on the road during July.  For vehicles first used after July, the deadline is the last day of the month following the month of first use.

Though some taxpayers have the option of filing Form 2290 on paper, the IRS encourages all taxpayers to take advantage of the speed and convenience of filing this form electronically and paying any tax due electronically.  Taxpayers reporting 25 or more vehicles must e-file.

The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more.  This generally includes trucks, truck tractors, and buses.  Ordinarily, vans, pick-ups, and panel trucks are not taxable because they fall below the 55,000-pound threshold.  The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply, explained in the instructions to Form 2290.

Governor Releases 2016-17 Official State Budget Proposal

Update(with updated link):  The governor signed the budget into law last Wednesday, July 1st and used his line item veto on 44 items.

On Monday, June 29th Governor Kasich released his budget recommendations for Fiscal Years 2016-2017, which included a proposal to continue the Small Business Investor Deduction at 75% for 2015 and increase it to 100% for qualified business income below $250,000 in 2016 and beyond.  The proposal was part of an assortment the governor brought before the General Assembly that included individual income tax cuts and tuition freezes.  The budget and explanations can be read here: http://obm.ohio.gov/Budget/operating/fy16-17.aspx.

Tax Tips for Farmers

The following IRS Tax Tip is specifically applicable to our farming clients.  Be sure to ask us any questions you might have regarding any of these items, we’re always here to answer them.

Farms include ranches, ranges, and orchards.  Some raise livestock, poultry, or fish.  Others grow fruits or vegetables.  Individuals report their farm income on Schedule F, Profit or Loss from Farming.  If you own a farm, here are some tax tips to help at tax time:

  1. Crop insurance.  Insurance payments from crop damage count as income.  Generally, you should report these payments in the year you get them.
  2. Sale of items purchased for resale. If you sold livestock or items that you bought for resale, you must report the sale.  Your profit or loss is the difference between your selling price and your basis in the item.  Basis is usually the cost of the item.  Your cost may also include other amounts you paid such as sales tax and freight.
  3. Weather-related sales. Bad weather such as a drought or flood may force you to sell more livestock than you normally would in a year. If so, you may be able to delay reporting a gain from the sale of the extra animals.
  4. Farm expenses. Farmers can deduct ordinary and necessary expenses they paid for their business.  An ordinary expense is a common and accepted cost for that type of business.  A necessary expense means a cost that is proper for that business.
  5. Employee wages. You can deduct reasonable wages you paid to your farm’s full and part-time workers.  You must withhold Social Security, Medicare and income taxes from their wages.
  6. Loan repayment. You can only deduct the interest you paid on a loan if the loan is used for your farming business.  You can’t deduct interest you paid on a loan that you used for personal expenses.
  7. Net operating losses. If your expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it.  You may get a refund of part or all of the income tax you paid in prior years.  You may also be able to lower your tax in future years.
  8. Farm income averaging. You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may cut your taxes if your farm income is high in the current year and low in one or more of the past three years.
  9. Tax credit or refund.  You may be able to claim a tax credit or refund of excise taxes you paid on fuel used on your farm for farming purposes.

Many Home-Based Businesses Can Use Simplified Method for Claiming Home Office Deduction

The following IRS newsletter introduces the you to the simplified home office deduction, which can be a simpler way of deducting your home office.  We can help you decide if this is a better option and properly calculate the deduction whichever way is best for you.

WASHINGTON — The Internal Revenue Service today reminded people with home-based businesses filling out their 2014 federal income tax returns that they can choose a simplified method for claiming the deduction for business use of a home.

This is the seventh in a series of 10 daily IRS tips called the Tax Time Guide.  These tips are designed to help taxpayers navigate common tax issues as the April 15 deadline approaches.

In tax year 2012, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions of more than $10 billion for business use of a home, which is commonly referred to as the home office deduction.

Introduced in tax year 2013, the optional deduction is designed to reduce the paperwork and recordkeeping burden for small businesses.  The optional deduction is capped at $1,500 per year, based on $5 a square foot for up to 300 square feet.

Normally, home-based businesses are required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Instead, taxpayers choosing the simplified method need only complete a short worksheet in the tax instructions and enter the result on their tax return.  Self-employed individuals claim the home office deduction on Schedule C, Line 30; farmers claim it on Schedule F, Line 32 and eligible employees claim it on Schedule A, Line 21.

Though homeowners using the simplified method cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A.  These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees, are still fully deductible.  Long-standing restrictions on the home office deduction, such as the requirement that a home office be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the simplified method.

Further details on the home office deduction and the simplified method can be found in Publication 587 on IRS.gov.

IRS YouTube Video:
Simplified Home Office Deduction: English / Spanish / ASL

Are You Self Employed? Check Out These IRS Tax Tips

The following is a brief, but informative Tax Tip from the IRS regarding self-employed people.  If you are self-employed, we can help you solve these issues and provide the best benefit for you.

Many people who carry on a trade or business are self-employed.  Sole proprietors and independent contractors are two examples of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return.  Here are six important tips about income from self-employment:

  • SE Income.  Self-employment can include income you received for part-time work.  This is in addition to income from your regular job.
  • Schedule C or C-EZ.  There are two forms to report self-employment income.  You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions.  See the form instructions to find out if you can use the form.
  • SE Tax.  You may have to pay self-employment tax as well as income tax if you made a profit.  Self-employment tax includes Social Security and Medicare taxes.  Use Schedule SE, Self-Employment Tax, to figure the tax.  If you owe this tax, make sure you file the schedule with your federal tax return.
  • Estimated Tax.  You may need to make estimated tax payments.  People typically make these payments on income that is not subject to withholding.  You usually pay this tax in four installments for each year.  If you do not pay enough tax throughout the year, you may owe a penalty.
  • Allowable Deductions.  You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry.  A necessary expense is one that is helpful and proper for your trade or business.
  • When to Deduct.  In most cases, you can deduct expenses in the same year you paid for them, or incurred them.  However, you must ‘capitalize’ some costs.  This means you can deduct part of the cost over a number of years.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcast:

Estimated Tax Payments – English | Spanish

IRS Reminder: For Most Truckers, Highway Use Tax Return Due Sept. 2

WASHINGTON — The Internal Revenue Service last Friday, August 22, reminded truckers and other owners of heavy highway vehicles that in most cases, their next federal highway use tax return is due on Tuesday, Sept. 2, 2014.

This year’s Sept. 2 due date, pushed back two days because the normal Aug. 31 deadline falls on a Sunday, generally applies to Form 2290 and the accompanying tax payment for the tax year that begins on July 1, 2014, and ends on June 30, 2015.  Returns must be filed and tax payments made by Sept. 2 for vehicles used on the road during July.  For vehicles first used after July, the deadline is the last day of the month following the month of first use.

Though some taxpayers have the option of filing Form 2290 on paper, the IRS encourages all taxpayers to take advantage of the speed and convenience of filing this form electronically and paying any tax due electronically. Taxpayers reporting 25 or more vehicles must e-file.

Paper returns must be mailed and postmarked by midnight on Sept. 2.  As usual, IRS offices will be closed on Labor Day, Monday, Sept. 1.

The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more.  This generally includes trucks, truck tractors, and buses.  Ordinarily, vans, pick-ups, and panel trucks are not taxable because they fall below the 55,000-pound threshold.  The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply, explained in the instructions to Form 2290.

More information can be found in the Trucking Tax Center at irs.gov/truckers.

Five Basic Tax Tips for New Businesses

The following is from a recent IRS Tax Tip about what to watch for when starting a business.  In the near future, look for updates from us on starting a business, including a packet to help you be aware of federal and state rules.

If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.

  1. Business Structure.  As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.
  2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.
  3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
  4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.
  5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts: