Many people don’t realize that there was a lot more to the Affordable Care Act than just affordable health care. With all the hype in the news and across the United States about the Affordable Care Act, the Marketplace, and what is and isn’t being done with our healthcare, some of those other provisions got completely overlooked and/or ignored.
One of those provisions was the Net Investment Income Tax that was included in that. Now according to the act, there was a 3.8 percent tax that took effect on January 1, 2013. This tax applied to individuals, estates, and trusts that have investment income over the threshold amounts.
After having received some comments from the public about the confusing rules and regulations concerning this tax, the IRS released some “final” rules and proposed regulations as it relates to certain types of properties.
Among these rules is a “safe harbor” provision for real estate professionals. It states that if this real estate professional participates in real estate activities for more than 500 hours in a given year that the rental income from these activities can be considered income that occurred in the “ordinary course” of doing business, and as such, would not be subject to this additional tax. This “safe harbor” has requirement tests which simplify whether or not you meet this and can avoid the additional Investment Income Tax.
There are, of course, other exceptions to the rule. So if you want to know whether you qualify for the Investment Income Tax or any other of the additional provisions listed in the Affordable Care Act. Call Taxpectations where you can get your questions answered.
Wendy Cassera, owner and operator of Taxpectations attended the annual Growth Summit hosted by Coastal Carolina University on August 13, 2013.
The theme for the 16th annual Growth Summit was “T.I.R.E.D. of a Sluggish Economy? Learn how Technology, Innovation, Rates, Economy and Discussion Paint a New Picture”
Here is a clip of Wendy Cassera of Taxpections being interviewed by Marc Liverman of WPDE, Channel 15 of Myrtle Beach.
“Having a real estate market being what it is, especially in a tourist kind of area like this, it really helps my kind of business because people need to have an expert, they need somebody that knows how it’s going to effect them in the long run,’ she said.
“When you have the stability, when you have the long term, it’s a lot easier to give the advice, it’s a lot easier to help people.”
If you need help with your growing business, let us know!
Here is the first in a long series of Tax Tips by me, Wendy Cassera of Taxpectations! With well over 25 years experience, I am accomplished in all areas of accounting, bookkeeping and tax preparation. Including full payroll, all payroll taxes, and workmans compensation audits. I work with my clients and handle and prepare all individual, business, and corporate income, sales & use and local taxes. I am also very experienced in virtual accounting and bookkeeping with clients across the United States. I have clients on both coasts and in between, however, I am based in Myrtle Beach, South Carolina. I love the beach life. The Myrtle Beach area is home to many hospitality businesses and I work with a fair number of them.
The first Tax Tip is about determining whether the people that work for you are Independent Contractors or Employees.
Watch this YouTube video –>
As mentioned in the video, you can go to IRS.gov to find the checklist. I have the direct link here. Use this list to determine whether your people are employees or independent contractors. For obvious reasons (different taxes and employer responsibilities) it is important to determine and classify them!
If you have further questions regarding your employees status, connect with me and I’ll be happy to answer.
Tax Tips, Tax Deductions, and a bigger tax refund from the IRS
We decided that there are so many good tax deductions out there that we should share a few of them with you so that you could add them to your tax returns and also in your tax preparation for the upcoming year.
So what if you decide to chuck it all and start your own think tank? Then you are in for some great tax deductions whether it will be a home-based business or a brick and mortar store.
There are plenty of tax deductions and tax tips that you can use as a business owner. For instance, your office supplies, such as the paper for the printer. If you use a ream of paper every two weeks and you pay an average of say $3.99 a ream, take that and multiply by 26 purchases over the year and you get a $103.74 deduction. Obviously you have other office supplies that you can add to this. Dollar by dollar, it all adds up!
Don’t forget your office equipment like printers, computers, ipads, and other technological wonders that make your job easier to do. You can often take 100% of the cost as a deduction. However, you can also depreciate the equipment so you get a smaller deduction, spread out over just a few years. The choice is dependent upon the total cost of the piece of equipment or furniture that you purchased.
If you have hung around me at all, you know that one of my favorites is, mileage …. Have you tracked your mileage today??? A mileage tax deduction can be one of the largest that a service business can take at times. For instance, say that you go to your clients site on a regular basis. Let’s say that they are an average of 20 miles from your home or office. Make that a round trip and it is 40 miles. Maybe you visit them 2 times a week so that is 80 miles. The IRS allows $.55 ½ cents a mile so … $44.40 a week over 52 weeks and you have a deduction of $2,308.80. WOW …. That is only if you drive 80 miles a week for your business and many of us drive much more than that … again, it all adds up to some serious dollars.
If you are working from your home, it is very important to keep track of everything purchased and used for your business as well as, other indirect expenses such as alarm systems, utilities, internet expenses, and other household bills that contribute to your office use. You can write off a portion of each of these which is dependent upon how much of your house is in use by your office. For example, your house is 1000 square feet and your office space is 250 square feet. Then you are able to deduct 25% of all of your household bills towards your business use of your home. (See other rules and policies about claiming business use of your home)
So … go out, start your own think tank, a home garden party service, or a small boutique. Just keep track of all your expenses or better yet, call Taxpectations, and we will keep track of it all for you!
Here are a few little known tax facts today ….
Did you know …. The actual tax code is more than 3 million words long and would fill 7,500 pages if printed on letter-size paper. (If you stack War & Peace, all of Shakespeares plays, and the Bible together you would have to double it to equal the tax code.)
Did you know …. There have been 4,400 Federal tax law changes made in the last 10 years. (Just think about it …. each individual state makes changes too!)
Did you know …. That almost 2 years ago, another tax bill was signed, called the “tanning tax” …. That indoor tanning salons and those that use them have to pay an extra 10% on getting tanned? (It replaced the “botox” bill which would have given an extra 5% on cosmetic surgery.)
Did you know …. That excise tax, despite its term being mentioned a number of places in the above mentioned tax code, is never really defined. So really, does anyone really know what it means? (Check out wikipedia …it changes its mind too!!)
Did you know …. That income is defined as income that is not not income? (I think someone made this up but who knows?)
Did you know … Almost half of all U.S. households owe no federal income tax at all? (I think we make up for it though in sales tax, property tax, and all those other “little” taxes.)
So now that we have filled your head with a little bit of tax trivia …. What other tax facts might your local taxpert know that could help save you money when it comes to filing your tax returns?
Bring your Inquiring minds here ….
A New Tax …. Not just on Healthcare ….
Well the country has been a buzz regarding the new Obama Health Care Mandate which is interestingly being referred to as a tax. In the furor over this, whether you are for this mandate or against it, there were other taxes put into effect by all this.
The one that I think is going to cause more uproar is the new investment tax. It is to be a 3.8% increase in investment income tax. Now this tax is dependent upon your adjusted gross income. So for this to be in effect for you, you must have an adjusted gross income of more than $250,000 or $200,000 if you are a single taxpayer. Now keep in mind that your adjusted gross income is the income after all your income, including wages, retirement income, and interest/dividend income, is calculated. This is before you get to the exemptions, deductions, and the like.
The 3.8% increase taxes the minimum capital gains tax that is now at 15% and raises it to 18.8%. This is the minimum amount. This capital gains tax is going to be applied to things like rents, royalties, annuity payments (the part subject to tax), and some types of passive income such as real estate income. It will not increase on things like IRA payouts, pension plans, or social security income, nor on things like life-insurance proceeds or veterans benefits.
Remember that a business you own that is recorded for tax purposes, on a schedule C, is not considered investment income for the sake of this tax. However, you MAY have to figure this tax in when selling your house, especially if it is a second home. Also of note, is that trusts and estates can be subject to this tax.
So it is going to especially important to pay attention to those investments and such so that you can properly plan for these increases. There are many things that you can do to help lower your investment tax including things that can reduce your adjusted gross income so that you are less likely to fall in the prevue of this new tax. One instance would be to convert your regular IRA to a Roth IRA as the withdrawals from a Roth IRA are tax-free.
Consult with your favorite tax planner to see what you can do to help prepare you for the upcoming tax season and not get a big surprise upon arrival.