Marietta Financial Services | CPA Indianapolis

Gambling losses may be deducted only to the extent of gambling winnings, even in the case of an individual engaged in the trade or business of gambling. Previously, the Tax Court had held that losses for purposes of the limitation included both the cost of wagers and business expenses. Earlier this year, the Court overruled its prior position and now says that a professional gambler’s business expenses are not subject to the loss limitation.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 tax Changes, gambling winnings

The IRS has announced a second voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. It will be available through Aug. 31, 2011.  As with the first offer, participants have to pay back taxes and penalties but will avoid criminal prosecution. The offshore penalty is different under the new offer. The general rule is that the penalty is 25% based on amounts in foreign bank accounts, but can be as low as 12.5% or 5% for some taxpayers.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 tax Changes, Offshore income

Married joint return filers are jointly and severally liable for the tax arising from their returns. Innocent spouses may
request relief from this liability in certain circumstances. An IRS regulation states that a request
for equitable innocent spouse relief must be no later than two years from the first collection
activity against the spouse. The Tax Court had found this regulation invalidly imposed a time
limit. However, the Court of Appeals for the Third Circuit has reversed the Tax Court and upheld
the regulation (so has the Court of Appeals for the Seventh Circuit).

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 accounting news, spousal relief request

The IRS has announced new policies and programs to help taxpayers pay back taxes and avoid tax liens. The goal is to help individuals and small businesses meet their tax obligations, without adding an unnecessary burden to taxpayers. Specifically, the IRS is:

1) Significantly increasing the dollar threshold when liens are generally issued,
resulting in fewer tax liens.

2) Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

3) Withdrawing liens in most cases where a taxpayer enters into a Direct Debit
Installment Agreement.

4) Creating easier access to Installment Agreements for more struggling small
businesses; and

5) Expanding a streamlined Offer in Compromise program to cover more taxpayers.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 tax Changes, tax lien procedures

There are a few changes regarding health insurance and medical expenses for 2011. These include:

IRS further delays health insurance coverage information reporting for small employers.
The new health reform legislation generally requires employers to report the cost of health
insurance they provide to employees on their W-2 forms. Last fall, the IRS made this new
reporting requirement optional for all employers for the 2011 Forms W-2. More recently, the IRS
announced that the reporting requirement will continue to be voluntary for small employers at
least through 2012.

Lactation expenses now qualify as deductible medical expenses. Reversing its prior position, the
IRS has announced that expenses paid for breast pumps and supplies that assist lactation qualify
as deductible medical expenses. Amounts reimbursed for these expenses under FSAs (flexible
spending accounts), Archer MSAs (medical savings accounts), HRAs (health reimbursement
arrangements), or HSAs (health savings accounts) are accordingly not income to the taxpayer.

Physician statement alone doesn’t establish financial disability to toll limitations period. In
general, a taxpayer must file a claim for credit or refund of tax within three years after filing the
return or two years after paying the tax, whichever period expires later. However, the statute of limitations is suspended for certain taxpayers who are unable to manage their financial affairs because of a medically determinable mental or physical impairment. A physician’s statement must be submitted to claim this relief, but a Court has made clear that the
statement alone doesn’t establish that the taxpayer was financially disabled. Thus, it allowed the
IRS to seek additional proof of the taxpayer’s condition.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 tax Changes, Health Insurance, medical deductibles

There is a new deadline for electing modified carryover basis rules. Estates of decedents dying in 2010 can choose zero estate tax, but at the price of beneficiaries being limited to the decedents’ basis plus certain increases. The IRS has announced that Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, is not due Apr. 18, 2011 and should not be filed with the final Form 1040 of persons who died in 2010. The IRS says the due date will be set in forthcoming guidance. The forthcoming guidance will also explain the manner in which an executor of an estate may elect to have the estate tax not apply for a decedent dying in 2010.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 tax Changes, carryover basis rules

The IRS has announced new guidelines on the 2010 Tax Relief Act’s 100% depreciation allowance in regard to qualifying new property. This property must have been acquired after September 8, 2010 and before January 1, 2012. The new rules allow:

1) A 100% bonus depreciation where work on a big self-constructed piece of property began before September 9, 2010.

2) A taxpayer to decide to “step down” from 100% to 50% bonus depreciation on property placed in service in a tax year that includes September 9, 2010.

3) Allows a 100% bonus depreciation for eligible restaurant property or retail improvement property that meets the definition of qualified leasehold improvement improvement property.

4) The new rule also provides an out for certain business car owners who might otherwise be subject to a severe depreciation result.

Speaking of vehicles, under the 2010 Tax Relief Act, a taxpayer that buys and places in service a new heavy SUV after Sept. 8, 2010 and before Jan. 1, 2012, and uses it 100% for business, may write off its entire cost in the placed-
in-service year. A heavy SUV is one with a GVW rating of more than 6,000 pounds.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2010 Tax Relief Act, 2011 tax law changes

Tax laws are constantly being revised.  As part of our service to our clients, we have summarized the most recent changes for your information.  Today, we are discussing real estate reporting.

For all payments made after December 31, 2010, individuals receiving rental property income will be treated as engaging in the business of renting property. Therefore, those individuals will be subject to the same reporting requirements as people engaging in trade or business. One important aspect of this change is that rental income recipients spending over $600 with a service provider (such as a plumber or electrician) in the course of earning rental income, must report that expenditure to the IRS and the service provider.

The rental property expense payment reporting requirement doesn’t apply to:

(1) a person who receives rental income of not more than a minimal amount to be determined by the IRS;

(2) an individual who receives rental income from renting his/her primary residence on a temporary basis; or

(3) any individual for whom the information reporting requirement would cause hardship (to be defined by the IRS).

Please direct questions on this and any other tax planning issues to your office.

© 2011 Thomson Reuters/RIA. All rights reserved.

Tags: 2011 tax Changes, rental property taxes, tax planning, Tax Preparation

Health insurance benefits are on the minds of all Americans, business owners and employees.  Changes in the tax law make it easier then ever for business owners to take advantage of tax benefits as they offer insurance to their employees, and try to get coverage for themselves.

Self-employed health insurance deduction. Effective March 30, 2010, a self-employed person who paid for health insurance may be able to include in his self-employed health insurance deduction any premiums he paid to cover his child who was under age 27 at the end of 2010, even if the child was not his dependent. Also, health insurance costs for a taxpayer and his family are deductible in computing 2010 self-employment tax.

Small business health insurance credit. There’s a new tax credit for an eligible small employer who makes qualifying contributions to buy health insurance for his employees. This credit is very complex but it can yield substantial tax savings. In general, the credit is 35% of premiums paid and can be taken against regular and alternative minimum tax.

If you are confused about how to take advantage of this important tax credit, please give us a call.

© 2010 Thomson Reuters/RIA. All rights reserved.

Tags: health insurance tax credit, small business tax, small business tax planning, tax credit, tax planning, tax planning tips

I know it seems like we just finished working on your 2010 taxes, but now is a good time to start your 2011 tax planning. Changes in the law will effect  how small business owners can take advantage of their Roth IRA:

(1) Roth IRA rollovers no longer restricted. You can now make a qualified rollover contribution to a Roth IRA, regardless of the amount of your modified adjusted gross income.

(2) Income from Roth rollover can be spread out. Half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010

It is never to early to start tax planning for next year.  Give us a call to see what we can do to help you take advantage of the tax savings available to you.

© 2010 Thomson Reuters/RIA. All rights reserved.

Tags: small business tax, small business tax planning, tax planning, tax planning tips