Back to School tips for the IRS

Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind. The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return. American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post-secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don't owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student. You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student. Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions. These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income.

Some Tips on Gambling Income and Losses

Whether you roll the dice, bet on the ponies, play cards or enjoy slot machines, you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings. Here are some important tips about gambling and taxes: Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive: • $1,200 or more in gambling winnings from bingo or slot machines; • $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno; • More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament; • $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or • Any other gambling winnings subject to federal income tax withholding. Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return. You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.' You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings. Refer to your tax professional for more details about the type of information you should write in your diary and what kinds of proof you should retain in your records.

3 Simple Tasks to keep the IRS at bay

We all have to pay taxes and no one wants any trouble. Follow these three simple rules and you’ll reduce your chances of grief from the IRS: Keep Good Records. You might think good records help only if you’re audited. Actually keeping good records can keep you out of trouble in the first place. See Keep Tax Records In The Vault! Most audits are by correspondence: your deductions will be disallowed unless you produce records substantiating them. To respond quickly and thoroughly, be prepared. Respect Those 1099s. Much of what the IRS does is information return matching–the endless correlation of taxpayer identification numbers and payments. Even small mismatches will be caught and can trigger bigger problems. There are different Forms 1099 for miscellaneous income (Form 1099-MISC), interest (Form 1099-INT), etc. How you handle them year round matters. Don’t just stick them in a drawer when they arrive, look at them. If you receive an incorrect 1099 (as is common), contact the payor that issued it. Explain the error and ask if they have already sent a copy to the IRS. If they have, ask for a “corrected” 1099 (there’s a special box for this). You need a system to record and track 1099s. That’s exactly what the IRS does. See Watch Your Mail for 1099s. Keep Business and Personal Separate. You may do things with a dual motive like a pleasant lunch with a business colleague, a boondoggle with your best customer or buying a vacation home you also intend as an investment. But your tax life will be easier if you avoid morphing personal into business, including: Deducting the cost of your divorce because your business is at risk; Deducting a miserable vacation with a client; or Claiming your hobby was really for profit. It’s safer and simple to separate your business and personal lives.

Reducing your Income Tax Refund and Preventing Tax Bills

The Internal Revenue Service reminds taxpayers that it's not too late to adjust their 2012 tax withholding to avoid big tax refunds or tax bills when they file their tax return next year. Taxpayers should act soon to adjust their tax withholding to bring the taxes they must pay closer to what they actually owe and put more money in their pocket right now. Most people have taxes withheld from each paycheck or pay taxes on a quarterly basis through estimated tax payments. Each year millions of American workers have far more taxes withheld from their pay than is required. Many people anxiously wait for their tax refunds to make major purchases or pay their financial obligations. The IRS encourages taxpayers not to tie major financial decisions to the receipt of their tax refund - especially if they need their tax refund to arrive by a certain date. Here is some information to help bring the taxes you pay during the year closer to what you will actually owe when you file your tax return. Employees When you start a new job your employer will ask you to complete Form W-4, Employee's Withholding Allowance Certificate. Your employer will use this form to figure the amount of federal income tax to withhold from your paychecks. Be sure to complete the Form W-4 accurately. You may want to change your Form W-4 when certain life events happen to you during the year. Examples of events in your life that can change the amount of taxes you owe include a change in your marital status, the birth of a child, getting or losing a job, and purchasing a home. Keep your Form W-4 up-to-date. You typically can submit a new Form W–4 at anytime you wish to change the number of your withholding allowances. However, if your life event results in the need to decrease your withholding allowances or changes your marital status from married to single; you must give your employer a new Form W-4 within 10 days of that life event. Self-Employed If you are self-employed and expect to owe a thousand dollars or more in taxes for the year, then you normally must make estimated tax payments to pay your income tax, Social Security and Medicare taxes. You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you are required to pay estimated tax on a quarterly basis. Remember to make estimated payments to avoid owing taxes at tax time. The IRS has more information available www.irs.gov or you can call your trusted NestEggg Team member by calling 760-322-4622.

Eight Tips for Taxpayers Who Receive an IRS Notice

Receiving a notice from the Internal Revenue Service is no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in your mailbox, here are eight things you should know. 1. Don’t panic. Many of these letters can be dealt with very simply. 2. There are a number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. 3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry. 4. If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return. 5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due. 6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Respond to the IRS in writing to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left corner of the notice. Allow at least 30 days for a response from the IRS. 7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. When you call, have a copy of your tax return and the correspondence available or you can simply get the notice to your trusted tax preparer or accountant and let them address. 8. Keep copies of any correspondence with your tax records. For more information about IRS notices and bills, please contact a trusted NestEggg staff member today.

Six Tips for Charitable Taxpayers

Contributing money and property are ways that you can support a charitable cause, but in order for your donation to be tax-deductible, certain conditions must be met. Below are six things the IRS wants taxpayers to know about deductibility of donations. Tax-exempt status: Contributions must be made to qualified charitable organizations to be deductible. Ask the charity about its tax-exempt status, or look for it on IRS.gov in the Exempt Organizations Select Check, an online search tool that allows users to select an exempt organization and check certain information about its federal tax status as well as information about tax forms an organization may file that are available for public review. This search tool can also be used to find which charities have had their exempt status automatically revoked. Itemizing: Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A. Fair market value: Cash contributions and the fair market value of most property you donate to a qualified organization are usually deductible. Special rules apply to several types of donated property, including cars, boats, clothing and household items. If you receive something in return for your donation, such as merchandise, goods, services, admission to a charity banquet or sporting event only the amount exceeding the fair market value of the benefit received can be deducted. Records to keep: You should keep good records of any donation you make, regardless of the amount. All cash contributions must be documented to be deductible – even donations of small amounts. A cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity that includes the charity’s name, contribution date and amount usually fulfill this record-keeping requirement. Large donations: All contributions valued at $250 and above require additional documentation to be deductible. For these, you should receive a written statement from the charity acknowledging your donation. The statement should specify the amount of cash donated and/or provide a description and fair market value of the property donated. It should also say whether the charity provided any goods or services in exchange for your donation. If you donate non-cash items valued at $500 or more, you must also complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a contribution of noncash property worth more than $5,000, you typically must obtain a property appraisal and attach it to your return along with Form 8283. Timing: If you pledge to donate to a qualified charity, keep in mind that for most taxpayers contributions are only deductible in the tax year they are actually made. For example, if you pledged $500 in September but paid the charity just $200 by Dec. 31 of that same year, only $200 of the pledged amount may qualify as tax-deductible for that tax year. End-of-year donations by check or credit card usually qualify as tax-deductible for that tax year, even though you may not pay the credit card bill or have your bank account debited until after Dec. 31. Bottom line: your support of a qualified charitable organization may provide you with a money-saving tax deduction, but conditions do apply. For more information, contact your friendly NestEggg Tax Specialist at 760-322-4622 or at www.nesteggg.com for more information

Tax Tips for Recently Married Taxpayers

Tax Tips for Recently Married Taxpayers If you’ve recently updated your status from single to married, you’re not alone – late spring and summertime is a popular period for weddings. Marriage also brings about some changes with your taxes. Here are several tips for newlyweds from the IRS. Notify the Social Security Administration It’s important that your name and Social Security number match on your next tax return, so if you’ve taken on a new name, report the change to the Social Security Administration. File Form SS-5, Application for a Social Security Card either at the IRS or your closest NestEggg Office. Notify the IRS if you move IRS Form 8822, Change of Address, is the official way to update the IRS of your address change. Download Form 8822 from IRS.gov at the IRS or your closest NestEggg Office. Notify the U.S. Postal Service To ensure your mail – including mail from the IRS – is forwarded to your new address, you’ll need to notify the U.S. Postal Service. Submit a forwarding request online at www.usps.com or visit your local post office or your closest NestEggg Office. Notify your employer Report your name and/or address change to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year. Check your withholding If you both work, keep in mind that you and your spouse’s combined income may move you into a higher tax bracket. You can use Publication 505, Tax Withholding and Estimated Tax, to help determine the correct amount of withholding for your marital status, and it will also help you complete a new Form W-4, Employee's Withholding Allowance Certificate. Fill out and print Form W-4 online and give it to your employer(s) so the correct amount will be withheld from your pay. Select the right tax form Choose your individual income tax form wisely because it can help save you money. Newlywed taxpayers may find that they now have enough deductions to itemize on their tax returns rather than taking the standard deduction. Itemized deductions must be claimed on a Form 1040, not a 1040A or 1040EZ. Choose the best filing status A person’s marital status on Dec. 31 determines whether the person is considered married for that year for tax purposes. Tax law generally allows married couples to choose to file their federal income tax return either jointly or separately in any given year. Figuring the tax both ways can determine which filing status will result in the lowest tax, but filing jointly is usually more beneficial. Bottom line: planning for your wedding may be over, but don’t forget about planning for the tax-related changes that marriage brings. More information about changing your name, address and income tax withholding or anything regarding your personal tax payer responsibilities, contact a NestEggg office near you.

How to Save on Office Supplies

Office supplies are necessary, but they do not necessarily have to drain your budget. To help you cut down without losing efficiency, here are seven easy ways to save on office supplies. Buy in bulk - You can save big bucks by going bulk. Keep track of which supplies you use the most, and try to order these in large quantities. Bulk orders provide you with a double discount: you will likely benefit from lower prices and diminished shipping costs. Just make sure to order wisely, or you may find yourself with a great supply of something you do not need. Avoid ordering bulk quantities of reusable supplies, such as paper clips and binders. Go generic - To make sure you do not end up losing money on lower-quality supplies, test out a small sample of the generic brand items before making a big purchase. For example, you may find that the generic pencils keep breaking, so paying the higher premium for a trusted brand may be worth the cost. Saddle up to your supplier - Large suppliers have already designed customer loyalty programs to encourage frequent purchases. Consolidating your purchases and sticking to one supplier may add up with discounts or free rewards. You may even be able to negotiate prices for recurring orders, if the supplier knows that you will make more orders in the future. Create stations - A supply station set may encourage employees to share supplies. Designate a spot with a hole puncher, stapler and any other supplies you may wish to distribute. For example, keeping boxes of pens in the station means employees can take a pen whenever they need one, without keeping a whole box of unused pens in a desk drawer. If one station is getting congested, you can always create more. Find free stuff - Many office necessities are simply being given away. For example, a short search will usually turn up free accounting software that may fit all of your needs. You may even be able to find free antivirus software. If you keep an eye out for deals and rebates, you will likely find yourself eligible for free supplies. You can also find free stuff right in your office. Print on the back side of old memos and paper to save trees and expenses. Reuse supplies, such as binders, folders and even boxes or bubble mailers. Try setting up a reusable supply station, where people can drop off and pick up supplies. Cut printing costs - Between the heavy price of ink and rapid use of paper, printing costs can add up. A few smart computer settings can cut down on the costs. Printers usually have an economy setting that will print documents using less ink. Note that the image and text quality will be slightly lower, but you may not need anything fancy for most of your printing purposes. Other ways of cutting printing costs include double-sided printing, using scrap paper and focusing on electronic communication

Benefits of Miscellaneous Deductions

If you are able to itemize your deductions on your tax return instead of claiming the standard deduction, you may be able to claim certain miscellaneous deductions. A tax deduction reduces the amount of your taxable income and generally reduces the amount of taxes you may have to pay. Here are some things you should know about miscellaneous tax deductions: Deductions Subject to the 2 Percent Limit. You can deduct the amount of certain miscellaneous expenses that exceed 2 percent of your adjusted gross income.

Deductions subject to the 2 percent limit include:

• Unreimbursed employee expenses such as searching for a new job in the same profession, certain work clothes and uniforms, work tools, union dues, and work-related travel and transportation.

 • Tax preparation fees. • Other expenses that you pay to: – Produce or collect taxable income, – Manage, conserve, or maintain property held to produce taxable income, or – Determine, contest, pay, or claim a refund of any tax. Examples of other expenses include certain investment fees and expenses, some legal fees, hobby expenses that are not more than your hobby income and rental fees for a safe deposit box if it is not used to store jewelry and other personal effects. Deductions Not Subject to the 2 Percent Limit. The list of deductions not subject to the 2 percent limit of adjusted gross income includes:

• Casualty and theft losses from income-producing property such as damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art.

• Gambling losses up to the amount of gambling winnings. • Impairment-related work expenses of persons with disabilities.

 • Losses from Ponzi-type investment schemes. Qualified miscellaneous deductions are reported on Schedule A, Itemized Deductions.

Keep records of your miscellaneous deductions to make it easier for you to prepare your tax return when the filing season arrives. There are also many expenses that you cannot deduct such as personal living or family expenses.

You can find more information by calling a NestEggg Tax professional today 760-322-4622 or visiting www.nesteggg.com

Clients on Vacation, What do I do?

Service-oriented businesses may find themselves to be slower than usual during the summer, when many customers go on vacation. What should you do with the downtime? How do you cope with the unsteady cash flow?

Here are a few tips for what to do while your clients are away:

§  Take a vacation, too. As an business man or woman, it can be tough to get away from work completely. The best time to take a break is when your clients will miss you the least. Before you head off, take stock of your current projects and delegate any tasks that need to be handled in your absence. Once you’ve finalized a plan, tell clients that you’ll be away and that you won’t be starting any new projects until you return. (Of course, you’ll want to bring a smartphone or laptop with you, just in case).

§  Look ahead. When you’re not consumed by customer demands, it’s easier to focus on strategies that will further your business goals. Conduct research, ask around to fwllow cooleagues to see what’s new and exciting in your industry, and start plotting or revising your business’s long-term objectives. Consider writing a business plan to help you follow through with your agenda.

§  Look inward. Use downtime to focus on internal projects you’ve been meaning to work on for months, such as creating blog content or presentation materials, redecorating your shop, or writing a job listing for your next hire. If you’re seeking new clients, you could also use spare time to put together new marketing collateral and identify the best people to target.

Focus on your bottom line. If your cash flow is unsteady during the summer, look carefully at your budget and analyze where your profits and expenses come from. Consider whether cloud-based services could replace more expensive equipment, and re-examine your vendor relationships to see whether better deals are available. Making sure that your business is spending wisely will help you prepare for ebbs and flows.

Sold your Home, Now moving? Here are 10 Helpful Tax Tips

School’s out for the summer and about to resume, but thousands of taxpayers choose this as a popular time for people to move - especially families with children.  If you are moving to start a new job or even the same job at a new job location, the IRS offers 10 tax tips on expenses you may be able to deduct on your tax return.

1. Expenses must be close to the time you start work  Generally, you can consider moving expenses that you incurred within one year of the date you first report to work at a new job location. 

2. Distance Test  Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous main job location was from your former home.  For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.

3. Time Test  Upon arriving in the general area of your new job location, you must work full time for at least 39 weeks during the first year at your new job location. Self-employed individuals must meet this test, and they must also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test. There are some special rules and exceptions to these general rules, so see Publication 521, Moving Expenses for more information.

4. Travel  You can deduct lodging expenses (but not meals) for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay, but you can only deduct one trip per person.

5. Household goods  You can deduct the cost of packing, crating and transporting your household goods and personal property, including the cost of shipping household pets. You may be able to include the cost of storing and insuring these items while in transit.

6. Utilities  You can deduct the costs of connecting or disconnecting utilities.

7. Nondeductible expenses  You cannot deduct as moving expenses: any part of the purchase price of your new home, car tags, a driver’s license renewal, costs of buying or selling a home, expenses of entering into or breaking a lease, or security deposits and storage charges, except those incurred in transit and for foreign moves.

8. Form  You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.

9. Reimbursed expenses  If your employer reimburses you for the costs of a move for which you took a deduction, the reimbursement may have to be included as income on your tax return.

10. Update your address  When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS.

For more info visit www.nesteggg.com

Ten Tax Tips for Individuals Selling Their Home

The Internal Revenue Service has some important information for those who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may be able to exclude all or part of that gain from your income.

Here are 10 tips from to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the full exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

4. If you can exclude all of the gain, you do not need to report the sale of your home on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in IRS Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude. Most tax software can also help with this calculation.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See IRS Publication 523, Selling Your Home, for details.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

For more info visit www.nesteggg.com

Help Employees Reduce Distractions

Do your employees frequently head out the door at the end of the workday without having completed many of the tasks on their to-do lists?

 

These staffers probably aren’t slacking off intentionally. It’s more likely that they’re bombarded with email and other distractions. Now that technology has us available 24/7, we often never have time to think and can see this everywhere in all aspects of our everyday lives.

 

Although it may be frustrating to acknowledge low productivity among your staffers, there’s good news: Setting a few simple boundaries can help your employees focus and finish those projects you’ve been waiting for.

 

Here are four easy ways to get your employees back on track:

 

1.      Invest in headphones. To help workers tune out office conversations and clamor, offer them a pair of noise-cancelling headphones. Better yet, let them buy their own and expense the purchase. You’ll get a much better buy-in if the employee selects the headphones they want most, rather than giving them a pair.

 

2.      Set “office hours.” If co-workers continually interrupt one another with questions, create a schedule that gives them time to work alone and time to answer questions. For example, ask everyone to remain at their own desks from 8 to 10 a.m., and then allow for a half hour of open conversation to address questions and concerns. After that, it’s back to working solo until the next scheduled “office hours.”

 

3.      Use time-management software. If your employees spend hours at the computer, helping them fight online distractions can boost their output. There are many time-management apps out there; finding the best fit for your office will depend on your specific needs.

 

4.      Establish an email policy. Email is probably the worst offender when it comes to interruptions. To counter time lost on electronic communications, consider setting an email policy. If your employees don’t need to answer email immediately as part of their job, designate two or three blocks of time during the day for checking and responding to business-related email.

For  more info on how NestEggg can help your visit www.nesteggg.com

How to Retain the Good Employees

In today’s economy there a wide range of potential employees that can fill job openings. Some employees don’t work out for various reasons. The worthy employees are the one you want to take steps to stick around. So if you want to keep your employees happy, in both good and bad times, here are five things you need to know.

Challenge your employees – Offer the ambitious employee some new challenges to help them grow professionally and help your business too. You don't want to overwhelm them, but you shouldn't bore them either.

Pay your employees - If you can, pay them more than they think they are worth, But if you can't pay a high salary, then provide benefits, such as family time and flexible work schedules, can have more value to the employee rather than additional cash. Pay your employees compliments.

Don't hover - Remember, if you hired employees because they're talented, creative and have a unique set of skills and intelligence, if you constrain them too much and make them do their work exactly like you would do it if you were in their position, you risk losing the very qualities that you hired them for in the first place.

Make the work environment as work-friendly as possible - Look around you and the environment in your office. Money is not the only motivator, but so is going into a workspace that doesn’t tolerate office gossip and general tension. Is the office everyone works in kind of a dump?  Would you work here if you were an employee of yours?

Employees need to get something out of their job – At least offer your employees as much career growth as possible.  It may seem counterproductive to help prepare an employee for a better job, but the more you help an employee grow and evolve so they can get a better job, the better the odds that they're going to realize that the better job is the one they have.