Category Archives for "Record Keeping"

Landscapers and Gardeners:

The IRS recognizes Small Business Week May 1–7 by highlighting some of its most popular educational products, videos and webinars to help your small business thrive. If you are a self-employed landscaper or gardener, be sure to view the IRS webinar “Business Taxes for the Self-Employed: The Basics.” Here are some topics included in the webinar or on IRS.gov that you should know:
Accounting Method. An accounting method is a set of rules about when to report income and expenses. Many small businesses use the cash 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. Find out more in IRS Publication 538, Accounting Periods and Methods.
Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. You may need to pay self-employment tax as well as income tax if you make a profit. Self-employment tax includes Social Security and Medicare taxes. With estimated tax payments, you pay taxes at various times during the year to ensure you don’t have a large tax bill when you file your tax return. Use IRS Direct Pay, the fast, easy and secure way to pay from your checking or savings account.
Tax Forms. 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. Use Schedule SE, Self-Employment Tax, to figure your SE tax. If you owe this tax, make sure you file the schedule with your federal tax return.
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. View the webinar “Small Business Owners: Get All the Tax Benefits You Deserve” to learn more.
Business Use of a Vehicle. If you use your car or truck for your business, you may be able to deduct the costs to operate the vehicle for the business use. Refer to IRSPublication 463, Travel, Entertainment, Gift, and Car Expenses for details.

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Tax Time Guide: Good Records Key to Claiming Gifts to Charity

IRS YouTube Videos:

Charitable Contributions: English | Spanish | ASL
Exempt Organizations Select Check: English | Spanish | ASL
WASHINGTON ― The Internal Revenue Service today reminded taxpayers planning to claim charitable donations to make sure they have the records they need before filing their 2015 tax returns.

This is the fifth in a series of 10 IRS tips called the Tax Time Guide. These tips are designed to help taxpayers navigate common tax issues as this year’s April 18 deadline approaches.

For any taxpayer, keeping good records is key to qualifying for the full charitable contribution deduction allowed by law. In particular, this includes insuring that they have received required statements for two contribution categories—each gift of at least $250 and donations of vehicles.

First, to claim a charitable contribution deduction, donors must get a written acknowledgement from the charity for all contributions of $250 or more. This includes gifts of both cash and property. For donations of property, the acknowledgement must include, among other things, a description of the items contributed.

In addition, the law requires that taxpayers have all acknowledgements in hand before filing their tax return. These acknowledgements are not filed with the return but must be retained by the taxpayer along with other tax records.

Second, special reporting requirements generally apply to vehicle donations, and taxpayers wishing to claim these donations must attach any required documents to their tax return. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

The IRS also reminded taxpayers to be sure any charity they are giving to is a qualified organization. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible even if they are not listed in the tool’s database.

Only taxpayers who itemize their deductions on Form 1040 Schedule A can claim gifts to charity. Thus, taxpayers who choose the standard deduction cannot deduct their charitable contributions. This includes anyone who files a short form (Form 1040A or 1040EZ).

A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2015 Form 1040, Schedule A to determine whether itemizing is better than claiming the standard deduction.

Besides Schedule A, taxpayers who give property to charity usually must attach a special form for reporting these noncash contributions. If the amount of the deduction for all noncash contributions is over $500, a properly-completed Form 8283 is required.

The IRS provided these additional reminders about the special rules that apply to charitable contributions of used clothing and household items, monetary donations and year-end gifts.

Rules for Charitable Contributions of Clothing and Household Items

This includes furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
Guidelines for Monetary Donations

A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Year-End Gifts

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2015 count for 2015, even if the credit card bill isn’t paid until 2016. Also, checks count for 2015 as long as they were mailed in 2015.
IRS.gov has additional information on charitable giving, including:

Charities & Non-Profits
Publication 526, Charitable Contributions. Among other things, this publication has a detailed discussion of records to keep.
Online mini-course, Can I Deduct My Charitable Contributions?
Other tips in the Tax Time Guide series are available on IRS.gov.

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Keep your Health Insurance Documents with Your Tax Records

Gathering documents and keeping well-organized records make it easier to prepare a tax return. They can also help provide answers if the IRS needs to follow-up with you for more information.

This year marks the first time that you may receive information forms about health insurance coverage.

The information forms are:

Form 1095-A, Health Insurance Marketplace Statement
Form 1095-B, Health Coverage
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
You do not need to send these forms to IRS as proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family’s employer-provided coverage, premiums paid, and type of coverage. You should keep these – as you do other tax records – generally for three years after you file your tax return.

When preparing 2015 tax returns, most people will simply have to check a box to indicate they and everyone on their tax return had health care coverage for the entire year. You will not need to file any additional forms, unless you are claiming the premium tax credit or a coverage exemption. In which case, you will use Form 8962, Premium Tax Credit, or Form 8965, Health Coverage Exemptions.

For more information about the information forms, see our Questions and Answers on IRS.gov/aca.

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Six Facts You Should Know Before Deducting a Charitable Donation

If you gave money or goods to a charity in 2015, you may be able to claim a deduction on your federal tax return. Here are six important facts you should know about charitable donations.

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. An exception to this rule is contributions under the Slain Officer Family Support Act of 2015. To check the status of a charity, use the IRS Select Check tool.

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

4. Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.

5. Form to File and Records to Keep. You must file Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. If you need to prepare a Form 8283, you can prepare and e-file your tax return for free using IRS Free File. The type of records you must keep depends on the amount and type of your donation. To learn more about what records to keep see Publication 526.

6. Donations of $250 or More. If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

Can I Deduct my Charitable Contributions?
Charitable Contributions – Topic 506
Publication 561, Determining the Value of Donated Property

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Claiming Work Opportunity Credit

In order to claim the Work Opportunity Credit, employers must request and be issued a certification for each employee from the State Employment Security Agency (SESA).  The certification proves that the employee is a member of a targeted group.  You must receive certification Form 8850 Pre-Screening Notice and Certification Request for the Work Opportunity Credit, […]

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IRS Starts 2015 Tax Season

The Internal Revenue Service announced the opening of the 2015 filing season.  The IRS Free File program, available at IRS.gov, opened Friday, and the IRS will begin accepting and processing all tax returns on Tuesday – January 20th.  Taxpayers have until Wednesday – April 15th to file their 2014 tax returns and pay any tax […]

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2015 Increase of Standard Mileage Rate

The Internal Revenue Service issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.  Following are the three big categories that are covered, each with a different amount of money per mile.  Beginning on January 1, 2015, the standard mileage rates […]

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