Read This If You Have A Home-based Business

The Internal Revenue Service today reminded people with home-based businesses that this year for the first time they can choose a new simplified option for claiming the deduction for business use of a home.

In tax year 2011, the most recent year for which figures are available, some 3.3 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction) totaling nearly $10 billion.

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

The new option is available starting with the 2013 return taxpayers are filing now.  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 claiming the optional deduction need only complete a short worksheet in the tax instructions and enter the result on their return. Self-employed individuals claim the home office deduction onSchedule C Line 30, farmers claim it on Schedule F  Line 32 and eligible employees claim it onSchedule A Line 21. 

Though homeowners using the new option 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 new option.

For further details on the home office deduction and the new option, contact Neikirk, Mahoney & Smith PLLC, one of America's premier business accounting firms. 

Tax-Credit Plan Refocuses Poverty Debate

BY JEANNA SMIALEK

BLOOMBERG

(Bloomberg) Policy makers on both sides of the partisan divide, from Treasury Secretary Jacob J. Lew to Mitt Romney’s economic adviser Glenn Hubbard, favor expanding the Earned Income Tax Credit. This rare harmony holds the potential to reshape the debate on bridging the growing opportunity gap.

“The dynamics surrounding EITC are changing,” said Alex Brill, a researcher at the American Enterprise Institute, referring to the refundable tax credit for low-income workers. “There’s a little bit of a shift among conservatives and Republicans—an increased level of interest in issues around the working poor.”

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The House Committee reports that the IRS had a political agenda in regulating tax-exempt organizations

The House Committee on Oversight and Government Reform reports that the IRS had a political agenda in regulating tax-exempt organizations

Read more here - http://nmscpas.com/house-committee-oversight-and-government-reform-reports-irs-had-political-agenda-regulating-tax

Weak Recovery Continues as Unemployment Rate Stagnates

from the Wall Street Journal
by Ben Leubsdorf and Jeffrey Sparshott

WASHINGTON—The U.S. labor market in February picked up from recent months, though growth remained measured and the unemployment rate stubbornly high.

U.S. nonfarm payrolls increased by a seasonally adjusted 175,000 in February, the Labor Department said Friday. Revisions by the agency showed the economy added slightly more jobs in recent months than previously believed. Employers added 129,000 jobs in January, up from 113,000, and 84,000 jobs in December, up from 75,000.

The nation's unemployment rate ticked up to 6.7% in February from 6.6% in January. The labor force grew, but so did the number of unemployed.

Economists surveyed by Dow Jones Newswires had projected payrolls would rise 152,000 in February and the unemployment rate would fall to 6.5%.

U.S economic growth accelerated in the second half of 2013 but has shed momentum in recent months. Gross domestic product grew at a seasonally adjusted annual rate of 2.4% in the fourth quarter, down from its 4.1% pace in the third quarter, according to the Commerce Department. Many economists expect growth to slow further in the first quarter. The forecasting firm Macroeconomic Advisers projects GDP will grow at a 1.5% pace, and Barclays Capital predicts 2.2% growth in the first three months of the year.

The recent stretch of mixed economic data, including weak retail sales and a drop in factory output, has been blamed in part on harsh winter weather. The weather may have distorted Friday's reading on jobs, too. Last month's household survey, one component of the jobs report, coincided with a mid-February storm that brought ice and snow to much of the eastern U.S.

It's far from clear if weather is the primary culprit or if the U.S. economy is slowing down in earnest. "A number of data releases have pointed to softer spending than analysts had expected," Federal Reserve Chairwoman Janet Yellen told lawmakers last week. "That may reflect in part adverse weather conditions, but at this point it is difficult to discern exactly how much."

The Fed has been scaling back its bond-buying program, which aims to stimulate the economy by lowering borrowing costs. It now stands at $65 billion per month and policymakers have signaled they plan to pare it in $10 billion increments this year as long as the economy continues to improve.

The central bank's policy-making committee is scheduled to meet March 18-19. Federal Reserve Bank of New York President William Dudley said Thursday that "the threshold is pretty high" for changing course and "the outlook would have to change in a material way relative to my expectations."

Payrolls grew an average of 129,000 a month in December, January and February, slower than the average for the last year of 189,000 a month.

The construction sector, which can be sensitive to the weather, added 15,000 jobs in February after adding 50,000 in January. Manufacturing firms added 6,000 jobs last month, retailers cut 4,100 jobs and employment in the leisure and hospitality sector rose by 25,000 jobs.

Professional and business services employers added 79,000 jobs in February. Employment in the health-care industry rose by 9,500, the third straight month the Labor Department said the field remained nearly flat.

The labor force participation rate held steady at 63% in February. The metric remains at historically low levels.

The number of Americans who have been out of work for 27 weeks or longer rose in February by 203,000 to 3.8 million. Federal funding for extended unemployment benefits expired at the end of December, which could push many of the long-term unemployed either to take jobs or drop out of the workforce entirely.

The unemployment rate rose to 6.7% last month, but a broader measure that includes people working part-time who want a full-time job and others who are marginally attached to the workforce fell to 12.6% in February. It stood at 12.7% in January and 14.3% a year ago.

An economic forecast like this makes it even more critical that you trust your business accounting to one of Louisville's leading CPA firms, Neikirk, Mahoney & Smith, PLLC.

Boehner Seeks Contempt Charges Against Lerner

(Bloomberg) House Speaker John Boehner said an IRS official should be held in contempt if she continues to refuse to testify on the agency’s scrutiny of Tea Party groups.

Lois Lerner, who retired from the Internal Revenue Service in September amid the inquiry, exercised her Fifth Amendment right against self-incrimination at a hearing today after 10 questions from Representative Darrell Issa, the Republican chairman of the House Oversight Committee.

“She has to testify or she should be held in contempt,” Boehner, an Ohio Republican, told reporters, adding that he would wait for a report from Issa.

Read more here

Neikirk, Mahoney & Smith PLLC, an accounting firm in Louisville, Ky. keeps up with what's going on in Washington so you don't have to.

Returns Are UP, According to IRS

The Internal Revenue Service said Thursday that only three weeks after the opening of tax season, it has already received about one-third of the individual income tax returns it expects to receive in 2014.

The IRS reported that tax season has gone smoothly so far, despite the two-week delay before kicking off tax season on January 31.  The IRS has processed almost 98 percent of the 49.6 million returns received so far. Each week this filing season, the IRS has processed a greater percentage of the returns received than during comparable weeks last year.

For more, check out Michael Cohn's article in Accounting Today. If you need help with preparing your 2013 tax returns, contact Neikirk, Mahoney & Smith PLLC.

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