LLC or C corporation?

Among the many decisions you need to make when launching a business is selecting a business structure. If you do nothing, your business, by default, is structured as either a general partnership (multiple owners) or sole proprietorship (solo owner). These may be the simplest entities to form, but they offer one major drawback: There’s no separation between the business and business owner.

If your partnership or sole proprietorship business is sued or can’t pay its bills, your personal assets can be on the hook. That is why both the Limited Liability Company (LLC) and C corporation, or just corporation, are popular business structures, as they minimize the owner’s personal liability. Yet, they have vastly different approaches to taxation.

Here are 5 differences to think about when deciding on structure:
1. Pass-through business structure vs. non pass-through entity
2. Ability to leave money in the company
3. Social security and Medicare taxes
4. Ability to deduct a loss
5. Employee benefits

When it comes to choosing a structure, there’s no single right answer that works for every business. You need to think about your financial situation and future plans to determine the optimal structure for your needs.

Courtesy of Entrepreneur

For help deciding which business structure is best for you contact Neikirk, Mahoney and Smith at 502-896-2999

Students Working this Summer

Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some topics you might need help with:
1. Withholding and Estimated Tax.
2. New Employees.
3. Self-Employment.
4. Tip Income.
5. Payroll Taxes.
6. Newspaper Carriers.
7. ROTC Pay.
8. Use IRS Free File.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Summer camp may be tax deductible

Expenses associated with summer camp may result in a tax break in the form of the child care credit so long as they are work-related. There are, however, some rules and restrictions for claiming summer camp expenses on your taxes:

Overnight camp is fun for the parents but doesn’t qualify for the credit.

Chess camp might be okay. The cost of sending your child to a day camp may be a qualifying expense, even if the camp specializes in a particular activity.

The forms matter. To claim a credit for child care expenses, you’ll need to attach a federal form 2441 to a federal form 1040, federal form 1040A, or form 1040NR.

Stay at home and unemployed spouses make you ineligible for the credit.

Some of the expenses involved in simply getting ready for camp are deductible. That includes physicals (you do not have to be sick for a physical or well exam to be deductible); shots (vaccines and immunizations are considered preventative care and are deductible); and fees for doctors to complete forms for camp.

Courtesy of Forbes

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Warns Consumers of Possible Scams Relating to Orlando Mass Shooting

The Internal Revenue Service today issued a consumer alert about possible fake charity scams emerging due to the mass shooting in Orlando, Fla., and encouraged taxpayers to seek out recognized charitable groups.

When making donations to assist victims of the terrible tragedy, there are simple steps taxpayers can take to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to quickly and easily check out the status of charitable organizations.

While there has been an enormous wave of support across the country for the victims and families of Orlando, it is common for scam artists to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Advisory Committee Pushes IRS to Go Further on Digital

The Electronic Tax Administration Advisory Committee issued its annual report Wednesday, with recommendations calling on the Internal Revenue Service to expand its electronic filing efforts and digital strategy, and to offer end-to-end capabilities on online accounts for both taxpayers and tax professionals.
The ETAAC report noted that in 2016, the IRS publicly committed to a Future State Initiative and digital service model that embraces technology to improve the taxpayer service experience, in line with recommendations in ETAAC’s 2015 report. In this year’s report, ETAAC made recommendations on how the IRS should go further to optimize the taxpayer experience.

Courtesy of AccountingToday

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Empowerment Zone Designations Continue Through the End of 2016

The Internal Revenue Service today announced that all empowerment zone designations remain in effect through the end of 2016. Empowerment Zones are certain urban and rural areas where employers and other taxpayers qualify for special tax incentives.

Today’s announcement primarily affects businesses that would benefit from claiming the tax incentives for empowerment zones on their 2015 returns, either original or amended, and 2016 returns.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Child and Dependent Care Credit this Summer

Day camps are common during the summer months. Many parents enroll their children in a day camp or pay for day care so they can work or look for work. If this applies to you, your costs may qualify for a federal tax credit. Here are 10 things to know about the Child and Dependent Care Credit:
1. Care for Qualifying Persons.
2. Work-related Expenses.
3. Earned Income Required.
4. Joint Return if Married.
5. Type of Care.
6. Credit Amount.
7. Expense Limits.
8. Certain Care Does Not Qualify.
9. Keep Records and Receipts
10. Dependent Care Benefits.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Makes Electronically Filed Form 990 Data Available in New Format

The Internal Revenue Service announced that the publicly available data on electronically filed Forms 990 will now be available for the first time in a machine-readable format through Amazon Web Services (AWS). The publicly available data does not include donor information or other personally identifiable information. The launch of this effort marks an important step forward in access to this important public data.
Previously, this Form 990 data was only available in image files.  This data, which includes filings from 2011 to the present, will now be available as an XML file that is downloadable from the web via AWS.

Courtesy of IRS

For more information Contact Neikirk, Mahoney and Smith at 502-896-2999

Don’t Forget to Report Certain Foreign Accounts to Treasury by the June 30 Deadline

The Internal Revenue Service today reminded taxpayers who have one or more bank or financial accounts located outside the United States, or signature authority over such accounts that they may need to file an FBAR by Thursday, June 30.

By law, many U.S. taxpayers with foreign accounts exceeding certain thresholds must file Form 114, Report of Foreign Bank and Financial Accounts, known as the "FBAR." It is filed electronically with the Treasury Department's Financial Crimes Enforcement Network.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

New IRS Special Procedure to Allow Property Owners to Request Return of Property

The Internal Revenue Service has established a special procedure for people whose assets were involved in structuring to request a return of their forfeited property or funds. The new process follows a change of IRS policy on structuring cases in October 2014 and ongoing discussions with members of Congress.
The IRS will begin mailing letters this week to potentially eligible property owners to participate in this initiative.  Since 2014, the IRS has already considered a number of petitions from property owners.  The new mailing is being taken to ensure that eligible property owners in this category are aware of this option.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

New Tax Treatment on Per Capita Distributions of Direct Pay Lease Funds

IRS has recently issued Interim Guidance on the income tax treatment of per capita distributions to tribal members on certain direct pay leases. The interim guidance directs IRS employees to apply the standards set forth in Notice 2015-67 when determining whether the per capita distributions of direct pay lease funds are subject to reporting or withholding.

IRS will not seek information reporting on per capita distributions of direct pay lease funds that, had they been paid from the trust, satisfy the general rule under Notice 2015-67. IRS will apply the Notice 2015-67 examples of mischaracterized distributions to all per capita distributions, including those from direct pay leases.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Student Loans and Taxes

Factoring in student loan debt can be especially confusing.
Here are three ways student loan debt affects your taxes, from deductions to tax bills you might owe in the future.

1. You can deduct student loan interest from your income.

If you paid interest on student loans last year, you can lower your taxable income by up to $2,500.

2. Filing jointly with a spouse could increase your student loan payment.

More and more grads are opting for income-driven repayment plans to pay off their federal student loans. These plans limit your monthly payment to a percentage of your discretionary income. Plus, they forgive your loan balance after you’ve made payments for 20 or 25 years.

3. You could be in for a big tax bill if your loans are forgiven later on.

You’ll get your federal student loans forgiven after a certain number of years if you take advantage of the government’s Public Service Loan Forgiveness program, or if you choose an income-driven repayment plan. But these two options affect your taxes very differently.

Courtesy of USAToday

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Tips for Clients Moving Overseas

U.S. citizens living overseas must still file federal tax returns if they meet IRS filing requirements, according to the Huffington Post.

1. File your return on time.

2. Learn to save on your taxes.

3. File the FBAR if you have $10,000 or more in foreign financial accounts.

4. Have a foreign pension plan, foreign investment account, foreign trust etc? You need to file this.

5. Know the rules of your state.

6. Keep your health insurance.

7. Report your rental income.

8. Keep your social security income.

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Online Tools Help Individuals and Employers Estimate Health Care Law’s Effect on Taxes

Whether you’re an employer or an individual taxpayer, the Taxpayer Advocate Service has several tools available to assist you in estimating credits and payments related to the Affordable Care Act. The Taxpayer Advocate Service recently added a tool to help employers understand how the employer shared responsibility provisions apply to their organization.

Because these tools provide only an estimate, you should not rely on them as an accurate calculation. You should use these estimators only as a guide to assist you in making decisions regarding your tax situation.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Tax tips for Uber, Lyft and gig workers

Hey, Uber and Lyft drivers, did you know that the snacks you serve your customers are partially tax deductible? But the snappy clothes you wear to burnish your image with your clientele aren't. Those are just two tax tidbits that many joining the ranks of the on-demand, or "gig," economy should keep in mind.

 People working in the gig economy typically receive either a 1099-Misc or 1099-K, IRS forms that summarize income earned from a platform such as Uber, Lyft or TaskRabbit. The IRS can keep track of that income because they receive copies of the same forms that taxpayers receive. According to the IRS, there were over 91 million 1099 forms issued last year, the highest number on record.

ZPeople are required to report all of their income, even if they do not receive a 1099 or other tax form. If you make money as a contractor, issuers are required to report compensation of $600 or more on form 1099-Misc.  Form 1099-K, the form issued by credit card merchants to report payments processed on your behalf, should be issued if your gross payments:

Exceed $20,000, and
Exceed 200 transactions within the tax year

However, even if you don’t receive these forms and make under $600 you still need to report your income to avoid penalties for failing to report income.

Courtesy of USAToday

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Interest Rates Remain the Same for the Third Quarter of 2016

The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning July 1, 2016. The rates will be:
four (4) percent for overpayments [three (3) percent in the case of a corporation];
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
1 and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during April 2016 to take effect May 1, 2016, based on daily compounding.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

More Rigorous e-Authentication Process and Get Transcript Online

With the assistance of top digital experts at U.S. Digital Service and other security authorities, the Internal Revenue Service today launched a more rigorous e-authentication process for taxpayers that will significantly increase protection against identity thieves impersonating taxpayers to access tax return information through the IRS Get Transcript online service.  This enhanced authentication process will also provide a foundation for additional IRS self-help services in the future.

After being disabled last spring, Get Transcript Online is now available for all users to access a copy of their tax transcripts and similar documents that summarize important tax return information. Today’s formal relaunch of Get Transcript Online addresses increased cybersecurity threats by using a new, more secure access framework. This framework enables the IRS to require a two-step authentication process for all online tools and applications that require a high level of assurance.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Possible new changes for tax expenditures

The Federal Accounting Standards Advisory Board is proposing changes in how the federal government accounts for tax expenditures.
FASAB chairman D. Scott Showalter said Friday the board is seeking input on the proposed Statement of Federal Financial Accounting Standards, Tax Expenditures: Management’s Discussion and Analysis and Disclosure Requirements.

Generally, tax expenditures are provisions in the tax law available to subsets of taxpayers who engage in certain kinds of activities, face special circumstances, or otherwise meet specified criteria. The government uses tax expenditures to stimulate behavior that will accomplish public policy goals, such as facilitating homeownership, reducing the cost of borrowing for state and local governments, encouraging higher education, and promoting domestic energy production.

Courtesy of AccountingToday

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Adds Future State Discussion to Nationwide Tax Forums

The Internal Revenue Service today announced the addition of new sessions during this summer's IRS Nationwide Tax Forums discussing the agency’s Future State efforts.  The IRS is including these new sessions to share information with tax professionals and others about the evolving Future State and have the opportunity to discuss it first-hand with IRS leaders.

The IRS Future State efforts are focused on improving the taxpayer’s and tax professional’s experience in their interactions with IRS, whether it involves taxpayer service or tax enforcement.

Future State work will be discussed at each of the five Nationwide Tax Forum locations. The IRS reminds tax professionals that early registration deadlines are rapidly approaching.

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Small Business Healthcare Tax Credit

If you are a small employer, there is a tax credit that can put money in your pocket. The small business health care tax credit benefits employers that:

offer coverage through the small business health options program, also known as the SHOP marketplace
have fewer than 25 full-time equivalent employees
pay an average wage of less than $50,000 a year
pay at least half of employee health insurance premiums
Here are five facts about this credit:

The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
To be eligible for the credit, you must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace, or qualify for an exception to this requirement.
The credit is available to eligible employers for two consecutive taxable years beginning in 2014 or later. You may be able to amend prior year tax returns to claim the credit for tax years 2010 through 2013 in addition to claiming this credit for those two consecutive years.
You can carry the credit back or forward to other tax years if you do not owe tax during the year.
You may get both a credit and a deduction for employee premium payments. Since the amount of your health insurance premium payments will be more than the total credit, if you are eligible, you can still claim a business expense deduction for the premiums in excess of the credit.  
 For more information, see the small business health care tax credit page on IRS.gov. 

Have questions? Contact Neikirk, Mahoney and Smith at 502-896-2999

7 things to do if your tax refund is stolen

There are few things worse than spending hours preparing your tax return only to discover that identity thieves have already snatched your refund.

For many people, the misery starts with an error message from their tax software saying that they’ve already submitted a return; for paper filers, a letter from the IRS is usually the red flag. Either way, if thieves come after your tax return, experts say there are a few steps you’ll need to take to deal with the damage.

1. Fill out IRS Form 14039.
2.  Remember your state return.
3. Shield your credit.
4. Lock down your cellphone.
5.  File your tax return.
6. Prove you’re you.
7. Don’t expect a quick resolution.

For more information contact Neikirk, Mahoney and Smith at 502-896-2999