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“Taxing” is a word synonymous with “onerous” and “wearing.” Bond Beebe, Accountants & Advisors, have created a user friendly blog called “It’s Taxing” to inform and educate our clients and business associates on timely topics related to tax, estates, accounting and finance. We hope our blog answers your questions and alleviates the heavy burden and anxiety related to understanding complicated tax laws and related matters.
A recent tax court decision, Kureck v. Commissioner, T.C. Memo 2013-64 (Feb. 28,2013), highlights the danger faced by many taxpayers utilizing independent contractors in their businesses. The taxpayer in this case (Kurek) was a sole proprietor contractor specializing in home renovation. He hired approximately 30 part-time workers on a project by project basis. None of the workers were engaged full-time by Kureck. Each worker was paid weekly based on the percentage of work completed on a particular job. The workers set their own work schedules and provided their own small tools. The taxpayer purchased the materials and provided any large equipment needed for the jobs.
While many taxpayers are currently focused on preparing the proper forms and compiling supporting documents and receipts, there is another important tax-related consideration - identity theft. As Bond Beebe Principal John Merchant explains in his recent post at BBForensic, tax identity theft is growing. Perpetrators use stolen identities to file a tax return with an overpayment and then deposit the refund into a false account. Sadly, victims are not limited to living taxpayers; often these schemes use information from recently deceased individuals.
With the fiscal-cliff deal being reached on the last day of 2012, the IRS announced that it was going to delay the opening of the 2012 tax-filing season until January 30, 2013. Along with this delayed start, there has also been a delay in the release of several of the forms that are used in the preparation of tax returns. Some of the delayed forms commonly used include: Form 4952 (Deprecation & Amortization), Form 8863 (Education Credits), and Form 8582 (Passive Activity Losses). These delays combined with brokerage firm 1099’s usually being delivered to taxpayers around February 15th, means that many taxpayers could be filing their tax returns later than normal this year.
Tucked into the recent “Fiscal Cliff” bill (the American Taxpayer Relief Act of 2012) was a provision allowing an individual to convert amounts in their 401(k) plans to a Roth 401(k). Previously, an individual could only convert amounts that were otherwise available to withdrawal from their 401(k), meaning after leaving their job, retiring, or reaching age 59 ½. Under the new rules, as long as Roth contributions are offered by the employer’s 401(k) plan, employees can convert amounts while still employed, and at any age.
In 2011, a ruling in the Maryland court system had very interesting implications for many resident taxpayers with out-of-state sourced taxable income.
The court case: Brian and Karen Wynne, et al v. Comptroller of Treasury.
In court the Wynne’s argued that it is unconstitutional for the state of Maryland to disallow a tax credit for taxes paid to another state against the income taxes paid to a Maryland county.
The IRS has issued a clarification to IRS Notice 2013-8 as to the reporting of the 2012 retroactive adjustment to the tax-free exclusion of transit passes and transportation in a commuter highway vehicle on the 2012 fourth quarter Form 941.
The IRS has issued Notice 2013-8, which provides employers guidance on how to deal with the retroactive (part of the American Taxpayer Relief Act of 2012 passed 1/1/13) increase in the maximum monthly exclusion afforded employees from $125 to $240 for 2012. The increased exclusion is applicable to employer-provided transit passes and commuter highway vehicle (vanpooling) transportation benefits and puts them on par with the exclusion for qualified parking for tax year 2012 and 2013. Such benefits are excluded under Section 132(f)(2)(A) of the Internal Revenue Code.
The IRS has issued Rev. Proc 2013-13 which promises a much simpler way to claim the home office deduction. Beginning in 2013, a user of a qualified home office can elect to claim an expense of $5 per square foot of office space, up to 300 square feet total, instead of calculating the actual expenses. This $5 amount takes the place of utilities, cleaning, repairs, depreciation and any other expenses related to business use of the home deducted against the business income. Mortgage interest, property taxes and casualty losses are still allowed as itemized deductions on Schedule A, but are not allocated against business income. Other non-home office related business expenses are also still allowed and are unaffected by this election.