Debra A. Simmons, CPA

Archive for the ‘Uncategorized’ Category

How to Prepare Before a Disaster Strikes

In Other Items of Interest, Uncategorized on July 11, 2011 at 5:59 pm

A home disaster can be stressful enough without reconstructing important records and accounting for belongings. You should safeguard your financial and tax records before disaster strikes. Listed below are simple tips for individuals on preparing for a disaster.

*Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. You can receive bank statements and documents electronically and important documents like W-2s and tax returns can be scanned into an electronic format and stored on a flash drive or CD in a safe place. Keep it with other essential documents like home-closing statements, vehicle titles, insurance records and birth, death or marriage certificates and legal paperwork. Some online services can automatically back up computer files and store them offsite. Regardless of how you save your documents (whether it is electronically or on paper) ensure they are safe from the elements, but also encrypted and/or locked up to guard against disclosure or theft. Read the rest of this entry »

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Health Insurance Tax Breaks for the Self-Employed

In Uncategorized on March 14, 2011 at 11:39 pm

If you are self-employed, you may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:

*A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
*A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., box 14, code A.
*A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.

The insurance plan must be established under your business. Read the rest of this entry »

Tax Tips about Tip Income

In Income Taxes, Uncategorized on January 20, 2011 at 8:46 pm

If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes. Here are four things you should know about tip income:

*Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.
*Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.
*Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.
*Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tip income.

For more information see IRS Publication 531, Reporting Tip Income and Publication 1244 which are available at http://www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

Tax Changes for Small Businesses

In Income Taxes, Uncategorized on January 6, 2011 at 2:04 am

During 2010, new laws, such as the Affordable Care Act and the Small Business Jobs Act of 2010, created or expanded deductions and credits that small businesses and self-employed individuals should consider when completing their tax returns and making business decisions in 2011.

Health Insurance Deduction Reduces Self Employment Tax
With the enactment of the Small Business Jobs Act of 2010, self-employed taxpayers who pay their own health insurance costs can now reduce their net earnings from self-employment by these costs. Previously, the self-employed health insurance deduction was allowed only for income tax purposes. For tax year 2010, self-employed taxpayers can also reduce their net earnings from self employment subject to SE taxes on Schedule SE by the amount of self-employed health insurance deduction claimed on line 29 on Form 1040. Read the rest of this entry »

2011 Changes to Flexible Spending Arrangements

In Other Items of Interest, Uncategorized on September 15, 2010 at 7:53 pm

The Internal Revenue Service issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs. Read the rest of this entry »

Do You Owe Use Tax?

In Uncategorized on July 20, 2010 at 4:14 pm

You may owe use tax on purchases you made from out-of-state or Internet sellers. Use tax is similar to the sales tax paid on purchases you make in California. You may report use tax on your income tax return instead of filing a use tax return with the State Board of Equalization.

In general, you must pay California use tax if you purchase an item out-of-state (for example, by telephone, over the Internet, by mail, or in person) and

*The seller does not collect California sales or use tax, and
*You use, give away, store, or consume the item in this state.

To determine the amount of use tax you owe:

1. Add the amount of all purchases made from out-of-state or Internet sellers made without payment of California Sales/Use tax. Include only items on which you would have paid sales tax if you had purchased them in California.
2. Look up the use tax rate for the location where you used, gave away, stored, or consumed the items you purchased.
3. Multiply the amount by the use tax rate.
4. Subtract any sales or use tax you paid to another state for the items you purchased.
5. Enter this amount.

Report use tax due on the following items directly to the Board of Equalization:

*Vehicles, vessels, and trailers that must be registered with the Department of Motor Vehicles.
*Mobile homes or commercial coaches that must be registered annually as required by the Health and Safety Code.
*Vessels documented with the U.S. Coast Guard.
*Aircraft.
*Leases of machinery, equipment, vehicles, and other tangible personal property.

If you owe use tax for prior years, the Board of Equalization has established a voluntary use tax liability disclosure program for in-state qualified purchasers who wish to acknowledge their liability for California use tax. By voluntarily coming forward to the Board of Equalization under this program, you may be able to limit your liability for tax, penalties, and interest due for prior periods. Get more information.

If your filing status is “Married/RDP Filing Separately”, you may elect to report one-half of the use tax due or the entire amount on your income tax return. If you elect to report one-half, your spouse may report the remaining half on his or her income tax return or on the individual use tax return available from the State Board of Equalization.

For more information about use tax, contact Debbie Simmons at (310) 701-1825.