New Standard Mileage Rates Now Available; Business Rate to Rise in 2015

 

Tarm Logo_Page_1

IR-2014-114, Dec. 10, 2014

WASHINGTON — The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously).

Posted in Uncategorized

IMPORTANT CHANGES TO THE MASSACHUSETTS MINIMUM WAGE

IMPORTANT CHANGES TO THE MASSACHUSETTS MINIMUM WAGE

In accordance with An Act Restoring the Minimum Wage and

Providing Unemployment Insurance Reforms Chapter 144 of the Acts of 2014

Effective January 1, 2015

MINIMUM WAGE: $9.00 PER HOUR

The minimum wage law applies to all employees except those being rehabilitated or trained in
charitable, educational, or religious institutions; members of religious orders; agricultural,
floricultural, and horticultural workers; those in professional service; and outside salespersons
not reporting to or visiting their office daily. See M.G.L. chapter 151, §§1 and 2. For further
information regarding the Massachusetts state minimum wage, contact the Massachusetts Department of
Labor Standards at (617) 626-6952 or visit www.mass.gov/dols.

In no case shall the Massachusetts minimum wage rate be less than $0.50 higher than the effective
federal minimum rate.

SERVICE RATE: $3.00 PER HOUR

Wait staff, service employees and service bartenders may be paid the service rate if they regularly
receive tips of more than $20 a month, and if their average hourly tips, when added to the service
rate, are equal to or exceed the basic minimum wage. See M.G.L. chapter 151, §7.

AGRICULTURAL RATE: $8.00 PER HOUR
Work on a farm and the growing and harvesting of agricultural, floricultural and horticultural
commodities requires payment of no less than the above-listed rate per hour, except when such wage
is paid to a child seventeen years of age or under, or to a parent, spouse, child or other member
of the employer’s immediate family. See M.G.L. chapter 151, §2A.

 

Effective January 1, 2016:

• Minimum Wage shall be $10.00 per hour

• Service Rate shall be $3.35 per hour (provided service employee receives tips of more than $20
per month and if his/her average hourly tips, when added to the service rate, equals $10.00 per
hour).

Effective January 1, 2017:

• Minimum Wage shall be $11.00 per hour

• Service Rate shall be $3.75 per hour (provided service employee receives tips of more than $20
per month and if his/her average hourly tips, when added to the service rate, equals $11.00 per
hour).

Posted in Uncategorized

Autumn Resolutions

“Life starts all over again when it gets crisp in the fall,” Fitzgerald wrote in The Great Gatsby.tax-saving-tips-india

Fall is a time of renewal. We put our children on new schedules and get “tough” about bedtimes. However, this is also the time to make you Autumn Resolutions! Yup, this time of year is actually the best time of year for you to start a new habit or get a “fresh start” says Brooke Randolf from Shape.

So why not resolve to get your financial affairs in order and increase your bottom line? Here are just a few things you can do NOW to reduce your tax liability and improve your financial health.

  1. 1.       Boost your Retirement – Contributing to a retirement fund can not only give you peace of mind when it comes to retirement, but it can also lower your tax bill. Increasing your pretax contributions to a 401K, IRA or other retirement plans now can reduce your “taxable income” thus decreasing the overall amount of tax you pay come January! If you are self-employed and don’t have a retirement account – now is the time to start! Tarm Tax Services, Inc. and help you set up a retirement fund and determine the proper amount to contribute.
  2. 2.       Avoid the Penalties – If you expect to owe money when you file your taxes don’t wait till January or even April to pay. Increasing your withholdings on your last few paychecks rather than paying with your tax return is a great way to avoid or reduce an underpayment penalty. Self-employed? You’ll need to make estimated payments. We can help you determine the amount you should be paying each quarter!
  3. 3.       Plan Ahead – Will your income decrease next year? If so you may want to increase your itemized deduction this year to take advantage of the situation. Make your January mortgage payment in December to increase your Mortgage interest deduction, make an additional estimated tax payment to the state to increase your deduction for state taxes, Give early! Contribute next year’s charitable contributions before the end of the year.
  4. 4.       Consider a checkup – It’s important to consider your tax situation before it becomes a “situation.” Set up an appointment to review your income and deductions now to avoid the “April Surprise!”
Posted in Uncategorized

Helpful Hints

recipetsKeeping good financial records is as important a task as any for every business regardless of size. Retaining and organizing transactions relating to both income and expenses will help you manage your cash flow and make sound business decisions. Additionally, it can provide peace of mind and protect you in case of an audit.

It’s critical that entrepreneurs ensure that we take advantage of every tax situation,” says Denise Winston, founder of Money Start Here, a financial education company. “That means treating receipts like cash, not trash,” she says. “Think about it: each $100 business expense receipt could be worth up to $50 when it comes time to filing your taxes, depending on your tax bracket.”

To help insure you pay the lowest possible tax allowed by law we have a few recommendations for keeping good records.

Designate a place for receipts: Train yourself to naturally put receipts in a box or envelope instead of on a table or car dashboard where they can be easily lost.

Track your mileage: Keep a small notebook in your auto and note the beginning and ending mileage, date, destination, and purpose of each trip you drive for business. You will need a mileage log to claim auto expenses regardless of how many gas receipts you collect.

Use what you’re comfortable with: Bookkeeping is a necessary evil for every business. That doesn’t mean you have to invest in expensive and complex software. Base your accounting system on what you’re comfortable with. Using paper journals can work just fine for some small businesses just starting out. If you have a computer, chances are you have Excel. Take a beginner class or view YouTube videos on how to use valuable functions like sum, average, and data sorts. These functions will save you a tremendous amount of time and can be learned in just a few minutes.

Outsource your accounting: Of course as your business grows you will need to have a computerized system like QuickBooks. Outsourcing your books to companies like Tarm Tax Services can save you from having to purchase these systems yourself, while providing greater efficiencies in time and accounting.

Retain your records: The length of time you should keep a document depends on many factors. The IRS says “you must keep your records as long as they may be needed to prove the income or deductions on a tax return.” Most employment records must be kept at least 4 years. Income and expense receipts should be kept a minimum of three years and generally tax records should be maintained three to seven years from the due date or date last paid. Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Keep in mind that if the IRS suspects fraud or you fail to file a return it may be necessary to prove income and expenses for as many years back as they deem necessary. Some records should therefore be kept indefinitely.

Preserve your receipts: Many receipts are printed using thermal ink. These receipts will fade over time making them difficult to read and eventually useless. Keeping them in a dark dry place will help preserve them a little longer. If the receipt has already faded try holding the receipt at arm’s length and point a hair dryer at it to heat up the paper. Use the highest setting for the hair dryer to get the maximum amount of heat.

 

Posted in Uncategorized

IRS.gov has information about the health care law and its effect on your taxes

IRS Health Care Tax Tip 2014-14, Jul. 16, 2014

IRS.gov has information about the health care law and its effect on your taxes

There is a lot of information in the news and online about the health care law and its effect on your taxes. For the most current answers to questions you may have, visit IRS.gov/aca.

From the individual shared responsibility provision to the definition of minimum essential coverage, the IRS website covers a wide range of health care topics and how they relate to your taxes.

The IRS knows that many taxpayers want to know how the health care law will affect them when filing their taxes next year. When questions come up, IRS.gov is a great place for taxpayers to begin finding the answers they need – when they need them.

This information is especially important for individuals because several provisions of the law went into effect this year, such as the premium tax credit and the requirement for individuals to have minimum essential coverage. The IRS will continue to post information that is relevant and helpful to you as you get ready to prepare and file your 2014 tax return.

At IRS.gov/aca, you’ll find frequently asked questions, legal guidance, and links to other useful sites. You can also access valuable information about specific topics, including the premium tax credit for individuals, rules and responsibilities for employers, as well as tax provisions for insurers, tax-exempt organizations and other businesses.

Aside from IRS.gov, we also post new guidance and information about the health care law on the official IRS Twitter, Tumblr and Facebook accounts. You can also access a Web-based IRS flyer, Health Care Law Online Resources, for links to other federal agencies that also have a role in the health care law.

More Information

Find out more about the tax-related provisions of the health care law at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov

Posted in Uncategorized

14 IRS Audit Red Flags

Although the overall individual audit rate is only about one in 100, the odds increase dramatically as your income goes up. Recent IRS statistics show that people with incomes of $200,000 or higher had an audit rate of 3.26%, or one out of every 30 returns. Report $1 million or more of income? There’s a one-in-nine chance your return will be audited.

We’re not saying you should try to make less money—everyone wants to be a millionaire. Just understand that the more income shown on your return, the more likely it is that you’ll be hearing from the IRS.

Read more at http://www.kiplinger.com/slideshow/taxes/T056-S001-irs-audit-red-flags-the-dirty-dozen-slide-show/index.html?vsmaid=281&vcid=32279#tB0OMgIcyruCDbbx.99

 

 

Posted in Uncategorized

What’s New

This section summarizes important tax changes that took effect in 2013. Most of these changes are discussed in more detail throughout this publication.

Future developments. For the latest information about the tax law topics covered here, including information about any tax legislation, go to www.irs.gov/pub17.

Additional Medicare Tax. Beginning in 2013, a 0.9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:

• $125,000 if married filing separately,
• $250,000 if married filing jointly, or
• $200,000 for any other filing status.

Net Investment Income Tax. Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). The NIIT is 3.8% of the smaller of (a) your net investment income or (b) the excess of your modified adjusted gross income over:

• $125,000 if married filing separately,
• $250,000 if married filing jointly or qualifying widow(er), or
• $200,000 if any other filing status.

Change in tax rates. The highest tax rate is 39.6%. For more information, see the 2013 Tax Computation Worksheet or the 2013 Tax Rate Schedules near the end of this publication.

Tax rate on net capital gain and qualified dividends. The maximum tax rate of 15% on net capital gain and qualified dividends has increased to 20% for some taxpayers. See chapter 16.

Medical and dental expenses. You can deduct only the part of your medical and dental expenses that is more than 10% of your adjusted gross income (7.5% if either you or your spouse is age 65 or older). See chapter 21.

Personal exemption amount increased for certain taxpayers. Your personal exemption is increased to $3,900. But the amount is reduced if your adjusted gross income is more than:

• $150,000 if married filing separately,
• $250,000 if single,
• $275,000 if head of household, or
• $300,000 if any other filing status.

Limit on itemized deductions. You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than:

• $150,000 if married filing separately,
• $250,000 if single,
• $275,000 if head of household, or
• $300,000 if any other filing status.

Same-sex marriages. If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. See chapter 2.If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. For details on filing amended returns, see chapter 1.

Health flexible spending arrangements (FSAs). You cannot have more than $2,500 in salary reduction contributions made to a health FSA for plan years beginning after 2012. See chapter 5.

Expiring credits. The plug-in electric vehicle credit and the refundable part of the credit for prior year minimum tax have expired. You cannot claim either one on your 2013 return. See chapter 37.

Ponzi-type investment schemes. There are new rules for how to claim a theft loss deduction on Form 4684 due to a Ponzi-type investment scheme. See chapter 25.

Home office deduction simplified method. If you can take a home office deduction, you may be able to use a simplified method to figure it. See Publication 587.

Standard mileage rates. The 2013 rate for business use of your car is increased to 56½ cents a mile. See chapter 26.The 2013 rate for use of your car to get medical care is increased to 24 cents a mile. See chapter 21.The 2013 rate for use of your car to move is increased to 24 cents a mile. See Publication 521, Moving Expenses.

Interest Rates Remain the Same for the First Quarter of 2014

IR-2013-96, Dec. 9, 2013

WASHINGTON ? The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2014. The rates will be:

• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• three (3) percent for underpayments;
• five (5) percent for large corporate underpayments; and
• one-half (0.5) 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 Oct.2013 to take effect Nov. 1, 2013, based on daily compounding.

Revenue Ruling 2013-25 announcing the quarterly rates will be published in Internal Revenue Bulletin 2013-52, dated Dec. 23, 2013.

Posted in Uncategorized