What You Need to Know about Employee Expenses

If you own a business and have employees, then there is likely a good chance that you regularly reimburse your employees for spending related to their jobs. Unfortunately, though, many smaller businesses aren’t as strict about following up on these”re-fundings” and ensuring that they are

legitimate as they should be. To really be sure that you are not overspending and that you can trust your employees, you should require proper identification and proof, such as receipts, of all funds that you reimburse.

 Though this may be a difficult thing to enact, it will benefit your business and make it much easier to prove your employee expenses come tax time. In addition to careful tracking of employee expenses, it is also wise for business owners to consider placing a cap on employee expenditures.

Eliminate Costs Where You Can

One thing that can help you to save money on employee expenses and to make your expenses appear more credible to the IRS is to eliminate any unnecessary spending when possible. Obviously, if you have your employees traveling, you need to be able to pay for their travel, lodging, and food while they are away. Most things outside of that, however, are not TRUE necessities.

If, for example, you cover the cost of your employees’ phones and phone plans or the cost of their pleasure outings while traveling for work, you may want to rethink that decision. These kinds of expenses can look questionable to the IRS and can also cause you to spend more money than you really need to.

While cutting off certain employee expenses may not thrill your employees, it is often a necessary and worthwhile step for businesses to take, especially businesses that are struggling financially or that are fearful of undergoing a highly scrutinous audit in the near future.

Take Deductions When Possible

In addition to putting an end to unnecessary employee spending on your dime, you should also take a close look at the expenses you are financing. There is a very good chance that many of them fall under governmental benefit plans. If, for example, you are reimbursing employees for relevant educational expenses, you could potentially get reimbursed for those expenses through tax-deductible government programs.

Your best bet is to work with a financial adviser to determine which programs exist and, then, if and how you can take advantage of them. This option provides you with a way to still encourage your employees and keep them happy without having to foot the entire bill for doing so yourself.

Capping Costs

As mentioned earlier, you will be expected, in most cases, to take care of employee necessities, such as dining and lodging. However, do keep in mind that you can control your business’ spending by placing a cap on employee expenses.

By only giving your employees a certain amount to spend on food, lodging, and other expenses per day or per instance, you can greatly reduce the number of employees that take (an unfair) advantage of your kindness and your overall costs.

While your employees may not love getting “capped” and “reduced” in these ways, the bottom line is that the tips presented here can help you to save money while still reasonably providing for those who work for you, and, at the end of the day, that is what matters most.

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Stock Losses? Don't Worry - Deduct Them

When you invest in a stock, you certainly don’t hope to lose money. Unfortunately, though, losses do occur from time to time, and it’s important to understand that you don’t have to keep paying the price for those losses, at least not when it comes to your tax bill!

Keep in mind, though, that deducting losses isn’t as simple as you might think. There’s a right way- actually a handful of right ways- to do it, and you want to make sure you choose the one that’s going to benefit you the most in the long run. That’s where having a tax advisor and/or an investment advisor can really come in handy!     

Capital Losses

First things first, it’s important to understand what kind of losses stock market losses are. Technically, they are capital losses or capital gains losses. You, as an investor, are only responsible for paying on “realized” capital gains or losses, which means you have to sell your stock for it to truly count as a loss. In other words, just losing money on it isn’t enough. If you don’t sell a stock, no matter how badly it performed, it can’t create a tax deduction, plain and simple.

You do want to make sure, however, that you are not selling your stock for a profit. If you do so, the money you make will be considered taxable income, which will defeat the purpose and benefit of counting your losses to save on taxes.

Figuring Out Your Loss Amount

The loss amount is not just the money you lost or the money you paid for the stock. Instead, it’s the number of shares sold times the per share adjusted cost basis minus the total sale price. If that sounds confusing, it can be! That’s why having a professional to help you do the figuring is really necessary.

Also bear in mind that if there was a stock split while the stock was under your ownership, your costs basis will need to be adjusted accordingly.

Required Forms

Once all the math is done, you’ll need to fill out the appropriate IRS forms to avoid being taxed for lost stocks. The appropriate form is Form 8949 and Schedule D. Your losses will count as short-term or long-term capital losses, based on various factors.

Again, having a professional to help you navigate this process and to choose the right way to handle your stock losses will lead to the most benefits for you. While you can just follow these basic instructions, it’s always smarter to work with someone who will look at your circumstances as unique and come up with the best “plan of attack” for your particular needs. Also, the right professional assistance can help you to avoid stock losses altogether (or at least mostly!) in the future.

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Taxes and the Home Office Rules

Are you part of the growing number of self-employed entrepreneurs or telecommuting employees who are working from home? If so, a home office deduction could provide a valuable tax benefit. Here’s a brief overview of the basic rules for deducting a home office.  

 What’s required?

The first requirement is that you have a part of your home that you use regularly and exclusively for business purposes. It doesn’t have to be a separate room, but it must be a clearly defined area. The exclusive use is very important. The area must be reserved only for business use; if you also use it for personal activities, it won’t qualify. The only exceptions are if you store business samples or inventory at home, or if you run a home day - care business. The second requirement is that your home office must be one of the following:

• Your principal place of business. That’s the place where you conduct most of the management and administrative activities of running your business.

• A place where you regularly meet customers, clients, or patients. Even if you run the business from another location, a home office can qualify if you regularly use it for meeting with customers, clients, or patients.

• A separate building, not connected to your home. A freestanding garage or studio will qualify if it is used in your business.

 What’s deductible?

If you have an area of your home that qualifies, you can generally deduct a percentage of your total costs, including mortgage interest, insurance, taxes, and utilities. The percentage is calculated as the area used for business divided by your home’s total area. For the self-employed, home office deductions are limited to the net income of the business. An employee’s home office must be for the convenience of the employer, and this should be documented in writing. Deductions for employees, other than mortgage interest and taxes, are available only to the extent they exceed 2% of adjusted gross income. The rules on home offices are complex, with many gray areas. Contact our office if you need more information or assistance.

Home Office Deduction - New simplified deduction

The IRS permits taxpayers to use a simplified method for deducting the use of a portion of their home for business. Taxpayers who qualify may use the new optional deduction calculated at $5 a square foot for up to 300 square feet of an area in the home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.

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Tax Help Tips

More often than not, when people seek tax help, it’s because they want to find a way to increase their tax refunds. Fortunately, just about any qualified tax professional can find a way to help you to do just that.

So, what’s the secret to bigger, more rewarding tax refunds? Well, that really all depends on you and your finances. What will work for you might not work for someone else.  

With that said, however, there are some general tips that can benefit just about anyone. Changing your filing status, for example, can often have good results. Even if you’re married, choosing not to file jointly can sometimes provide a much-needed increase to your refund amount.

You might also consider making more tax deductible contributions during the year. Just a few good contributions can pay off majorly come tax time.

To learn about more situation-specific options to increase your refund, talk to a professional tax preparer for advice.

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Are You Eligible for These Deductions?

Whether you handle your tax return preparation on your own or hire someone to do it for you, you are probably aware that there are a lot of tax deductions out there. When you qualify for multiple deductions, you can really save yourself a lot of money. Unfortunately, however, there are some truly great deductions available that a lot of people miss out on, simply because they don’t know they exist.

You probably already know, for example, that you can get a nice write-off for cash donations that you make to charitable organizations. Did you know, however, that you can also get a discount for non-cash

donations? Yes, donating that old television set or dryer can add up to a nice discount on your taxes.

You can also catch a big break if you deduct your mortgage interest, something you can only do if you actually live in the home at the current time. But, of course, you don’t have to sniff out all of these deductions on your own. The right tax preparer can find them for you and then make sure you get the full deductions to which you are entitled.

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Don't Miss Out on Deductions

One of the most common complaints amongst recent taxpayers is that they missed out on deductions. Deductions can help any taxpayer to save lots of money on his or her taxes, but unfortunately, finding all of the deductions for which a filer is eligible isn’t as easy as it seems.

Sometimes, for example, new tax laws or amendments to laws can create deduction opportunities that didn’t exist before. And, unfortunately, those who haven’t “heard the news” often miss out.  Others might rely on tax software to help them find deductions, but even the best software will eventually reach a point where it’s out of date. Furthermore, even quality software can often miss the mark when it comes to scoping out all

possible deductions available.

Missing out can become a thing of the past when people work with a Naperville accounting firm, however. An accountant is more reliable than software and can handle each person’s deductions on a case by case basis. Furthermore, it’s an accountant’s job to be up to date on the latest changes to tax laws and the creation of new laws.

To make sure you get all the deductions you’ve got coming, trust Susan S. Lewis, Ltd. to be your Naperville accounting firm. You won’t regret it!

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Do Some Good, Get a Break

Would you like to give your business a break on taxes this year? Well, one of the best ways to get a well-deserved deduction is to make a charitable contribution to a worthy cause. The IRS, however, recently released some helpful tips on how to make sure you actually get that deduction.

Retail Goodwill (Photo credit: StockMonkeys.com)

For starters, notice that we said “a worthy cause.” What we (and the IRS) mean is that you need to be donating to a true and legitimate charity. Keep in mind that your gifts to people, political causes, and politicians don’t count, at least not as tax deductions.

The IRS also reminds people to file Form 1040 and to then itemize their deductions; otherwise, that deduction you’re banking on isn’t going to happen!

If you’re having trouble figuring out how to get your deduction, don’t take risks that could cause you to miss out. Instead, let a qualified corporate tax accountant, which you can find at Susan S. Lewis Ltd. of Naperville, assist you!

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Easier Filing for Those Who Work From Home

Do you work from home? If so, do you have a home office? If you answered yes to both of those questions, you probably already know that you qualify for a home office deduction. What you might not realize, however, is that, as of last year, changes to tax law have resulted in an easier filing process as it relates to this deduction.

While past filers were forced to keep tally of all of their incurred home office expenses, now deductions can be made based on the size of the home office. Those who work at home can deduct $5 for every square foot of their office, not to exceed a deduction of $1,500. Even better yet, receiving the deduction now only takes one line of writing, rather than forty-three!  

If you don’t want to do the math yourself or to miss out on other possible deductions, take advantage of accounting services in your area. Susan S. Lewis, Ltd. offers a variety of Naperville accounting services geared specifically toward those who work from home.

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Deducting Medical Expenses Just Got Harder

Smart taxpayers know that deducting any expenses possible is an easy way to save on taxes. For many years now, wise taxpayers have made sure to deduct all applicable medical expenses during the tax return preparation process. Unfortunately, however, recent changes to deduction laws have made it more difficult for medical expenses to qualify for deduction.  

While it used to be that the threshold for deducting medical expenses was 7.5% of the taxpayer’s adjusted gross income, the threshold is now at 10%. Fortunately, however, the change does not apply to individuals over the age of sixty-five; they can utilize the old rate for the next three years.

Even if you are no longer able to deduct medical expenses, the right accountant can still handle your tax return preparation in such a way that you get maximum benefits, so contact the friendly accountants at Susan. S. Lewis, Ltd. today.

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