Everything I read makes it sound like the world is coming to an end when the government starts requiring small business to report payments made on 1099s.
I don't think this is a big deal. Go here to download a fillable w-9 form from the IRS. Fax, mail, or e-mail it to every single person you paid any money to last year. This is easy to do if you've followed my advice and used Quickbooks.
If you haven't, don't worry. You are using Quickbooks now, right? Send a copy of this with every single check you send out and keep track of the ones you get back. If a vendor doesn't return it, inform them that you won't be paying them until they do return it.
Now, play nice. Keep one filled out with your information handy. When someone requests it, send it to them immediately. Better yet, just put your tax id right on your invoices.
Tuesday, January 25, 2011
Thursday, December 16, 2010
Sell 'em if you got 'em!
Capital gains. When you sell anything for more than you bought it you realize a capital gain. Capital losses occur when you sell and investment for less than you bought it.
All you ebayers out there should take careful note of this next paragraph.
Notice that you have a gain if you sell anything for more than you pay for it. You only get a loss if it is an investment. If you buy a car, fix it up to drive it, and sell it for a gain you pay tax on that gain. If you lose money on the deal there is no deduction. Special rules apply if you are in the business of buying and restoring cars but the point is that the government wants "their" money when you work hard and earn yours.
Bottom line: Everybody has capital gains. Obviously the IRS has a hard time finding out about some transactions but if you own mutual funds those gains are reported to the IRS every year. Your 1099 DIV box 2A and a 1099 B will both tell the government how much you made in capital gains.
You can only offset capital gains with capital losses. Short term against short term and long term against long term. If you losses exceed your gains you write off up to $3,000 against your regular income. If your losses exceed $3,000 you can carry forward that loss.
If you have losses in your portfolio meaning your stock is worth less than you paid, sell it. If you believe the stock is still a good investment, wait 30 days and buy it back. If you believe it's coming back fast, purchase a similar investment or fund. The 30 days is to get around the IRS "Wash" rule.
When all is done, you still have your stock and you have a capital loss to offset income.
Call your broker. Why are your waiting?
All you ebayers out there should take careful note of this next paragraph.
Notice that you have a gain if you sell anything for more than you pay for it. You only get a loss if it is an investment. If you buy a car, fix it up to drive it, and sell it for a gain you pay tax on that gain. If you lose money on the deal there is no deduction. Special rules apply if you are in the business of buying and restoring cars but the point is that the government wants "their" money when you work hard and earn yours.
Bottom line: Everybody has capital gains. Obviously the IRS has a hard time finding out about some transactions but if you own mutual funds those gains are reported to the IRS every year. Your 1099 DIV box 2A and a 1099 B will both tell the government how much you made in capital gains.
You can only offset capital gains with capital losses. Short term against short term and long term against long term. If you losses exceed your gains you write off up to $3,000 against your regular income. If your losses exceed $3,000 you can carry forward that loss.
If you have losses in your portfolio meaning your stock is worth less than you paid, sell it. If you believe the stock is still a good investment, wait 30 days and buy it back. If you believe it's coming back fast, purchase a similar investment or fund. The 30 days is to get around the IRS "Wash" rule.
When all is done, you still have your stock and you have a capital loss to offset income.
Call your broker. Why are your waiting?
Thursday, November 11, 2010
Getting Paid to Ride your Bicycle
A professional triathlete recently commented that a famous runner gets $500k / year from a shoe company to train. I argue that no one gets paid to train, they get paid to sell shoes.
It seems however; that no matter how little, you can actually get paid to ride your bike to work.
There is a tax break for bicycle commuting. It is in a section of the US Tax Code IRC 132(f)(1)(F)(iii)(II) which allows employers to exclude from your W-2 up to $20 per month of reimbursements paid to employees for bicycle commuting expenses as long as you regularly ride your bicycle to work. Commuting expenses include the purchase, maintenance, repair, and storage expenses related to bicycle commuting.
In English.
If your employer so chooses, you can hand him a receipt for the purchase of your bicycle and he can pay you $20 per month until the bike is paid for. Tires, tubes, co2, and maybe even your gym membership can qualify.
If your employer doesn't want to pay an extra $20 per month, you and he can agree to have $20 per month withheld form your check before the calculation of taxes and withholding. He then cuts you the check for the expenses.
If you are self employed this gives you another way to pay out of your business for what would otherwise be personal expenses.
Marc
marcbpetrinecpa.com
It seems however; that no matter how little, you can actually get paid to ride your bike to work.
There is a tax break for bicycle commuting. It is in a section of the US Tax Code IRC 132(f)(1)(F)(iii)(II) which allows employers to exclude from your W-2 up to $20 per month of reimbursements paid to employees for bicycle commuting expenses as long as you regularly ride your bicycle to work. Commuting expenses include the purchase, maintenance, repair, and storage expenses related to bicycle commuting.
In English.
If your employer so chooses, you can hand him a receipt for the purchase of your bicycle and he can pay you $20 per month until the bike is paid for. Tires, tubes, co2, and maybe even your gym membership can qualify.
If your employer doesn't want to pay an extra $20 per month, you and he can agree to have $20 per month withheld form your check before the calculation of taxes and withholding. He then cuts you the check for the expenses.
If you are self employed this gives you another way to pay out of your business for what would otherwise be personal expenses.
Marc
marcbpetrinecpa.com
Monday, October 25, 2010
Home Office Deduction
The question I’m most often asked this time of year is, “Should I take a home office deduction?” My answer is that one should never shy away from a deduction to which they are entitled.
In order for space in your home to be eligible the following MUST BE TRUE:
1. You must use the space regularly and exclusively for your business. The IRS takes the position that if you balance your personal checking account at your business desk you have not used the space exclusively for your business. There are more relaxed rules if you use your home as a daycare facility or if you store inventory.
2. You must use the space to meet with clients or it must be your principal place of business. The IRS doesn’t want you to be able to take the deduction if you also rent office space.
If you are not self-employed you can still take a deduction if your employer does not provide you office space and forces you to keep a home office. They will need to provide you with written evidence of these facts.
If you’ve managed these hurdles you get to deduct a percentage of rent or mortgage interest, taxes, insurance, repairs, utilities, HOA fees, and depreciation. You can fill out form 8829 and carry the totals over to your Schedule C. The question is do you want to deduct them?
Remember that mortgage interest and taxes are already deductible on your schedule A; you don’t get to double-dip. All direct business expenses such as a second phone line are deductible on Schedule C. Also keep in mind that depreciation is really a deferral of taxes; you pay tax on all your home business depreciation when you sell your home. An employees’ deduction will then be reduced by 2% of their Adjusted Gross Income (AGI).
Don’t avoid a home office deduction because someone said the high audit risk. Don’t take a deduction to which you are not entitled. Take the deduction if it makes good financial sense. I usually recommend that one year you calculate your taxes both with the home office deduction and without to determine if the savings justify the cost of filling out the additional forms and keeping the required records.
Remember, these are your tax returns. Please contact me if you have any questions.
Marchttp://www.marcbpetrinecpa.com/
Monday, October 4, 2010
Simplify your life today (Part 2)
Buy Quickbooks.
Keep track of everything.
Do it for a month. Trust me.
You don't actually even have to buy Quickbooks. Download a free version of Simple Start here.
Marc
http://www.marcbpetrinecpa.com/
Keep track of everything.
Do it for a month. Trust me.
You don't actually even have to buy Quickbooks. Download a free version of Simple Start here.
Marc
http://www.marcbpetrinecpa.com/
Saturday, September 25, 2010
Simplify your life, today!
There are two pieces of office equipment that everyone should own: A high speed scanner and a high security shredder.
Put them right next to each other. Better yet, put the shredder right below the scanner and figure out a way to have the scanner feed directly into the shredder feeder. Want to make a billion dollars? Create a device that does both and call me. I'll beta test the device.
For the scanner, my recommendation is a Fujitsu ScanSnap. There are several models and the same basic model is marketed by a few manufacturers. I don't know if it is the same machine but they all look and perform alike if you ask me. The other day my daughter had a minor surgery in the hospital. Every workstation had some version of this scanner on the desk. They scanned everything; my driver's license, insurance card, and admission paperwork. Why do we have to fill this out when we get there, anyway? Why don't they send the paperwork the day before and let me fill it out online? But I digress.
This scanner costs anywhere from $200 - $1,000 depending on the model and features but all have the same basic functions: They all have at least a 25 page sheet feeder, all scan pages 8 1/2 inches wide with varying lengths but handle almost anything smaller, all scan full duplex, all allow you to customize several different defaults for file save format and location, all come with Adobe Acrobat, and they all have a setting to automatically OCR (Optical Character Recognition) documents.
For the shredder I have no intelligent recommendations. I have not yet found the shredder that I can't live without. I refuse to spend more than $200 on a scanner so that might be my problem. I have a small one in the kitchen that was free after rebate at office max that I use for junk mail and a big one in my home office but it doesn't really handle enough pages at a time to make me love it.
What you want to do, is everytime you walk into the house scan every piece of paper you have. Sort through the mail. If it's junk, throw it in the shredder; if it isn't junk, throw it in the scanner and then shred it. If you aren't sure if it's junk, scan it! We can delete it later. Everything you scan should be saved to a temp file which you can go through at your liesure. If you are smart enough to OCR everything before you save it you never have to file it. It's amazing how good OCR has gotten in the past five years. Google or MS Desktop search will help you locate any document in an instant. If you want, and I do strongly suggest that you do, go through the docs using Adobe to file them in the appropriate places on your computer. You'll need the writer for this which will come with your scanner. The free reader that came with your computer will not allow you to edit a document in any way. Unless you intent to create fillable forms or type directly onto a document you don't need the professional version of Adobe. After a few days you will get very good at manipulating documents and you seriously will not know how you lived without Adobe.
If you need any help selecting the correct equipment or getting set up give me a call or shoot me an e-mail. I'll be happy to help.
Marc
http://www.marcbpetrinecpa.com/
Put them right next to each other. Better yet, put the shredder right below the scanner and figure out a way to have the scanner feed directly into the shredder feeder. Want to make a billion dollars? Create a device that does both and call me. I'll beta test the device.
For the scanner, my recommendation is a Fujitsu ScanSnap. There are several models and the same basic model is marketed by a few manufacturers. I don't know if it is the same machine but they all look and perform alike if you ask me. The other day my daughter had a minor surgery in the hospital. Every workstation had some version of this scanner on the desk. They scanned everything; my driver's license, insurance card, and admission paperwork. Why do we have to fill this out when we get there, anyway? Why don't they send the paperwork the day before and let me fill it out online? But I digress.
This scanner costs anywhere from $200 - $1,000 depending on the model and features but all have the same basic functions: They all have at least a 25 page sheet feeder, all scan pages 8 1/2 inches wide with varying lengths but handle almost anything smaller, all scan full duplex, all allow you to customize several different defaults for file save format and location, all come with Adobe Acrobat, and they all have a setting to automatically OCR (Optical Character Recognition) documents.
For the shredder I have no intelligent recommendations. I have not yet found the shredder that I can't live without. I refuse to spend more than $200 on a scanner so that might be my problem. I have a small one in the kitchen that was free after rebate at office max that I use for junk mail and a big one in my home office but it doesn't really handle enough pages at a time to make me love it.
What you want to do, is everytime you walk into the house scan every piece of paper you have. Sort through the mail. If it's junk, throw it in the shredder; if it isn't junk, throw it in the scanner and then shred it. If you aren't sure if it's junk, scan it! We can delete it later. Everything you scan should be saved to a temp file which you can go through at your liesure. If you are smart enough to OCR everything before you save it you never have to file it. It's amazing how good OCR has gotten in the past five years. Google or MS Desktop search will help you locate any document in an instant. If you want, and I do strongly suggest that you do, go through the docs using Adobe to file them in the appropriate places on your computer. You'll need the writer for this which will come with your scanner. The free reader that came with your computer will not allow you to edit a document in any way. Unless you intent to create fillable forms or type directly onto a document you don't need the professional version of Adobe. After a few days you will get very good at manipulating documents and you seriously will not know how you lived without Adobe.
If you need any help selecting the correct equipment or getting set up give me a call or shoot me an e-mail. I'll be happy to help.
Marc
http://www.marcbpetrinecpa.com/
Wednesday, September 22, 2010
OK, I got this one completely wrong.
Blockbuster expected to file Chapter 11: source
I'm not saying that I didn't see this coming. Everyone did, including Carl Icahn. Blockbuster's recent half-hearted attempt to stay out of bankruptcy by closing stores should have been the wake up call.
But here's why I got this wrong: 10 years ago when the likes of drugstore.com, toys.com, and pets.com (I still have the sock puppet) went away in favor of CVS, Walmart, and Petsmart my thinking was that the brick-and-mortar businesses were going to win out over the straight online companies. I still thought this last Christmas even as I did all my shopping on Amazon.com and I haven't been into a Barnes & Nobel except to buy a coffee or use the restroom in 12 years.
I really predicted BB would win out over Netflix. It seemed like BB was in a perfect position and could do everything that Netflix could deliver but you could still return a movie to a store and go home with a new movie that day. There was not a single competitive advantage that Netflix had that Blockbuster couldn't duplicate almost instantly. And yet, here we are. I guess I should have had a clue when a friend of mine told me he was paying $9.99 / month for Netflix and my monthly bill to BB was $25.00. When I realized that I hadn't watched a movie in 3 months I did cancel my service.
Marc
http://www.marcbpetrinecpa.com/
I'm not saying that I didn't see this coming. Everyone did, including Carl Icahn. Blockbuster's recent half-hearted attempt to stay out of bankruptcy by closing stores should have been the wake up call.
But here's why I got this wrong: 10 years ago when the likes of drugstore.com, toys.com, and pets.com (I still have the sock puppet) went away in favor of CVS, Walmart, and Petsmart my thinking was that the brick-and-mortar businesses were going to win out over the straight online companies. I still thought this last Christmas even as I did all my shopping on Amazon.com and I haven't been into a Barnes & Nobel except to buy a coffee or use the restroom in 12 years.
I really predicted BB would win out over Netflix. It seemed like BB was in a perfect position and could do everything that Netflix could deliver but you could still return a movie to a store and go home with a new movie that day. There was not a single competitive advantage that Netflix had that Blockbuster couldn't duplicate almost instantly. And yet, here we are. I guess I should have had a clue when a friend of mine told me he was paying $9.99 / month for Netflix and my monthly bill to BB was $25.00. When I realized that I hadn't watched a movie in 3 months I did cancel my service.
Marc
http://www.marcbpetrinecpa.com/
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