The Firm of David E. Gardner, CPA

Back-to-School Tips for Students and Parents Paying College Expenses

2011-08-18T07:20:00.000-07:00

Internal Revenue Service- Washington D.C.--Whether you’re a recent graduate going to college for the first time or a returning student, it will soon be time to get to campus – and payment deadlines for tuition and other fees are not far behind. The Internal Revenue Service reminds students or parents paying such expenses to keep receipts and to be aware of some tax benefits that can help offset college costs.
Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

1. American Opportunity Credit This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years -2011 and 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. The full credit is generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

2. Lifetime Learning Credit In 2011, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student, but to claim the credit, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).

3. Tuition and Fees Deduction This deduction can reduce the amount of your income subject to tax by up to $4,000 for 2011 even if you do not itemize your deductions. Generally, you can claim the tuition and fees deduction for qualified higher education expenses for an eligible student if your modified adjusted gross income is below $80,000 ($160,000 if married filing jointly).

4. Student loan interest deduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, if your modified adjusted gross income is less than $75,000 ($150,000 if filing a joint return), you may be able to deduct interest paid on a student loan used for higher education during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

You cannot claim the tuition and fees deduction for the same student in the same year that you claim the American Opportunity Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information, visit the Tax Benefits for Education Information Center at http://www.irs.gov/.

Please contact our office if you have questions about these or other tax items.

The Montana State Fund Decreases Its Workers Compensation Insurance Rates

2011-06-23T10:01:00.000-07:00

The Montana State Fund (MSF) Board of Directors has adopted an overall average decrease of twenty percent for premium rates effective July 1, 2011. Rates may differ as individual class codes can vary up or down each year from the prior year rates, depending on the average losses for all the businesses in the class code. The new rates apply to any policy with an effective date in Policy Year 2012 (July1 ,2011 to July 1, 2012).
House Bill 334 (HB334) enacted by the 2011 Montana Legislature is expected to significantly reduce workers' compensation costs. Most of the provisions in that legislation become effective for injuries that occur July 1, 2011 and later.

For more information please contact our office or visit the Montana State Fund website at montanastatefund.com

IRS Increases Mileage Rate to 55.5 Cents per Mile

2011-06-23T09:41:00.001-07:00

WASHINGTON --The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.
The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.
"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."
While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.
The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Mileage Rate Changes

Business Rate increases from 51 cents to 55.5 cents
Medical/Moving increases from 19 cents to 23.5 cents

Charitable rates stays at 14 cents.

For additional information please contact our office or visit the IRS website at http://www.irs.gov/.

Social Security Administration no longer mailing out earnings statements to workers

2011-04-25T07:43:00.001-07:00

The Social Security Administration (SSA) has announced that it is no longer mailing out annual earnings statements to workers. The statements show how much workers have paid into the Social Security system and how much they are scheduled to receive in retirement benefits. The SSA said that the decision was made ""in light of the current budget situation."" It advises workers to estimate their retirement benefits using the ""Retirement Estimator"" on its website. Workers may use the ""Retirement Estimator"" if they have enough Social Security credits to qualify for retirement benefits and are not: (1) currently receiving Social Security benefits on their own Social Security record; (2) age 62 or older and receiving benefits on another Social Security record; or (3) eligible for a pension based on work not covered by Social Security. Published reports say that the SSA is working on providing the annual earnings statements electronically, possibly by the end of the year.

Question or concerns please contact our office or your SSA office.

Ten Important Facts About Capital Gains and Losses

2011-03-11T11:03:00.000-08:00

Washington- Internal Revenue Service--Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.

Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may deduct capital losses only on investment property, not on property held for personal use. (Investment property would include use in your business)

5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. In the case of livestock, in order to qualify as long-term property they must be held for two years or more.

6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.

8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10.Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.

For more information about reporting capital gains and losses visit irs.gov or contact our office.

Are Your Social Security Benefits Taxable?

2011-02-11T08:34:00.000-08:00

Internal Revenue Service- Washinton

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

1. How much- if any - of your Social Security benefits are taxable depends on your total income and marital status.

2. Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.

3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.

4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.

5. You can do the following quick computation to determine whether some of your benefits may be taxable:

* First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.

* Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

6. The 2010 base amounts are:

* $32,000 for married couples filing jointly.

* $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.

* $0 for married persons filing separately who lived together during the year.

For additional information on the taxability of Social Security benefits visit irs.gov.

Points to Keep in Mind When Choosing A Tax Preparer

2011-02-07T07:55:00.000-08:00

Internal Revenue Service- Washinton

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. Most return preparers are professional, honest and provide excellent service to their clients.

Here are a few points to keep in mind when choosing someone else to prepare your return:
Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number — even if they already have one — before preparing any federal tax returns in 2011.

Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility for enrolled agents.

Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.

Make sure the tax preparer is accessible.Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

Provide all records and receipts needed to prepare your return. Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.

Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

Review the entire return before signing it.Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
Make sure the preparer signs the form and includes their PTIN.A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.The preparer must also give you a copy of the return.

Taxable or Non-Taxable Income?

2011-02-07T07:52:00.000-08:00

Internal Revenue Service- Washington

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.

To help taxpayers understand the differences between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items not included as taxable income:

* Adoption Expense Reimbursements for qualifying expenses
* Child support payments
* Gifts, bequests and inheritances
* Workers' compensation benefits
* Meals and Lodging for the convenience of your employer
* Compensatory Damages awarded for physical injury or physical sickness
* Welfare Benefits
* Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

* Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
* Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive for more information visit irs.gov or contact our office.

IRS Kicks of 2011 Tax Season with Deadline Extended to April 18th

2011-01-05T07:58:00.000-08:00

WASHINGTON- The IRS announced yesterday that taxpayers have until Monday, April 18 to file their 2010 tax returns and pay any tax due. Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until October 17 to file. This extension however, still is not an extension to pay taxes.

The IRS also reminded taxpayers impacted by recent tax law changes that using e-fil is the best way to ensure accurate tax returns and will result in getting faster refunds.

New tax law will delay 2010 return processing

2011-01-05T07:53:00.000-08:00

The IRS has announced that it will take until mid to late February before their system will be able to process certain income tax returns due to the late tax law changes.

Individual income tax returns affected include those with the following, a Schedule A for itemized deductions, a claim for higher education expenses, a claim for educator expenses, and a claim for state or local sales taxes.

This delay will apply to all filers, whether they file electronically or by paper.

New Tax Law passed in December

2011-01-05T07:42:00.000-08:00

December 2010-- The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law on December 17, 2010. This legislation will keep tax rates the same as they have been for another two years, keeping the Bush-era income tax cuts in place. The law also allows a 13-month extension of unemployment benefits.

Capital gains and dividend rates also stay the same, at 15% and 0% for the next two years. The law also patches the alternative minimum tax by increasing the AMT exemption for 2010 and 2011.

Many tax breaks that expired at the end of 2009 were also extended, retroactively. Some of these include; the teachers' deduction for buying classroom supplies, and the deduction for college expenses.

This law also included a reduction in the social security taxes for employees, from 6.2% to 4.2% on wages up to $106,800. Self-employed individuals will also see a decrease in their tax.

The estate tax was restored, retroactively for 2010, with a top rate set at 35% and the exclusion amount set at $5 million.

For more information on how this new law will affect you, please contact our office.

Payroll Tax Cut to Boost Take-Home Pay for Most Workers

2010-12-17T08:50:00.000-08:00

WASHINGTON--The Internal Revenue Service today released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.

Workers will see their take-home pay increase during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a payroll tax cut for employees. The act reduces the Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. The new law also maintains the income-tax rates that have been in effect in recent years.

Employers should start using the new withholding tables and reduce the amount of Social Security tax withheld as soon as possible in 2011 but no later than Jan. 31, 2011. Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.

The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.

For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.

Employers will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form. If you are an employer and need assistance please contact our office, we would be glad to assist you.

Livestock Replacement

2010-12-16T14:43:00.000-08:00

All Montana Counties except Big Horn, Carbon, Flathead, Gallatin, Glacier, Granite, Lake, Lincoln, Mineral, Missoula, Park, Pondera, Ravalli, Sanders, and Stillwater have been determined to be drought free for the 12 months ending with August of 2010. As a result, if you have deferred livestock sales resulting from drought in previous years, and you haven’t replaced the livestock yet, you will be required to do so in the calendar year 2011. If you fail to replace the livestock, and haven’t replaced with other depreciable property, you will need to amend your return for the year of the original sale and recognize the income from the livestock sale.

2011 Standard Mileage Rate

2010-12-13T15:38:00.000-08:00

The Internal Revenue service has announced the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, medical, moving, or charitable purposes. Beginning January 1, 2011 the standard mileage rates for these uses will be:

51 cents per mile for business miles driven
19 cents per mile for medical or moving purposes
14 cents per mile for service of a charitable organization

A taxpayer may not use the business standard mileage rate for a vehicle they are currently depreciating or have depreciated in the past. The standard mileage rate also is used instead of using actual vehicle costs such as fuel, repairs, etc. Therefore a comparison between actual costs and the standard mileage rate are recommended.

We recommend keeping an odometer log book to properly calculate and record business mileage.

For more information please contact our office.

Federal Tax Deposit Changes

2010-12-13T08:22:00.000-08:00

The U.S. Treasury has proposed changes to no longer maintain the paper deposit coupon system after 2010. This means that you will no longer be able to take your paper payroll coupon to the bank to make your payroll tax deposits. Deposits will need to be done electronically via the internet or telephone through the Electronic Federal Tax Payment System (EFTPS). If you have not been making deposits and owe less than $2,500 on your payroll report you can continue to send a check with your payroll report.

If you are an employer, you may have already received a notice from EFTPS and the Department of Treasury or your bank, about this change. Our office will be glad to assist you in completing your enrollment in EFTPS.

We currently offer the service of initiating the payment for clients through EFTPS. If you are interested in this service please contact us at your convenience.

Montana Minimum Wage Increasing

2010-12-13T08:06:00.000-08:00

Effective January 1, 2011, the mimimum wage for Montana employees will increase by ten cents to a rate of $7.35 an hour. Therefore, all hours worked after midnight on December 31, 2010 by minimum wage employees need to be paid at this higher rate.

Welcome to Our Blog.

2010-12-13T08:02:00.000-08:00

We would like to take this opportunity to welcome you to our blog. We hope you will find this a useful tool in keeping informed.

Welcome to our blog

2010-12-12T10:35:00.000-08:00

This blog is sponsored by The Firm of David E. Gardner, CPA. We will be updating this blog with prudent information so stay tuned.