Ask an Accountant: Paying Estimated Taxes


Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
I have an at home business that has started making me a small amount of income. Should I be paying estimated taxes on what I am making?

Answer:
You need to pay in at least 90% of your prior year tax through withholding and estimated payments by January 15th. If your income is expected to be the same as last year and more than $150k, then you need to pay in at least 100% of last year’s tax. If your income is higher than last year and greater than $150k you must pay in 110% of last year’s tax by January 15th. Now is an excellent time to discuss year end taxes with your accountant.

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

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Ask an Accountant: Claiming Blog Sponsorships


Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
I am a blogger and frequently attend conferences. I accept sponsorship from companies for these conferences. How would these sponsorships be taxed?

Answer:

The sponsorship would be recorded as ‘Other Income’ and the costs related to the conference would be an written off as an expense. If the amount of the sponsorship and the amount of the conference were equal, there would be no taxable profit from the transaction. If the sponsorship did not cover the total expenses of the trip, there would be a net loss on the transaction. If the sponsorship exceeded the expenses of the trip the difference would be ordinary income(profit) and included in the Net Profit of the business, thus taxed at the appropriate income tax rate

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

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Ask An Accountant: Purchasing Items for a New Business


Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question
:
I am in the process of registering the blog as a business and wanted to know if I am going to be able to claim all of the stuff I have already purchased for it from the time I started or if I cannot start claiming until it is registered.

Answer:

If you are operating the blog as a business and your intent in purchasing the items was to have a blog as a business than yes. You can claim items purchased as long as they are solely for the business.

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation
.

photo credit: austinpost.org

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Ask an Accountant: Deductions from Stockpile Donations


Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:

I donate from my stockplile quite frequently. When claiming these deductions, do I deduct what I paid out of pocket or what the items would normally cost without coupons/sales?

Answer
:
There are 2 schools of thinking for this question. One side says you do not get to deduct something you have not paid for (assuming the item is free after coupons). The other side is that you still get to deduct fair market value. Generally speaking, I agree you deduct fair market value. For example, on average, diapers are priced around $10. If you buy a pack of diapers but there is a sale, you have coupons, and you have store rewards (such as register rewards, etc) so your final price is less than $10, you can still deduct $10 since the value of the diapers did not change, despite how much you paid out of pocket.

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation
.

photo credit: austinpost.org

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Ask an Accountant: Claiming a Contest Won Vacation


Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
In 2010 I won an all expense paid trip as a prize for winning a contest. The company immediately asked for my social security number for the purposes of taxes. I expected I would be responsible for taxes on the value of the trip (I think it was $1,800.00.) In February of this year I contacted the company to see if they were sending me a 1099-Misc so I could file my taxes. They said they were going to send the form by the end of February, but I never received the forms. I needed my tax return funds, so I went ahead and filed my taxes without their information. If they claimed my trip on their taxes for 2010, is it likely that the IRS will see that I didn’t claim the trip and come after me tacking on interest?
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Ask an Accountant: Tax Audits

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:

I have been audited for medical expenses for 2008 (my husband became very ill) and have close to 300 individual expenses. If I copy every bill, check, explanation of benefits from the insurance company, flexible spending account reimbursement, credit card bill, prescription receipt, etc., I will be paying for and sending a 12 x 12 box. Will the IRS take scanned documents on CD or do you have another idea? Also, can I write off the time, postage, printer ink and paper to do this?
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Ask an Accountant: Accounting Software

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
What type of accounting software is the best when setting up my small business?

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Ask an Accountant: Delayed Filing

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
If you’re late filing your taxes and the government owes you a refund, are you penalized?

Answer:
You will not be charged if the IRS owes you a refund. They can assess a failure to file, or assess tax based on the information they receive (which is all income from reportable sources & limited deduction info) so the result will be a tax due.

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Ask an Accountant: Claiming Review Items

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
Do I have to pay taxes on an item sent by a company to review?

Answer:

As far as products for review, the IRS requires you report the fair market value of the item. That being said, I would take one of the 2 aggressive positions:

1. A “de minimis” fringe benefit of the business (not feasible to track & report)

or

2. a barter transaction and your cost to review the item would be equal to the fair market value of the item so the net income would be 0. Unless the company providing the product issued a 1099-MISC for the fair market value of the product (and I don’t believe they ever will).

In my opinion filing a “de minimis” would be opening up a whole can of worms so I don’t think I would even report it.

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation
.

photo credit: austinpost.org

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Ask a Accountant: What Expenses Can’t a Blogger Deduct?

Thanks to Mom on Dealz for sharing her series, Ask an Accountant!  Sharon is married to an experienced accountant.  Although tax season is over, tax questions arise year round.

Question:
What expenses can you not claim on your taxes?

Answer:

The items not deductible are expenses that would not be used to generate a profit. One example would be groceries. You could not deduct groceries from a shopping trip that you used to post on your website. The groceries are a necessary item needed to sustain life, not make a profit. Commuting mileage cannot be deducted, only the mileage to and from couponing class held outside of your home/office. Personal expenses and profit distributions are not deductble. This question is better answered by including what is deductible…epenses directly related to the generation of profit, that are not necessary living expenses

*Please keep in mind this post is for informational purposes only and answers given are very general. Many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation
.

Photo credit: austinpost.org

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