Carol McAtee's Blog

From Carol McAtee’s CPA firm in St. Petersburg, FL-

3. Limited Non-business Energy Property Credit Still Available

This credit generally equals 10 percent (down from 30 percent the past two years) of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $500 (down from the $1,500 combined limit that applied for 2009 and 2010). In addition, the energy standards are increased for most property; windows, exterior doors and skylights, for example, must meet Energy Star Program requirements.

Because of the way the credit is figured, in many cases, it may only be helpful to people who make energy-saving home improvements for the first time in 2011. That’s because homeowners must first subtract any non-business energy property credits claimed on their 2006, 2007, 2009 or 2010 returns before claiming this credit for 2011.

The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items do not.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL-

2. Tax Credits Extended

Legislation, enacted in December 2010, extended several popular tax benefits, including the American opportunity credit for parents and students, the enhanced child tax credit and the expanded Earned Income Tax Credit.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL- From Roth conversions to changes in reporting capital gains and losses, there were a number of tax changes in 2011. Whether you already know about them or simply need a reminder, here’s the first of the changes made in 2011 that might benefit you, the taxpayer, this tax season:

1. April 17 Tax Deadline: Two Extra Days to File and Pay

Taxpayers across the nation will have until Tuesday, April 17, 2012, to file their 2011 income tax returns and pay any taxes due. Taxpayers have extra time because April 15 falls on Sunday, and Emancipation Day, a holiday in the District of Columbia, is observed the following day on Monday, April 16. By law, filing deadlines that fall on D.C. holidays are extended to the next day that is not a Saturday, Sunday, or holiday.

The April 17 deadline applies to any return or payment normally due on April 15. It also applies to the deadline for requesting a tax-filing extension and for making 2011 IRA contributions. Taxpayers requesting an extension will have until Oct. 15 to file their 2011 tax returns.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL- The IRS is giving taxpayers two extra days to get their taxes done this year. The deadline for filing personal Form 1040 tax returns is usually April 15, however the IRS has announced that it is pushing back this year’s filing deadline to Tuesday, April 17. Taxpayers now have until April 17, 2012 to file their 2011 tax returns.

The extension was granted because April 15 falls on a Sunday in 2012, and the following Monday, April 16, is Emancipation Day, a holiday in Washington D.C. that celebrates the freeing of slaves in the district. Last year, the filing deadline was extended until April 18, because of Emancipation Day.

Additionally, on January 17 the IRS will begin accepting returns through the agency’s e-filing system. A system the IRS says is the fastest, most accurate filing option for taxpayers.

The IRS expects to receive more than 144 million individual tax returns this year, with the majority projected to be submitted by the extended April 17 deadline.

Avoid late filing fees and penalties and insure all allowable deductions are considered by hiring a tax professional. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL- The end of the year is near, but there is still time to consider the following items to save money on taxes or help make things easier in the new year. Remember, taxpayers can use credit cards to pay for deductable items purchased in December. The first four items below apply only to taxpayers that itemize.

1.      Schedule medical appointments. Taxpayers can deduct yearly medical costs as long as the total of the costs exceed 7.5 percent of Adjusted Gross Income. Refilling prescriptions, scheduling check-ups, eye exams, purchasing deductable medical supplies, and paying any outstanding medical bills in December will increase your deduction. Mileage driven to medical appointments is also deductable, so keep track of it.

2.      Pay real estate taxes. Pay any currently due real estate taxes by year end. Also, make payments due early in 2012 before the end of December.

3.      Pay mortgage interest early. In many cases, mortgage or home equity line payments are due the first week of the month. Make payments due in January before the end of December and the additional amounts of interest can be deducted for 2011.

4.      Make charitable contributions. Taxpayers can add their favorite church and charities to their Christmas gift list and make cash donation before year end. Also, donate unused clothes, books, and household items to the Salvation Army, Goodwill, or other similar organization. Be sure to get a receipt from each organization that items are donated to and make a list of all items donated.

5.      Make your home more efficient. The costs of certain qualified energy efficient improvements, such as insulation, exterior windows and doors, and some roofs, can qualify for a tax credit. The cost of installation does not qualify for the credit. Taxpayers, who have not claimed at least $500 in energy tax credits on prior returns, can claim a credit of ten percent of the cost of the qualified energy efficient improvements made to their principal personal residence. The maximum credit is $500. Ten percent of the cost, including installation, of residential high efficiency heating and air conditioning systems can also be included in the credit.

 6.      Make needed repairs to rental properties. Taxpayers who own rental real estate can make needed repairs, buy supplies, pay utilities and taxes, and any January mortgage payment before year end to increase deductions.

 7.      Change important passwords. For extra security to sensitive personal information, taxpayers should change their passwords at least once a year. The best passwords contain a mix of numbers, letters, and special characters. Remember, length is generally more important than complexity.

 8.      Digitize documents. Taxpayers can transfer the contents of their filing cabinets and drawers to the computer, allowing better organization of important documents and saving space. All that’s needed is a simple document scanner. Be sure to keep backups of documents.

Avoid late filing fees and penalties and insure all allowable deductions are considered by hiring a tax professional. McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL- Every year millions of taxpayers overpay their income taxes by overlooking some of the money saving deductions listed below.

1. State sales tax. If a taxpayer itemizes, they have the choice of deducting either state and local income taxes paid of local sales tax. For taxpayers residing in states with a state income tax, the income tax deduction is usually a better deal. However, taxpayers living in states that do not impose an income tax, such as Florida, can deduct state sales tax paid. The IRS has tables to calculate the deduction based on their income and state and local sales tax rates. However, if a taxpayer purchased a vehicle, boat, or other big ticket item, any sales tax paid on the purchase can be added to the IRS table amount.
2. Out-of-pocket charitable contributions. Most taxpayers remember the large gifts made during the year or donations made through payroll deduction, but the little things can add up, too. Costs incurred and mileage driven while doing work for charities is also deductable. For example, ingredients used to prepare casseroles for the local nonprofit soup kitchen or stamps purchased for a school’s fundraising mailing are also deductable.
   
3. Job-hunting costs. Taxpayers looking for a position in the same or similar line of work can deduct job search expenses. Such expenses can be deducted if a taxpayer itemizes and to the extent that the total costs exceed 2 percent of adjusted gross income. Job-hunting expenses incurred while searching for a taxpayer’s first job don’t qualify. Deductable job search costs include, but are not limited to: lodging, transportation, food (if away from home overnight), cab fares, employment agency fees, postage, advertising, resume preparation, and business cards.
   
4. The cost of moving for a first job. Although job-hunting expenses are not deductable when looking for a first job, moving expenses to get the job are. This deduction is available even if a taxpayer does not itemize. To qualify for the deduction, the job must be at least 50 miles away from your old home. Deductable costs include: moving costs, mileage driven to the new home, parking and tolls.
   
5. Deduction of Medicare premiums for the self-employed. Taxpayers who continue to be self-employed after qualifying for Medicare can deduct the premiums paid for Medicare Part B, Medicare Part D, and the cost of any supplemental Medicare (medigap) policies. The deduction is available whether or not a taxpayer itemizes and is not subject to the 7.5 percent of AGI limitation that applies to itemized medical expenses.

Hiring a tax professional can pay for itself, with just the addition of often-overlooked deductions and the avoidance of even small penalty amounts. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL– IRS statistics show that an increasing number of taxpayers are using software programs to prepare and file their own returns. However, the cost savings may not be worth it. Given the complexity of the tax laws, especially when starting a new business, it is easy for taxpayers to overlook or mishandle the numerous tax deductions or required tax filings. As tax professionals, McAtee and Associates can ensure that taxpayers neither pay too much nor too little, and also help avoid mistakes or misfiling that can lead to penalties.

Additionally, there have been a number of recent court cases where taxpayers have tried to avoid penalties by claiming the tax software used caused the underpayment of tax. However, the courts have denied relief to these taxpayers, stating that the tax programs are only as good as the information put into them by the taxpayer. In not one case has a taxpayer won with this argument.

Hiring a tax professional can pay for itself, with just the addition of often-overlooked deductions and the avoidance of even small penalty amounts. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL–Now that your 1040 has been filed, the question is: will the IRS come a-calling? Audit letters typically go out 18 months after the filing date of the return. Listed below, are five things concerning IRS audits.

1. Audits are on the rise. The number of audits has risen each year for the past ten years. And that trend is expected to continue, with the ballooning federal deficit and the additional $400 million earmarked for tax enforcement in 2011. However, most taxpayers audit risk in any one year is slim, about 1 percent for those with incomes under $200,000, 2 percent for those with incomes from $200,000 to $1 million, and 6 percent for taxpayers with incomes over $1 million.

2. Delaying can cost taxpayers the right to fight. If a taxpayer does get the dreaded letter from the IRS, they should take the action required within the time frame allotted, usually 30 days. If no action is taken within the allotted time period, the dispute becomes a final assessment and moves to the collection process, with no grace period. Taxpayers can ask for a postponement, prior to the deadline, if additional time is needed to locate and organize the necessary records and documents.

3. Taxpayers can benefit from having a pro on their side. Three quarters of audits are conducted by mail, with the IRS simply requesting documentation, like receipts, relating to a specific part of the return. However, some audits require a meeting with the IRS to discuss certain issues in greater depth. In either case, the tax professionals at McAtee and Associates can help taxpayers negotiate the audit process and in many cases reduce the taxes, penalties and interest owed.

4. Remember, anything said by taxpayers may be used against them. In any audit, taxpayers should avoid offering information beyond what is requested by the IRS examiner. Taxpayers don’t want to unwittingly offer evidence that might expand the scope of the investigation. This is especially true during face-to-face audits, where even engaging in small talk could result in offering incriminating information. Another reason to hire representation is that taxpayers do not have to attend the meetings with IRS officers.

5. The auditor’s boss may be able to negotiate. The manager has more latitude than the front-line employee. This can be effective if the issue falls into a gray area. If a taxpayer is still unsatisfied, an appeal can be filed. The IRS will consider any potential loss and based on that potential may offer a compromise. A taxpayer’s final option is litigation, which may only be worth it when the amount is more than $10,000.

If you received a notice from the IRS for any reason, contact us for assistance. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

From Carol McAtee’s CPA firm in St. Petersburg, FL– If you are a taxpayer that works for someone else (other than yourself), you may be able to deduct certain work related expenses you have paid out-of-pocket. However, the rules for deducting these business expenses can be complicated. One main problem for taxpayers is that, unlike the business expenses of self-employed individuals, unreimbursed expenses of W-2 employees are treated less favorably. Regular employees must itemize to take business expense deductions and the deduction is limited, whereas self-employed taxpayers may take “above-the-line” deductions for business expenses.

Expenses that qualify as itemized deductions include:

• Business travel away from home
• Business use of car
• Business meals and entertainment
• Travel
• Business use of home
• Supplies
• Tools
• Continuing education
• Miscellaneous expenses

Only unreimbursed expenses qualify for the deduction. If a taxpayer is reimbursed by their employer for the expenses, the reimbursements are not included in income and no deduction is allowed for the expense. Additionally, only employee business that are in excess of two percent of your adjusted gross income can be deducted. For example, if a taxpayer has $50,000 in adjusted gross income, then only expenses that exceed $1,000 can be deducted on the tax return.

Finally, it is important for taxpayers to keep good records (receipts) to prove the amounts of any unreimbursed business expenses received during the tax year.

For assistance in determining what business expenses are deductable, please contact our office. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.