3rd quarter 2008 payroll information due
PLEASE NOTE – all payroll information is due to our office no later than Monday, October 20th, 2008. Any information received after the 21st will incur an additional $100 surcharge in addition to your payroll tax return preparation fees. Please call our office if you have any questions.
charitable contributions must have strict substantiation
The IRS has disallowed a married couple’s charitable contribution deduction to their church because they lacked a contemporaneous written acknowledgement of their contributions. Although they had a letter from the church that gave the usual recitation of the amount of the donation and there being nothing of value received in return, it was not contemporaneous with the claimed deduction and, thus, did not satisfy the substantiation requirements, the Tax Court held. Additional proof in the form of cancelled checks was also insufficient.
A written acknowledgement is contemporaneous only if it is obtained by the taxpayer on or before the earlier of: (1) the date on which the taxpayer files a return for the tax year in which the contribution is made or (2) the due date (including extensions) for filing such return. The acknowledgement must include both the amount contributed and whether the charity provided any goods or services in consideration for the contribution (and, if so, a good faith estimate of their value).
Source: CCH Federal Tax Weekly, Issue 33, August 21, 2008
attention new jersey employers:
If you are a New Jersey employer, you should know that the New Jersey Department of Labor and Workforce Development has issued a combined billing for seven different assessments. The assessments are required by law and are in addition to contributions made quarterly on the NJ927/NJ927W.
Contact our office if you need assistance when you receive the billing. You can also log onto www.state.nj.us/njbusiness/tax/assistance for more information.
property tax deduction for non-itemizers
Under current tax law, only individuals who itemize deductions may deduct real property taxes imposed by state and local governments. The new law gives non-itemizers a limited deduction for state and local real property taxes by increasing the amount of their standard deduction by the lesser of:
(1) The amount of real property taxes paid during the year, or
(2) $500 ($1000 for a married couple filing jointly).
This temporary deduction is available only for 2008. Its cost over 10 years is $1.5 billion, all estimated to be incurred in 2009.
Taxpayers most likely to benefit from this deduction include homeowners who have paid off their mortgage (and, therefore, no longer itemize interest payments) and lower-income homeowners (whose overall itemized deductions generally do not exceed their standard deduction).
Source: CCH Federal Tax Weekly, July 30, 2008 Special Report
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customer prepayments
Many businesses require customers to pay an upfront deposit before starting any work on your project. Are you? Should you be? If so, follow the steps below to record these payments in your accounting software appropriately:
If you are a Peachtree user: (version 2007 or higher)**Instructions may vary depending on your specific version.
- Go to TASKS and select RECEIPTS.
- Select the CUSTOMER that you are recording the deposit for.
- Fill out the remaining information on the top portion of the RECEIPT screen as you would for a regular deposit to your bank account (enter the deposit ticket ID, reference number and date as you normally would).
- Click on the APPLY TO REVENUES tab on the lower portion of the screen.
- Select the PREPAYMENT box that is right above the amount paid column on the right hand side of the screen.
- Enter a description for the prepayment and enter the amount of the payment.
- Click SAVE when you have finished entering all the information.
If you are a QuickBooks user: (version 2007 or higher)**Instructions may vary depending on your specific version.
- Go to CUSTOMERS and select RECEIVE PAYMENTS.
- Select the customer you are recording the deposit for.
- Enter the amount of the payment, the date and the payment method.
- After you have filled in the information, an overpayment box will appear and you can choose whether to leave it as a credit or issue a refund.
- Because you are recording down a payment, leave the OVERPAYMENT as a CREDIT to be used later against the customer’s invoice.
- SAVE and close the transaction when you have finished recording the information.
- NOTE: Since this payment is not applied to an invoice, financial reports are not accurate without an adjustment.
**Please note: the above information is only how to record an upfront deposit (pre-payment). There are additional steps involved when you invoice the customer apply the prepayment against the invoice. Please contact your Account Executive for further assistance.
distinguishing a "hobby loss" on your tax return
In an effort to reduce the current “tax gap”, the IRS has issued a reminder stressing the importance of taxpayers having a clearer understanding of what is a for-profit activity and what is a hobby. Generally, an activity is presumed to be carried on for-profit if it makes a profit in at least three of the last five tax years. If an activity is NOT for-profit, losses from that activity may not be used to offset other income.
Here are some examples of criteria the IRS looks for to determine hobby or for-profit activities:
- Does the time and effort put into the activity indicate an intention to make a profit?
- Does the taxpayer depend on income from the activity?
- If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
- Has the taxpayer changed methods of operation to improve profitability?
- Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
- Has the taxpayer made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?