Ask an Accountant


Although tax season is over, tax questions arise year round. Mr. Mom on Dealz is an experienced accountant and will be answering questions sent to me at momondeals@yahoo.com
I have received A LOT of questions lately about setting up a business. I wrote a post HERE about deciding on what entity to be. My husband (the accountant) has created a graph below that may make things more understandable.
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Ask An Accountant


Although tax season is over, tax questions arise year round. Mom on Dealz’  husband is an experienced accountant and will be answering questions sent to me at momondeals@yahoo.com
Question:
I read on Yahoo today that Social Security Tax is being raised. The article said that in 2012 the rate will go up to 12.4%, meaning 12.4% of a self employeed person’s income goes straight to Social Security Tax. Is this true?
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>Ask an Accountant

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As we all know, it’s that dreaded time of the year-Tax time! In honor of tax season, I have a new series called “Ask An Accountant”. Send in your tax questions each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant.
Since I am a blogger and know how confusing tax time can be, I thought it would be appropriate to share some questions I have received from fellow bloggers this week. I inserted my name and blog name to keep the situation anonymous. Also, due to the number of blogger tax questions I have received, I will be including 2 questions this week.
Question #1:
I’m a bit lost on the EIN and the company name thing and if I need to do it as a business or what…. I got an EIN but its for my name…do I need one for the blog? Do I need to get a business license? I know some have their blogs as corporations or LLC. ???
Answer #2:
The blog and you are one in the same (unless you incorporated or filed LLC registration with the state). Essentially the blog name is a d/b/a for you personally (sharon ____ d/b/a momondealz.com). What this does is allows you to get paid under your personal name for income of the business without putting your social security number for all to see.
If you plan to generate revenue or sell anything (advertising, tangible items, coupons, etc…) you do need a business license. Along with this comes an annual registration fee as well as Tangible Business Personal Property Tax for the city you live in (computer, camera). Tangible business personal property is any asset or item with a useful life used to produce income. The tax is similar to your personal property tax on your car. Without this, the IRS would consider your venture a “hobby” and limit the deductions you can take.
Question #2
Is it true that if you make under $600 you don’t have to report it? And is it $600 per source (this affiliate, that affiliate) or $600 from all sources?
Answer #2
Per IRS guidelines you are required to report ALL income from all sources whether you receive a 1099 or not.
The $600 threshold is for the “payer” or in this case the affiliates. The IRS mandates that the “payer” fill out and send form 1099 to each un-incorporated entity/person (blogger in this case) that they paid for services (no tangible items). The reasoning behind this is two-fold. One is to remind the recipient of the income they received from each source they received income from, and two, provides a “paper-trail” for the payer to substantiate payments they will deduct from their business. In the event of an audit, this is one of the first things the IRS will ask a business for in order to allow the deduction.
Keep in mind, even if you are incorporated or received less than $600, you may still receive a 1099 for services you performed, as $600 is the IRS threshold, not necessarily the company’s threshold
*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

>Ask an Accountant

>
As we all know, it’s that dreaded time of the year-Tax time! In honor of tax season, I have a new series called “Ask An Accountant”. Send in your tax questions and each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant.
Question:
We recently bought a manufactured home in 2010 (une). We have a mortgage on the house, and have a 30 year land lease for the land that it is on. can we claim the land lease on our taxes? Several places i have read give me different answers, some say yes, others say no unless it is a lease to own, which it is not. Any advice on how this plays into our taxes would be great appreciated!!
Answer:
If the lease payment is broken down by the lessor into principal and interest then you may deduct the interest just like a mortgage. This would typically be a situation where there is a lease to own with a small buyout at the end of the lease. If you are paying the taxes on the land you can deduct that.
*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

Thanks Mom on Dealz!

>Ask an Accountant with Mom on Dealz

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As we all know, it’s that dreaded time of the year-Tax time! In honor of tax season, I have a new series called “Ask An Accountant”. Send in your tax questions and each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant.
Question:I am a social worker and my job requires my personal car and cell phone for work use. I track my mileage and keep all gas receipts; can I claim my car (gas and maintenancen) and my cell phone on my taxes?
Answer:

This question is best divided into 2 separate questions so I will answer it like this:
1. Can I deduct car/auto expenses if I am required to use my personal auto for business.
2. Can I deduct the use of a cellphone used for work.
1. For an auto deduction, you may choose between depreciation (deducting the cost of the car over a predetermined useful life (5 years for autos) and the actual exenses (gas, oil, repairs) or mileage. The depreciation method will still require the recording of mileage, as the business vs. personal mileage will be used to determine the % of the depreciation you will be able to deduct.
The mileage method requires a log of business mileage but keep in mind commuting mileage (from your home to regular place of business/office) cannot be used, but from the workplace to a secondary workplace or client can be deducted. The mileage rate for 2010 is 50 cents per mile. These expenses are reported on Form 2106 and will be deducted an Schedule A of your tax return.
I recommend keeping a log for business vs. personal mileage in both situations above.
2. Business use of a cell phone is also reported on Form 2106 and deducted on Schedule A. The business use % must be calculated based on Personal vs. Business use of the phone and apply that % to the cost of the cell phone bills from Jan 1 to Dec 31. The IRS used to require a log for business deduction of cell phone, but has recently changed that rule, and no log is required. I would recommend some type of substantiation, such as noting business calls on an actual cell phone bill in the event you are audited.

*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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