September, 2008  

ONE ACCOUNT AT A TIME

ISSUE NO. 1009 - 08  

 

  

 

 

 

 

 

 

Welcome to the month of September. Additionally we want to continue  providing you with articles, tips, and tools to keep you informed throughout the year.  For more in depth information and articles please feel free to visit our website at www.olmstedcpa.com .  

 Keeping Good Tax Records  

In a tax emergency, would you be ready? Well-organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don't have to keep all tax records around forever.  Normally, tax records should be kept for three years, but some documents - such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property - should be kept longer. If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. If you are in business, there is no particular method of bookkeeping you must use.  However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.  Feel free to contact our firm if you would like more information regarding keeping your tax records.

             

 

 

 

Can you Take a Home Office Deduction? 

If you plan to run your small business out of your home you may be temped to "write-off" many of your household expenses. But how do you know what is deductible and what is not?  The Internal Revenue Services has some advice that may help answer the question:  " Can I take a Home Office Deduction?"

Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence are not deductible.  However, if you use part of your home for business purposes you may be able to take a home office deduction.   Expenses that can be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation.

In order to claim a business deduction, you must use part of your home:

  • Exclusively and regularly as your principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home; or
  • On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.

In addition, if you work as an employee you can claim this deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home is not rented by the employer.

 

"Exclusive use" mean a specific area of the home is used only for trade or business. "Regular use" means the area is used regularly for trade or business.  Incidental or occasional business use is not regular use.

 

Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies.

 

Example: An attorney uses the den in his home to write legal briefs or prepare clients' tax returns.  The family also uses the den for recreation.  The den is not used exclusively in the attorney's profession, so a business deduction cannot be claimed. 

 

If you would like more details regarding these deductions, please contact our firm. 

 

 

 

 

 Social Security Launches Online Retirement Calculator    

Here's a tool we've found useful, we thought you might as well.

The Retirement Estimator at www.socialsecurity.gov/estimator is tied to a person's actual Social Security earnings record and eliminates the need to manually key in years of earnings information.

The calculator lets the user compare different retirement options. For example, a person can change retirement dates or expected future earnings.  Individuals also can print out up to three different scenarios at one time, in addition to information about their benefits at age 62 (current age if older), full retirement age and age 70.

Best of all, the Retirement Estimator is secure.  The only thing it provides online is retirement benefit estimates.  It does not show the earnings record information on which the final benefit estimate was calculated, nor doe sit reveal other personal information.