Theresa Arndt, CPA

I want make you aware of a substantial deduction that many people in the construction industry qualify for but is often overlooked by tax preparers.   Specifically, I am speaking about the “Domestic Production Activities Deduction”.   This deduction is available to all home builders and contractors regardless of what tax forms they file.    If you are a sole proprietor, S-corporation, LLC or Partnership, you can tell if you have taken the deduction by looking at line 35 of your Form 1040.   I find that nearly all of the builder’s and sub contractor’s tax returns I have reviewed have not claimed this deduction…and it can be substantial.   Personally, I think there are a couple of reasons this deduction is not being taken advantage of: ·           Some tax preparers may not be up to speed on all changing tax laws as it relates to the construction industry   ·      ...

A Jan. 18 deadline looms for about 2 million homeowners who lost their homes to foreclosure between the start of 2008 and the end of 2011. Five lenders could give each of those borrowers as much as $2,000. The National Mortgage Settlement (NMS) administrator mailed Notice Letters and Claim Forms in late September though early October 2012 to those borrowers who lost their home due to foreclosure between January 1, 2008 and December 31, 2011.   The problem is that many qualifying homeowners never received those notices because they were mailed to the address of the foreclosed home.   Therefore, they do not realize they qualify for a refund. The deadline to file a claim is January 18, 2013.   So if you lost your home between 2008 and 2011, keep reading to see if you qualify for relief, how much you might receive and how to file a claim. What is the National Mortgage Settlement? The NMS was reached last February between 49 states and the nation's five largest m...

During the holiday season many business owners give gifts to their clients, prospective clients or employees to thank them for their business or show appreciation for their hard work.      But did you know your deduction for that business gift is limited to $25?   The basic rule is that if you give someone a gift for business purposes, your business expense deduction is limited to $25 per person per year.   Any amount over the $25 limit is not deductible.   If this amount seems low, it is.   That’s because it was established in 1954.      Most taxpayers are at least vaguely aware of this tax rule.   But what isn’t as widely known is that there are a few exceptions and work-arounds to this rather restrictive limit.      Here’s a quick rundown of the major exceptions to the $25 limit.   Companywide gifts   The $25 limit applies only to gifts to individuals, either directly or ind...

With the fiscal cliff stealing the spotlight over the holidays, very little attention was given to two new taxes that started January 1.   Thanks to the Affordable Care Act (also known as Obamacare) the first wave of tax increases rolls out in 2013 to help fund the massive 2010 health care reform.   The new taxes on wages and investment income are expected to raise about $318 billion over 10 years.   Granted the bulk of these taxes fall mainly on the wealthy and the health care industry, but sooner or later we will all be paying more.   To find out who pays and how much, keep reading: Increased Medicare payroll tax Currently, the Medicare payroll tax is 2.9% and it applies to earned income only.   An employee is responsible for 1.45% of the tax and it’s deducted automatically from the paycheck.   The employer kicks in the other 1.45%.     Under the new tax provision, most taxpayers will continue to pay the 1.45% Me...

It’s almost January, and that means Form 1099 season. Companies big and small are about to start churning them out and you can’t afford to ignore them. If you’re in business, that is you file a Schedule C, E, F, Form 1065, Form 1120 or Form 1120S, you need to pay attention to issuing them or face penalties .   New in 2011 to all federal business tax returns was a box asking whether any payments were made during the year that would require Form 1099 to be filed and a box asking whether or not you filed all required Forms 1099.    By asking the two questions prominently on the return, the IRS isn't only reminding taxpayers of their obligations but also setting a snare for taxpayers that habitually violate the law. If a taxpayer answers "no" and an audit shows he should have sent the forms, the answers could be evidence in favor of higher penalties.   So what are my Form 1099 obligations?   You need to send a Form 1099 to all service provider...

In my last post, I discussed some of the potential risks of misclassifying workers as independent contractors (IC).   If you are a company that hires independent contractors, now is a good time to do a self-audit of your worker classification and assess your worker misclassification exposure. A person is not an IC simply because the parties agree to that classification.   The common law rules determine the status of each worker. A number of courts have issued some interesting decisions in cases involving worker misclassification claims.   As a result, a multitude of tests have evolved for determining whether a worker is an employee or an IC.     Because federal and state agencies apply different tests to determine who is an employee versus an IC, it is possible for a worker to be an employee under one test and an IC under another. What test does the IRS and Missouri use? Historically, the IRS and Missouri used what has become known as the “Twenty Fact...