Give Withholding and Payments a Check-up to Avoid a Tax Surprise

Some people are surprised to learn they’re due a large federal income tax refund when they file their taxes. Others are surprised that they owe more taxes than they expected. When this happens, it’s a good idea to check your federal tax withholding or payments. Doing so now can help avoid a tax surprise when you file your 2013 tax return next year.

Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe.

Wages and Income Tax Withholding

• New Job.   Your employer will ask you to complete a Form W-4, Employee's Withholding Allowance Certificate. Complete it accurately to figure the amount of federal income tax to withhold from your paychecks.
• Life Event.  Change your Form W-4 when certain life events take place. A change in marital status, birth of a child, getting or losing a job, or purchasing a home, for example, can all change the amount of taxes you owe. You can typically submit a new Form W–4 anytime.
• IRS Withholding Calculator.  This handy online tool will help you figure the correct amount of tax to withhold based on your situation. If a change is necessary, the tool will help you complete a new Form W-4.

Self-Employment and Other Income

• Estimated tax.  This is how you pay tax on income that’s not subject to withholding. Examples include income from self-employment, interest, dividends, alimony, rent and gains from the sale of assets. You also may need to pay estimated tax if the amount of income tax withheld from your wages, pension or other income is not enough. If you expect to owe a thousand dollars or more in taxes and meet other conditions, you may need to make estimated tax payments.
• Form 1040-ES.  Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you need to pay estimated taxes on a quarterly basis.
• Change in Estimated Tax.  After you make an estimated tax payment, some life events or financial changes may affect your future payments. Changes in your income, adjustments, deductions, credits or exemptions may make it necessary for you to refigure your estimated tax.
• Additional Medicare Tax.  A new Additional Medicare Tax went into effect on Jan. 1, 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. For additional information on the Additional Medicare Tax, see our questions and answers.
• • Net Investment Income Tax.  A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. For additional information on the Net Investment Income Tax, see our questions and answers.

For further information or questions, please contact the professionals at Mantyla McReynolds 801.269.1818

Nine Tax Tips for Individuals Selling Their Home

If you’re selling your main home this summer or sometime this year, the IRS has some helpful tips for you. Even if you make a profit from the sale of your home, you may not have to report it as income.

Here are 10 tips from the IRS to keep in mind when selling your home.

1. If you sell your home at a gain, you may be able to exclude part or all of the profit from your income. This rule generally applies if you’ve owned and used the property as your main home for at least two out of the five years before the date of sale.

2. You normally can exclude up to $250,000 of the gain from your income ($500,000 on a joint return). This excluded gain is also not subject to the new Net Investment Income Tax, which is effective in 2013.

3. If you can exclude all of the gain, you probably don’t need to report the sale of your home on your tax return.

4. If you can’t exclude all of the gain, or you choose not to exclude it, you’ll need to report the sale of your home on your tax return. You’ll also have to report the sale if you received a Form 1099-S, Proceeds From Real Estate Transactions.

5. Generally, you can exclude a gain from the sale of only one main home per two-year period.

6. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is usually the one you live in most of the time.

7. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523 for details.

8. You cannot deduct a loss from the sale of your main home.

9. When you sell your home and move, be sure to update your address with the IRS and the U.S. Postal Service. File Form 8822, Change of Address, to notify the IRS.

For further information or if you have questions, please contact the professionals at Mantyla McReynolds 801.269.1818.

Summertime Tax Tip 2013

During the summer, you may not think about doing your taxes, but maybe you should. Some of the expenses you’ve paid over the past few months might qualify for money-saving tax credits or deductions come tax time. If you organize your tax records now, you’ll make tax filing easier and faster when you do them next year. It also helps reduce the chance that you’ll lose a receipt or statement that you need.

Here are some tips from the IRS on tax recordkeeping.

• You should keep copies of your filed tax returns as part of your tax records. They can help you prepare future tax returns. You’ll also need them if you need to file an amended return.
• You must keep records to support items reported on your tax return. You should keep basic records that relate to your federal tax return for at least three years. Basic records are documents that prove your income and expenses. This includes income information such as Forms W-2 and 1099. It also includes information that supports tax credits or deductions you claimed. This might include sales slips, credit card receipts and other proofs of payment, invoices, cancelled checks, bank statements and mileage logs.
• If you own a home or investment property, you should keep records of your purchases and other records related to those items. You should typically keep these records, including home improvements, at least three years after you have sold or disposed of the property.
• If you own a business, you should keep records that show total receipts, proof of purchases of business expenses and assets. These may include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices. Also include credit card receipts, sales slips, canceled checks, account statements and petty cash slips. Electronic records can include databases, saved files, emails, instant messages, faxes and voice messages.
• If you own a business with employees, you should generally keep all employment-related tax records for at least four years after the tax is due, or after the tax is paid, whichever is later.
• The IRS doesn’t require any special method to keep records, but it’s a good idea to keep them organized and in one place. This will make it easier for you to prepare and file a complete and accurate return. You’ll also be better able to respond if there are questions about your tax return after you file.

For further information or if you have questions, please contact the professinals at Mantyla McReynolds 801.269.1818.

Back-to-School Tax Tips for Students and Parents

Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress.

• American Opportunity Tax Credit.  This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017.

• Lifetime Learning Credit.   With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.

You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for these credits. The tool is available at IRS.gov.

• Student loan interest deduction.  Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it.

These education benefits are subject to income limitations and may be reduced or eliminated depending on your income.

For further information or if you have questions, please contact the professionals at Mantyla McReynolds 801.269.1818.

Identity Theft and Your Tax Return

We hear about and worry about identity theft almost every day it seems.  Did you know that identity thieves may be using your name, address and social security number to file false tax returns to claim refunds?  We have had clients who have fallen victim to this unfortunate situation.  Imagine e-filing a tax return and having that return rejected because the IRS claims that you have already filed a return.  Someone with your information can create a bogus W-2 with false withholdings, file the return, get the refund and disappear before you file your actual return.

The IRS knows this is a huge problem.  Recently, Danny Werfel, Principal Deputy Commission for the IRS in an address in Dallas, Texas, said,

“More than 3,000 IRS employees are currently working on identity theft – more than double the number at the start of the previous filing season. We have also trained 35,000 employees who work with taxpayers to recognize identity theft and help victims. So far this calendar year, the IRS has worked with victims to resolve more than 565,000 cases. This is more than three times the number of identity theft victim cases that we had resolved at the same time last year. We realize, though that case resolution often takes too long, and we continue to strive to reduce the time that it takes to close cases.

We have also expanded our fraud detection efforts. We have increased the number and quality of our identity theft screening filters, and we have suspended or rejected more than 4.6 million suspicious returns so far this calendar year. The number of identity theft investigations by our Criminal Investigation division continues to rise, with more than 1,100 investigations opened so far in FY 2013.”

These are the IRS' top tips to help you avoid becoming the victim of an identity thief.

Ø  The IRS does not initiate contact with taxpayers by email or social media tools to request personal or financial information. The IRS does not send emails stating you are being electronically audited or that you are getting a refund. This includes any type of electronic communication, such as text messages and social media channels.

Ø  If you receive a scam email claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.

Ø  Identity thieves access your personal information by many different means, including:

·         Stealing your wallet or purse

·         Posing as someone who needs information about you through a phone call or email

·         Looking through your trash for personal information

·         Accessing information you provide to an unsecured Internet site.

Ø  If your SSN is stolen, another individual may use it to get a job. That person's employer may report income earned by them to the IRS using your SSN, thus making it appear you did not report all of your income on your tax return.

When this occurs, you should contact the IRS to show the income is not yours. After the IRS authenticates who you are, your tax record will be updated to reflect only your information. The IRS will use this information to minimize future occurrences.

Ø  Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don't know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice. If you believe the notice is not from the IRS, contact the IRS to determine if the letter is a legitimate IRS notice.

Ø  For more information about identity theft, including information about how to report identity theft, phishing and related fraudulent activity, visit the IRS Identity Theft Protection page, which you can find by searching identity theft on the IRS.gov home page.

Should you become a victim of identity theft which involves filing of false tax returns, please contact us at Mantyla McReynolds as soon as possible.  We know the procedures and the forms that need to be filed to resolve this problem.

MANTYLA MCREYNOLDS RECOGNIZED FOR EXEMPLARY WORKPLACE PRACTICES

Receives prestigious Alfred P. Sloan Award for Excellence in

Workplace Effectiveness and Flexibility

SLC, UT  (August 13^th,  2013) – Mantyla McReynolds has been honored with the 2013 Alfred P. Sloan Award for Excellence in Workplace Effectiveness and Flexibility for its use of flexibility and other aspects of workplace effectiveness as a workplace strategy to increase business and employee success.

This prestigious award, part of the national When Work Works project administered by Families and Work Institute (FWI) and the Society for Human Resource Management (SHRM), recognizes employers of all sizes and types in Utah and across the country.

“We recognize the tremendous value of all of our employees to our organization and to our clients, therefore we have always strived to have a workplace culture, environment and benefit package which would attract top talent in the public accounting field.” Don Mantyla, Partner, CPA,  Business Development Director.

Workplace flexibility — such as flextime, part-time work and compressed workweeks — has been demonstrated to help businesses remain competitive while also benefiting employees. Flexibility in combination with other aspects of an effective workplace—such as learning opportunities and supervisor support for job success—can have a powerful impact on employee engagement and motivation.

“Our research consistently finds that employees in effective and flexible workplaces have greater engagement on the job and greater desire to stay with their organization. In addition, they report lower stress levels and better overall health,” said Ellen Galinsky, FWI president.

The Sloan Awards are unique for their rigorous, two-step selection process, which involves an evaluation of employers’ flexibility programs and practices, and a confidential employee survey on the key ingredients of an effective and flexible workplace. All applicants are measured against national norms from the National Study of Employers.

“As a recipient of the 2013 Sloan Award, Mantyla McReynolds ranks among the top 20% of employers nationally in terms of its programs, policies and culture for creating an effective and flexible workplace,” Galinsky said. “In addition, what makes this honor so special is that their employees have corroborated this, affirming that it is indeed an effective and flexible workplace.”

When Work Works is a national project to educate the business community on the value of workplace flexibility by sharing research and promising practices, and conducting the annual Sloan Awards. It is an ongoing initiative of FWI and SHRM.

For more information about the When Work Works initiative and the Alfred P. Sloan Awards for Excellence in Workplace Effectiveness and Flexibility, visit www.whenworkworks.org

  

ABOUT Mantyla McReynolds

Mantyla McReynolds began in 1989 when Don Mantyla and Kim McReynolds had a vision of creating their own business, their own legacy.  Born leaders, Don and Kim have successfully expanded the firm to over 30 employees by hiring bright thinkers and creating a positive work environment.

Mantyla McReynolds is a local CPA firm, based in one of the greatest places to live: Salt Lake City, Utah.  The firm has the experience and expertise to help businesses throughout Utah, the United States and the world, and it has serviced small business, middle-market and international organizations for over 20 years.  Mantyla McReynolds is a BDO Seidman Alliance firm, offering experienced and accessible service teams, world-class engagement management and a focus on quality and efficiency.

With a commitment to timely service and communication, the professionals at Mantyla McReynolds have the experience and knowledge to help you succeed.

About When Work Works

When Work Works is a national initiative, led by the partnership of Families and Work Institute and the Society for Human Resource Management (SHRM), to help businesses of all sizes and types become more successful by transforming the way they view and adopt effective and flexible workplaces. When Work Works is one of the foremost providers of resources, rigorous research and best practices on workplace effectiveness and flexibility in the nation. The initiative administers the prestigious Alfred P. Sloan Awards for Excellence in Workplace Effectiveness and Flexibility annually, which recognize exemplary employers for using flexibility as part of an effective workplace strategy to increase business and employee success. Visit www.whenworkworks.org and follow us on Twitter @WhenWorkWorks @FWINews and @SHRMPress, and join the workflex conversation on Facebook.com/FWINews.

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Helpful Tax Tips if You’re Moving this Summer

If you make a work-related move this summer, you may be able to deduct the costs of the move. This may apply if you move to start a new job or to work at the same job in a new job location. The IRS offers the following tips on moving expenses you may be able to deduct on your tax return.

In order to deduct moving expenses, you must meet these three requirements:
1. Your move closely relates to the start of work.  Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement.
2. You meet the distance test.  Your new main job location must be at least 50 miles farther from your former home than your previous main job location was. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.
3. You meet the time test.  After you move, you must work full time at your new job location for at least 39 weeks during the first year. Self-employed individuals must meet this test and also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.
See Publication 521, Moving Expenses, for more information about these rules. If you can claim this deduction, here are a few more tips from the IRS:

• Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your former home to your new home. You cannot deduct the cost of meals during the travel.
• Household goods.  You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
• Utilities.  You can deduct the costs of connecting or disconnecting utilities.
• Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the costs of buying or selling a home, or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
• Reimbursed expenses.  If your employer reimburses you for the costs of a move for which you took a deduction, you may have to include the reimbursement as income on your tax return.
• Update your address.  When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. File Form 8822, Change of Address, to notify the IRS.
• Tax form to file.  To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses. 

For further information or if you have questions, please contact the professionals at Mantyla McReynolds 801.269.1818. 

Reduce Your Taxes with Miscellaneous Deductions

If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses. You may benefit from this because a tax deduction normally reduces your federal income tax.
Here are some things you should know about miscellaneous deductions:
Deductions Subject to the Two Percent Limit.  You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:

• Unreimbursed employee expenses.
• Expenses related to searching for a new job in the same profession.
• Certain work clothes and uniforms.
• Tools needed for your job.
• Union dues. 
• Work-related travel and transportation.

Deductions Not Subject to the Two Percent Limit.  Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:

• Certain casualty and theft losses. This deduction applies if you held the damaged or stolen property for investment. Property that you hold for investment may include assets such as stocks, bonds and works of art.
• Gambling losses up to the amount of gambling winnings.
• Losses from Ponzi-type investment schemes.

Many expenses are not deductible. For example, you can’t deduct personal living or family expenses. Report your miscellaneous deductions on Schedule A, Itemized Deductions. Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.

Learn more about these rules in Publication 529, Miscellaneous Deductions. The booklet is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Getting the Best Tax Benefit Out of Your Charitable Contribution

If you are looking to maximize the power of your charitable contributions — to make a single asset make more of a difference to the causes you care about — consider donating your long-term appreciated securities (stocks, bonds or mutual funds), property, collectibles or other assets. 

Why is contributing your long-term appreciated assets so beneficial for tax purposes? 

·         If the long-term appreciated assets are donated rather than sold, capital gains taxes from selling them no longer apply. The more appreciation the asset has, the greater the tax savings will be.  This can be a tax savings of up to almost 30% on the gain. With the federal long-term capital gain rate as much as 20%, then add to that the new potential investment tax of 3.8%, and a state tax of 5%, it adds up quickly.

·         If you take itemized deductions on your return, the appreciated assets donated to a public charity are taken at its full fair market value, on up to 30% of the donor's adjusted gross income.  This reduces your taxable income, which in 2013 can be a tax savings of as much as 44.6%.

By taking advantage of the applicable tax incentives, donors can significantly increase the amount of funds available to them for charitable giving.

If you are donating anything other than publicly traded securities, the charitable institution will need time to make sure they are willing and able to accept your charitable contribution.  Accordingly, it is important to not wait until the end of the year to make this type of donation, or you may simply run out of time to get everything done. 

Since the tax benefit and charitable benefit of these types of contributions can vary so widely, if you are interested in donating appreciated assets to your favorite charity, please give us a call, so that we can discuss your individual situation.

Simplified Option for Home Office Deduction

Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning this year, there is a new, simpler option to figure the business use of your home. 

This simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping. 

Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.

1. You may use the simplified method when you file your 2013 tax return next year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.
2. The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.
3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.
4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.
5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.
6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.


Visit IRS.gov for more about this easier way to deduct your home office.