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Deducting Business Expenses

What May and May not be Deducted as a Business Expense

One of the thornier questions at tax time centers on what may and may not be deducted as a business expense. The rules change frequently, in response both to new rulings and to policies enacted by the Internal Revenue Service. But the general guidelines are contained in the Publication 535, Business Expenses.

Here is a summary provided by the IRS: [Read more…]

Supreme Court Takes Up Obamacare Subsidies Appeal

Move Surprises Those Following the Case

The US Supreme Court has elected to take up the issue of tax credits given to users of the federal health exchange, setting the stage to resolve one of the most highly contested interpretations of the health care act. The court placed the case of King v. Burwell, U.S. Supreme Court, No. 14-114, on the list on November 7 rather than waiting as expected until the following Monday – a move that surprised those following the case.

A ruling by the Supreme Court is important in that it will either stop subsidies for health care among more than five million consumers, or will firm up the legal foundation of the law against the most significant legal challenge it has yet faced.

The petition before the court was brought by opponents of the Patient Protection and Affordable Care Act (“ACA”), and hinges on eight words in the original language of the act — “enrolled through an Exchange established by the State.” That language was intended to give states an incentive to create their own health care marketplaces, called exchanges.

Sixteen states have implemented a state run health insurance exchange, while others make use of the federal government-run health insurance exchange. Still other states have elected to partner with another state or the federal government. Five million-plus consumers in 34 states without their own exchanges are at issue.

Under the ACA, the Internal Revenue Service authorized subsidies in the form of tax credits, which were intended in the act to make the health care programs more accessible to lower-income consumers. In July, the 4th US Circuit Court of Appeals upheld the credits.

The Supreme Court is expected to hear arguments in the case in March, with a ruling announced not later than June of 2015. There is no analysis yet on the impact this may have on the coming tax preparation season.

The Court’s order reads:



                   The petition for a writ of certiorari is granted.




Sources: Supreme Court of the United States List of Ceriorti Granted


Scam Phone Calls Continue; IRS Unveils New Video to Warn Taxpayers

Scam Phone Calls Continue; IRS Unveils New Video to Warn Taxpayers 

IRS YouTube Video:
IR-2014-105, Oct. 31, 2014

WASHINGTON — As incidents of an aggressive telephone scam continue across the country, the Internal Revenue Service unveiled a new YouTube video with a renewed warning to taxpayers not to be fooled by imposters posing as tax agency representatives. 

The new Tax Scams video describes some basic tips to help protect taxpayers from tax scams.
[Read more…]

Key Tax Provisions Were Implemented Correctly for the 2014 Filing Season

As of May 2, 2014, the IRS Received More than 135.5 Million Individual Income Tax Returns

WASHINGTON – The Treasury Inspector General for Tax Administration (TIGTA) released its annual review of the Internal Revenue Service’s (IRS) performance during the 2014 Filing Season. The objective of this review was to evaluate whether the IRS timely and accurately processed individual paper and electronically filed tax returns.

The closure of Government operations between October 1 and October 16, 2013 reduced the time the IRS had available to implement tax law changes and bring tax return processing systems online. As a result, the IRS delayed the start of the filing season from January 21 to January 31, 2014.

“The IRS’s performance during the 2014 Filing Season reflects its ability to process the majority of tax refunds timely, its continuing efforts to combat tax-related identity theft, and its increased emphasis on using the Internet to assist taxpayers,” said J. Russell George, Treasury Inspector General for Tax Administration. “However, more still needs to be done to ensure that all customer self-help tools accurately provide the assistance taxpayers need.” [Read more…]

Senators Wicker and Nelson Call on IRS to Address Tax Refund Fraud Bipartisan Coalition Urges Agency to Make Fraud Reduction a Top Priority

Senators Wicker and Nelson Call on IRS to Address Tax Refund Fraud Bipartisan Coalition Urges Agency to Make Fraud Reduction a Top Priority

WASHINGTON – U.S. Senators Roger Wicker, R-Miss., and Bill Nelson, D-Fla., today led a bipartisan group of 15 Senators in calling on Internal Revenue Service (IRS) Commissioner John Koskinen to update Congress regarding the agency’s efforts to prevent tax refund fraud using stolen identities.
[Read more…]

Information for Employers about Their Responsibilities Under the Affordable Care Act

Information for Employers About Their Responsibilities Under the Affordable Care Act 

If you are an employer, the number of employees in your business will affect what you need to know about the Affordable Care Act (ACA).

Employers with 50 or more full-time and full-time-equivalent employees are generally considered to be “applicable large employers” (ALEs) under the employer shared responsibility provisions of the ACA.  Applicable large employers are subject to the employer shared responsibility provisions.  However, more than 95 percent of employers are not ALEs and are not subject to these provisions because they have fewer than 50 full-time and full-time-equivalent employees. [Read more…]

IRS Allows Deduction for Local Lodging Expenses

New Rules Allow Deductions

Regulations issued under T.D. 9696 finalize rules the IRS put into effect in 2012 allowing employees to deduct certain expenses paid or incurred for local lodging as business expenses.

Normally, lodging expenses a taxpayer incurs while not traveling away from home are considered personal expenses under Sec. 262(a) and are not deductible. However, under the new rules, local lodging expenses that meet certain criteria will be considered ordinary and necessary business expenses and therefore deductible under Sec. 162.

To be deductible, local lodging expenses must meet a facts-and-circumstances test under Regs. Sec. 1.162-32(a) or qualify for a safe harbor under Regs. Sec. 1.162-32(b). Local lodging expenses paid by an employer on behalf of an employee may be deductible under Sec. 132 as a working condition fringe benefit if they meet the new tests. If an employee is reimbursed by the employer for local lodging expenses, the reimbursement amount may be excludable from the employee’s income if the expense allowance arrangement qualifies as an accountable plan under Sec. 62(c).

One factor considered under the facts-and-circumstances test is whether the expense is a “bona fide condition or requirement of employment imposed by the taxpayer’s employer.” Examples given in the regulations to illustrate the facts-and-circumstances test include employees who are required to stay at a local hotel during a work-related training session; professional athletes who are required to stay at a local hotel before a home game; an employee who is relocating for work and looking for a new home; an employee who has to stay at a hotel near the office while working long hours; and employees who occasionally are on call for a night duty shift and stay at a local hotel.

Under the safe harbor, local lodging expenses will be treated as an ordinary and necessary business expense if:

  • The lodging is necessary for the employee to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function;
  • The lodging does not exceed five calendar days and does not occur more than once each calendar quarter;
  • The employer requires the employee to remain at the activity or function overnight; and
  • The lodging is not extravagant or lavish and does not provide a significant element of personal pleasure.

In response to a comment, the final regulations clarify that expenses that do not qualify for the Regs. Sec. 1.162-32(b) safe harbor may nevertheless be deductible under the facts-and-circumstances test.

Taxpayers may apply the new rules to any tax year that is still open.




Source: IRS Regulation at 26 CFR Part 1. [TD 9696].

Lower Tax Refunds?

ACA Credits Could Mean Lower Tax Refunds

The Affordable Care Act (ACA) is already proving to be confusing and costly for consumers, with widespread premium increases and plan cancellations. Now, the Centers for Medicare and Medicaid Services (CMS) is warning tax preparers that their clients could face lower refunds in the coming tax season due to excessive tax credits on their 2013 returns.

CMS initially accepted the consumer’s estimates of income and other data, but subsequently verified that data through independent sources. That process revealed some 1.2 million households with income-related data mismatches, and another 966,000 individuals with citizenship or immigration data matching issues, as of May 30th. [Read more…]

Two Styles; One Successful Practice

Facing Challenges – Creating Solutions

The Challenge: Melding two management styles and different levels of experience into a single, client-focused tax practice.

The Solution: Recognizing that clients have differing needs, firms need a careful blend of professionalism, responsiveness and quality. Plus strong partnerships both inside and outside of the firm.

If there is such a thing as a romantic tax practice, it surely is a cornerstone of Tom and Beanna’s Whitlock Tax Service, LLC in Reno, NV. A Texas boy away from home for the first time to attend trade school in Oklahoma City, he met Beanna when she was still in high school – the two of them children of Air Force service members. He grew up in in Paris, TX (“Only I thought he meant he grew up in Paris, France,” laughs Beanna.”) but moved to the larger city for school. She asked if his intentions were honorable, and they were married just out of high school. This marks their 46th year together. [Read more…]

What is SEO, & Why Should Tax Preparers Care?

Websites are Competing for a Position on the First Page of the Search Engine Results


Search Engine Optimization (SEO) is the process organizations use to increase their visibility on the first page of a search engine’s unpaid listings. Generally, websites at the top of a search receive increased traffic and improved exposure for their products and services.

But optimizing a web site is hardly an easy matter. There are more than 150 different search engines. Each uses its own system to rate websites, and each will yield a different set of rankings for any given site. Even were the firm to concentrate on only the top four search engines in the US – Google, Bing, Yahoo!, and Ask – it would have to deal with four entirely different optimization systems. Finally, the search engine providers are painfully aware that search engine optimizers are trying to “game” their systems to improve their clients’ ranking, and tweak their systems on a regular schedule to prevent this. [Read more…]