by NFS | Jan 3, 2012 | Archives
If Starbucks is your headquarters and you spend much or most of your time out and about, you may be part of a growing group of business owners who work on a mobile basis. A laptop, tablet, and Smartphone enable you to set up an office just about anywhere. Certainly, not having to pay office rent cuts your overhead substantially. Being mobile also gives you more flexibility in scheduling and running your business. But you still have costs for working on a mobile basis. Here are the tax rules you need to know.
Home office deduction
Even if you don’t spend all your time working from home, you may still qualify to treat a portion of your residence as a home office. This entitles you to deduct costs related to the home office, including rent (if you are a tenant), real estate taxes, mortgage interest, and depreciation (if you own your home), utilities, insurance, etc.
To claim this deduction, your home office must be your “principal place of business.” Usually, this means the place where you earn your money. However, the tax law lets you treat your home office as your principal place of business if you use it to do substantial administrative activities and you have no other fixed location. Thus, if you use your home office to schedule appointments, keep your books, order supplies, do research, and do other business activities, the home office can qualify as your principal place of business.
Caution: The space you call your home office must be used regularly and exclusively for business. Your kitchen won’t work as an office because you eat there.
Travel costs
Once you establish that your home office is your principal place of business, then any travel to and from the office for business purposes—to see a customer, prospect, or vendor, or go to an office supply company, the post office, or the bank—becomes a deductible business expense. If you use your personal car, truck, or van for business travel, you can write off the business portion of vehicle usage in one of two ways:
- Deduct your actual costs;
- Deduct business mileage based on an IRS-set rate. For 2011, the rate is 51¢ per mile for the first half of the year and 55.5¢ per mile for the second half of the year.
Either way, you can also deduct your parking and tolls. However, to claim any deduction you must keep a good record of your business driving. For each trip, note the mileage (odometer reading), the date, destination, and purpose of the trip.
Technology costs
Usually, you have to depreciate the cost of any item that is expected to last for more than one year. However, two tax rules in 2011—the Section 179 deduction (first-year expensing) and 100% bonus depreciation—effectively allow you to write off the cost of a technology item purchased this year.
Laptops and tablets. The cost can be written off in the year you buy the item and place it in service (i.e., start to use it for business).
Smartphones. Monthly service fees are fully deductible. As long as you use the phone primarily for business, then any personal use can be ignored for deduction purposes.
Apps. While many apps are free, you may want to buy certain apps to help you work on a mobile basis. For example, you may need an app to process credit card payments on the fly, or other apps that increase your business productivity.
Final word
Work with us and will make sure you’re getting all the deductions you’re entitled to. Remember, while you’re pounding away at your laptop at Starbucks, you can’t deduct your latte!
by NFS | Jan 2, 2012 | Archives
With the New Year comes the opportunity to improve your financial well-being. Here are four financial resolutions to help get you started:
- Establish a budget based on what you spent last year, taking rising gas, heating and food prices into account.
- Cut back on debt by paying off a credit balance, forgoing unnecessary purchases or adding $50 a month to your mortgage payment.
- Prioritize major purchases you want to make and figure out how to pay for them out of your current income.
- Meet with a legal professional to review your will or estate plan to ensure it reflects your current life situation.
For help achieving your 2012 financial strategy, please contact our office.
by NFS | Jan 1, 2012 | Archives
Happy New Year!!
From all of us here at NFS, Here’s to a Happy & Prosperous 2012!!
by NFS | Dec 30, 2011 | Archives
No matter what your net worth, you should have an estate plan in place. Such a plan ensures that your family is cared for and your assets maximized upon your death. An estate plan consists of your will, health care documents, powers of attorney, life insurance coverage, and post-mortem letters.
For those of you with an estate plan already, good for you! But we have a piece of additional advice: make it a priority to review the plan every two years to see whether it needs updating.
Here are the life events that necessitate an update to your plan:
- Divorce
- Marriage or remarriage
- Birth/adoption of child
- Death of spouse or child
- Sale of a residence or purchase of new residence
- Retirement
- Enactment of new tax laws
When updating your estate plan you may need to do the following:
- Name a different executor
- Revise your will, especially if your assets have increased significantly
- Reassess your life insurance needs
- Add or change a power of attorney
- Change legal documents to comport with state laws if you move to a different state
- Change wills or trust instruments to account for changes in beneficiaries
- Change your post-mortem letter to reflect new assets, changes in executors, or other changes
Due to recent changes in estate tax laws, many estate plans may need to be revised. Give us a call to review your current situation.
by NFS | Dec 29, 2011 | Archives
While 2011 is not yet over, it’s not too early to starting planning ahead for 2012. If your business has employees, here are some things to help you get ready for next year.
1. Decide on wage increases
If you can afford to give raises, you probably want to keep up with what your competitors may be offering. According to one survey, most companies are giving raises of 3%. Raises are running higher for technology jobs.
2. Set retirement plans in motion
To enable employees to make salary elective deferrals to 401(k) and other similar plans throughout the year, be sure to implement the plan now and let employees set their deferrals for 2012. The contribution limit for 2012 is $17,000 ($22,500 for employees who will be more than 50 years old by the end of 2012).
3. Plan for fringe benefits
What types of benefits does your company provide to employees, besides retirement plan savings? Here are some things that could influence your decision:
- Health coverage. If you pay more than half of your employees’ premiums, you may be eligible for a federal tax credit. The credit is restricted to small employers. The credit is not new, but the Treasury Inspector General for Tax Administration says many small employers continue to be unaware of its availability.
- Transportation fringe benefits. If you give free parking or pay for monthly transit passes for your staff, the numbers change in 2012. The limit on the value of monthly free parking is $240 (up from $230 in 2011). The limit on monthly transit passes is $125 (down from $230 in 2011). Bicycling assistance stays at $20 per month.
4. Budget for payroll tax increases
Do you have many employees making over $100,000 a year? It may cost you more for employment taxes in 2012. The wage base for the Social Security portion of FICA increases to $110,100 (up from $106,800 in 2011). This means an increase of about $200 per employee whose earnings are at the new wage base. All earnings, without limit, continue to be subject to the Medicare portion of FICA.
If you do in-house payroll, now is the time to adjust your systems for 2012.
Changes:
- Adjust withholding to account for the new amounts needed to be withheld from employee wages.
- Change the withholding rate. In 2011, the employee share of Social Security portion of FICA is 4.2%; in 2012, it is set to rise to the level of 6.2% that had applied before 2011. Congress is currently debating whether to retain the lower rate for another year, so keep watch for any development.
Note: If you are self-employed, you’ll pay self-employment tax on the higher wage base. As long as your net earnings from self-employment in 2012 are at least $110,100, you’ll pay about $400 more than in 2011; half the payments are deductible.
5. Plan for new income tax withholding
As an employer, you are required to withhold federal income taxes. You may also be required to withhold state income taxes. Again, if you handle payroll in-house, look for new federal withholding tables in IRS Publication 15, Circular E (the 2012 tables are not yet out, but should be available shortly using the same link). Also check with your state; Maryland and Oklahoma have already announced that their withholding tables will change for 2012.
Final thoughts
Factor in any pay raises, new fringe benefit costs, and increased employment taxes into your 2012 budget. If you need assistance with your payroll processing, we offer an affordable full service payroll package. Contact us for details.
