Thank you to all my colleagues and wonderful clients for another great tax season! I look forward to seeing everyone again next year! As I Iook ahead on what still needs to be done and into 2016, it has become clear that I will not be able to accept any new 2015 tax clients at this time. If you are new to me and have a one time need before 2016, I will still be happy to help! Thank you!
I have received a lot of communication from people lately that they have received threatening phone calls about past taxes. This is a scam. And it doesn’t seem to be going away.
You can always call the IRS at their main number to double check you don’t owe anything, or am still in good standing with installments or other issues: 1.800.829.1040 They will not call you and threaten you for immediate payment.
Not the most exciting title to a post, but this is a big deal to those out there who get stock options. Stock options are confusing to begin with when it comes to taxes and sometimes it can be very confusing.
If you have received stock options from Chesapeake over the past few years, you may be puzzled at tax time when you sell because your broker has not reported the cost of the stock. So it looks like you owe tax on the entire amount of the sale. But if you report it that way, you will be double paying on some of that income.
All brokerages for 2014 now do not report the cost basis on the 1099B. Some list it in the details later so it is easy for you. Some do not. If yours do not you have a bit of digging to do.
For non-statutory stock options, you pay income tax when you exercise them – or in other words, when you get the stock. They add it to your wages and withhold tax. This is the “cost” so to speak of the stock.
When you sell that stock, you pay tax on any gain above that cost. So if the price went up, you pay capital gains tax on the difference in the cost when you exercised and the price when you sell. It can be short or long term gain depending on how long you held it after you exercised the option. The “exercise” may have been automatic at the vesting date.
Since the “cost” or amount included in your wages is not reported on your 1099B, or even on the W-2 (but frequently it is with with code V in box 12) you need to figure it out yourself and put it on your return yourself. If you dig through your Chesapeake E*Trade account long enough you should be able to see the amount for your cost basis. It will likely be the same as the closing price on the day you exercised the options.
If you are reading this with options for a different company and have non-statutory (or non-qualified) stock options, the same idea holds here. For statutory or qualified options, the task is different, and much easier.
Ah, working from home. You can blast recordings of yodeling choruses or harmonica orchestras at full volume. You can have no fear of being “that person” who microwaves fish or popcorn. You can wear comfortable clothes, or for those who use webcams while working, you can halfway wear comfortable clothes. And there’s nothing like the commute of walking to the next room.
But you can deduct things too.
This subject has a lot of exceptions and what-ifs because everyone’s work situation is different and has quirks to it which can’t all be covered here. For example, what qualifies as a home office and what if it is a structure outside of the home and such. The rules need to applied to each situation. That’s my job! However, in general it is good to know what records to keep and what to keep track of. So here it is.
Home Office Deduction
In many situations, some things can be apportioned using the square footage of the office verses the total square footage of the home such as:
- Mortgage Interest
- Real Estate Taxes
- Casualty Losses
- Utilities (electricity, gas, trash removal, and cleaning services)
- Depreciation of Home
Sometimes it might not be apportioned by square footage and you would take 100% if the nature of the deduction can be directly applied to the office. For example, if thieves took sculpting knives and carved the home office room out of your home and sold it on EBay – that would be a 100% home office deduction casualty loss. Also, painting just the home office walls would be another example.
A word about depreciation. I hear this a lot: “I don’t depreciate my home for my home office because I don’t want to have any gain when I sell.” Well, the IRS states that you have to report that gain for depreciation whether or not you claimed it. However, if you use the safe harbor method below, you are ok because that makes your depreciation zero for this purpose!
Recently the IRS introduced a simpler safe harbor way of doing things for the paperwork adverse. Assuming you qualify for the home office deduction, you can deduct $5 (as of this post) per square foot of your home. So far, I have rarely seen a situation where this is a larger deduction than the actual expense method above. But sometimes it can have advantages such as that depreciation issue and when there are recordkeeping issues.
People who work from home also commonly have these deductions:
Having a home office in many cases means that your principal place of work is your home. If that is the case, then the mileage from home to other work related locations can be deductible and won’t be considered commuting. That is very nice because you can’t normally deduct commuting costs from going from home to work!
A mileage log is a necessity, though. I know it is a pain. Just do it. A mileage log would have more than just mileage though – it would also have the date and the business purpose.
Cell Phone Use
You can deduct business cell phone usage. You no longer have to substantiate every call. However, it is a good idea to still substantiate the business percentage to support the deduction.
The internet is almost required to work at home. So it makes sense that it would be a deduction. However, it can be common that the internet is also used personally. So again it is a good idea to try and substantiate the business portion of the internet you need for your home office.
Where you deduct these things can change depending on your situation but these are general guidelines to help with your paperwork.
So congrats now you have the best of many things by working from home AND you can deduct things too! Maybe you’ll actually enjoy tax time!……. Nah I’m guessing not.
The end is coming. To the year 2014. Now is the time to start cracking on your 2014 bookkeeping if you are like the many self employed people that tend to shy away from that. “Shy away” is actually a tame term. Some people would rather poke their eyes out with hot knitting needles than do a bank reconciliation. But November and December is a much less stressful time to get most of your paperwork done. If you need help, feel free to contact me and I can send you on the right way or do it for you.
Or at least motivate you with scary stories of bad things that happen if you don’t do it.
I know everyone has been anxious for months for the 2014 mileage rates to be released. Well now you can rest easy. Just in time for 2014, the IRS released the new mileage rates today.
- 56 cents per mile for business miles driven
- 23.5 cents per mile driven for medical or moving purposes
- 14 cents per mile for charitable miles
The IRS pointed out that the business and medical rates went down half a cent. Half a cent! Just once I would like to have a year where I’m not multiplying by half cents. I am telling you sometimes my clients think I am just making these rates up and don’t know what I am doing when I say “the rate for that is twenty three and a half cents a mile”. Yes, that and I have a great deal on the Football Hall of Fame Bridge for you.
If you’ve checked your receipts recently, you’ll notice that there’s an extra .25% on the sales tax rate. And if you charge sales tax, hopefully you are collecting the correct rate! It changed as of September to 6.5% for Stark county.
Now if you remember, there was a lot of hubbub out there a while back with the Stark county sales tax rate. It went up, then down, then up, and now it is up again. But this isn’t because of the Stark county portion of the sales tax. Sales tax is made up of a combination of two rates – the state rate and the county rate. The Stark county rate has stayed the same. The Ohio portion went from 5.5% to 5.75% which is part of a bunch of other tax changes at the state level. So the total rate charged in Stark county went from 6.25% to 6.5%.
So the four novelty pens I bought at half off clearance price from Books-a-Million yesterday cost me an extra half cent more than if I had bought them in August. I don’t remember giving them half a cent but that’s their problem. Not as big as a problem as few vendors I saw on First Friday in Canton. I saw people charging wrong rates or sometimes no rates. If you saw a big black hole walking around sucking the fun out of everything around it, that was me. Correcting sales tax to strangers is almost up there with correcting people’s grammar.
So ALL the county rates changed. The Ohio Department of Taxation regularly posts an updated sales tax map for your perusal. It is so interesting to read I recommend not reading it before bed as it may keep you up.
While the filing deadline is April 15th, there is still time if you have waited until the last minute. Feel free to send me an e-mail on the contact page or give me a call to see what we can do for you.
We all know about our federal income taxes. If you don’t, let’s all hope that is because you don’t need to pay any. But there is more – you would be surprised. This is a tax calculator that will give you a clearer picture of the number and types of taxes you pay and their estimated amounts.
The Total Tax Insights™ calculator (totaltaxinsights.org) is the first-of-a-kind tool brought to you by the CPA profession that will give you a clearer view of your estimated annual tax obligation based on your place of residence across the country. There are more than 20 types of federal, state and local taxes included – some of which may surprise you. When I worked at Revol, I was able to see how many taxes are involved in cell phone service and within the telecommunications industry. And that was just a slice.
The more you know about the taxes you pay, the greater insight you will have to make better informed financial decisions. You may start thinking differently about a lot of things, such as whether to pay off a mortgage, start a new business or when and how to save for retirement. Give it a try and then let’s talk about whether you are ready to begin the process of planning, managing and building your financial future.
This is a quick reminder to write down your odometer reading since it is the start of the new year. This way you can calculate your total miles for the year, which is essential if you claim business mileage. Also, this is used to calculate total mileage for 2012 as well.
If you need a mileage log, send me a quick message. I have a large stack here to give out!
Happy driving! (And mileage recording)