Safeguard your business vehicle deductions

 

When you use an automobile in your business and claim vehicle-related federal tax deductions, you typically have to follow recordkeeping rules that are more strict than the requirements for other business expenses. These tougher substantiation rules call for logs detailing the usage of the vehicle, including the date, mileage, and purpose of trips.

The substantiation rules also apply when your business owns or leases vehicles for the use of your employees. You can get copies of auto usage logs from your employees or rely on a statement from each employee as long as you know the information is based on a properly kept log.

Either way, your employee must keep the records, and you report a summarized version of the information on your business tax return, typically on Form 4562. Failure to follow the rules can mean automobile deductions are disallowed or treated as a taxable fringe benefit to employees.

In some cases, your business can qualify for a safe-harbor exception to the substantiation rules when employees use company-owned vehicles. For example, if you have a written automobile policy prohibiting all personal use of a vehicle, including commuting, and the vehicle is kept on company property when not in use, detailed mileage records may not be necessary.

Please call us for help setting up a recordkeeping system that will keep your business vehicle expenses deductible.

aconner@atconnercpa.com

Avoid payday loans

 

Most folks know the "in-between-paycheck" cash crunch. Your money runs out before the next paycheck rolls in. The car breaks down, the roof starts leaking, the daredevil child falls off his bicycle and lands in the emergency room with a broken arm. The bills need to be paid, but your bank account is running on empty.
Payday loan companies are glad to offer a solution. They open storefronts in strip malls — often in the city's poorest neighborhoods or near military bases — and may even provide access to loans via Internet websites. You can walk into a payday loan store with copies of your driver's license and current pay stub, and walk out with a check. If you apply online (providing similar proof of employment and identification), you can have funds deposited directly into your bank account, sometimes within the hour. The amount borrowed is typically due within two weeks.
But borrowing from a payday loan company is seldom a good idea. Consider these three disadvantages:

• Payday loans are extremely expensive. Taking out a cash advance on your credit card is considerably cheaper (though not recommended). A typical payday loan of $375 carries an average fee of $55. That works out to 15% interest over two weeks. Carried out to an annual percentage rate (APR), you're borrowing money at well over 300%. A typical cash advance on a credit card is around 25% APR.

• Payday loans don't address the underlying issues. Although payday loans alleviate financial stresses for a time, the causes behind those problems may remain unresolved. It's better to face financial problems head on. To bring expenses into alignment with income, it may be necessary to adjust your lifestyle or work a second job (at least until the financial picture improves).

• Payday loans can lead to a debt spiral. Loan companies make tremendous profits from repeat customers. Borrowers extend their payday loans, accumulate fees, and dig themselves into greater and greater debt. The short-term fix becomes a long-term habit. The better loan companies will try to assist you by limiting your borrowing.

If you find yourself strapped for cash, consider alternatives to payday loans. Ask family and friends for help. Work overtime or take a side job. Sell unused items. Eliminate unnecessary expenses. Contribute — perhaps only a small amount at first — to an emergency fund. Increase your earning potential by going back to school. Develop habits of financial discipline. And say goodbye to payday lenders.

aconner@atconnercpa.com

Domestic Violence Awareness Does Not End in October

Kitchen to Host Upcoming 'Mothers & Daughters Day'

PHILADELPHIA, Oct. 23, 2012 - State Sen. Shirley Kitchen, in conjunction with Community Empowerment Group, are hosting the 4th annual "Mothers & Daughters Day," a free informational event to raise awareness about domestic violence and offer resources to women in transition.

Women and young ladies ages 13 and older are invited to attend the event, which takes place on Saturday, Nov. 3, from 9:30 a.m. to 2 p.m., at the Student Faculty Center, Temple University Health Sciences Campus, 3340 N. Broad Street (corner of Broad and Ontario Sts.) Registration starts at 8 a.m. Women must register with their mother or daughter. Women are welcome to bring granddaughters, nieces, cousins and/or other female acquaintances. Metered street parking is available.

Participants will learn more about options and resources for women. There will be speakers, discussion groups, giveaways and special prizes. Continental breakfast and lunch will be served.

"The bond between women in the family, whether they are mothers and daughters, grandmothers and granddaughters, aunts and nieces, or mentor and mentoree, is extremely special," Kitchen said. "This event is meant to bring domestic violence to light and empower women and young ladies with resources and information on this issue so that they can live in a peaceful and loving environment."

Attendees will be able to take a commemorative photo of themselves between 8 and 9:15 a.m., so individuals are asked to arrive early to participate in the free photo shoot.

Registration is required. Call 267-736-8801 or register online at www.senatorkitchen.com

###

Kentia Waters
Director of Communications
State Senator Shirley Kitchen's Office
1701 W. Lehigh Ave., Suite 104
Philadelphia, PA 19132
215-227-6161
Fax: 215-560-1316
kwaters@pasenate.com
http://www.senatorkitchen.com/

Domestic Violence Awareness Forum

Plan now for the tax impact of the health care law

 

Did you adopt the wait-and-see approach to tax planning this summer? With the Supreme Court decision on the health care act removing a level of uncertainty and the end of the year approaching, it’s time to stop waiting and start doing.
Here are three questions to consider.

• How will the increased medical deduction threshold affect me? Beginning in 2013, your unreimbursed medical expenses will have to exceed 10% of your adjusted gross income in order to claim an itemized deduction, unless you’re 65 or over. For your 2012 federal income tax return, the threshold is still 7.5%.
  
  Tip: Consider shifting elective medical expenses into 2012.

• Should I convert my Roth in 2012? Starting January 2013, a 3.8% tax on unearned income such as capital gains, dividends, and interest applies if your modified adjusted gross income (MAGI) is more than $200,000 ($250,000 for married filing jointly). Distributions from Roths do not increase your MAGI - but conversions do.
  
  To do: Calculate your tax exposure before year-end.

• Will the additional Medicare tax on earned income apply to me? The new 0.9% Medicare surtax takes effect in January 2013, and will apply when your compensation and self-employment income exceeds $200,000 ($250,000 when you’re married filing jointly). Your employer is only required to take your wages into consideration when withholding the tax.
  
  Result: Your estimated tax payments or withholding amounts might need to be adjusted next year.

Please call to discuss how the health care law will affect your taxes for 2012 and future years.

© MC 2012

aconner@atconnercpa.com

Home equity loans and lines of credit: Consider the pros & cons

 

It's a simple calculation. Deduct the outstanding balance on your mortgage from your home's market value. The difference is home equity. For example, if your house is worth $300,000 and your outstanding mortgage (including any other liens tied to the property) is $200,000, your home equity is $100,000. And as lenders are quick to point out, that equity represents a ready source of cash. It can be used to pay for emergencies, home improvement projects, debt consolidation, tuition payments, even a cruise in the Bahamas.

The two main vehicles for tapping your home's equity are home equity loans (HELs) and home equity lines of credits (HELOCs). With a HEL, you get the loan proceeds in a lump sum and establish payment terms (loan amount, payoff period, and interest rate). In that sense, a HEL is similar to an automobile or consumer loan. A HELOC, on the other hand, acts more like a credit card. The lender establishes a limit against which you may borrow, and the interest rate tends to be variable.
Before using the equity in your home to bolster your bank account or pay off high-interest debt, consider the following:

• A home equity loan is best used for a one-time goal, such as remodeling a kitchen. Using the proceeds for a project that increases the home's value may even pay for itself in the long run. A home equity loan provides the security of a fixed monthly payment, a stable interest rate, and a definite term (typically ten to fifteen years), making it a good choice for planning purposes. On the other hand, if your income suddenly dries up or your home's market value drops, you're still on the hook to make those payments.

• Home equity lines of credit provide more flexibility, making them useful for, say, a remodeling project to be completed over an extended period of time. You take on only as much debt as needed to complete the next step in the process. On the other hand, a line of credit's variable interest rate makes it more risky when rates are climbing. And like a credit card account, a line of credit is easy to abuse.

The decision to tap your home's equity using either of these vehicles will depend, to some extent, on your tolerance for risk. Remember, if you fail to make the required payments, your house is on the line.

Vacations: All-Inclusive vs. Seperate Food Expense

From Wallet Happy Vacations

After being stressed with life’s every day challenges, reaching the decision to take a vacation is, at most, the easiest yes you’ll ever say! After all, who wouldn’t pass up a weekend of pampering filled with spa treatment? Or, 7 whole days on the sunny beaches of the Caribbean Islands just to get away from it all? Even paying for the trip is a breeze with so many travel professionals partnering with destinations and resorts to offer unbeatable value! So you call up Wallet Happy Vacations, get your family together, book, pack and go!

Fast forward…

What happens after you’ve arrived to your destination and, after 2 days, have already spent more than $150 on just food? Yup! That seems to be the not so new but, new thing these days. Seems like where ever I go people are asking about the true benefit of booking an All-Inclusive vacation versus being surprised by the expense of food and entertainment with choosing not to have an All-Inclusive vacation.

So, the question today is: To be All-Inclusive or NOT to be?!

Before I tell you why I recommend the All-Inclusive option, allow me to provide the meaning of All-Inclusive for those who aren’t sure.

 All-Inclusive is having unlimited access to all of the amenities and food/beverage options you would otherwise have to pay separately for while on vacation. At most, the All-Inclusive resorts include some of the following under the All-Inclusive option to every guest during their stay:

·         Unlimited Meals

·         Unlimited Beverages(inclusive of alcohol)

·         Unlimited Use of in room Mini Bar

·         Unlimited Snacks

·         Unlimited SELECT Resort Non-Motorized Activities

·         Unlimited Resort Activities & Entertainment

·         Roundtrip Ground Transfers upon arrival to your destination

·         Tips & Taxes (Yes! It will include tips as well. But remember to take good care of the servers who took good care of you!)

Although I’ve traveled where the All-Inclusive added value is not offered, both, All-Inclusive and having a food expense have worked out rather well for me and my family. But, I’ll admit, the All-Inclusive vacations were the most fun and beneficial to us! Why? Well, for start, taking a teen anywhere food is is enough reason to book All-Inclusive! Besides not having to worry about the pricing of each person’s plate, there is also relentless entertainment from sun up to sun down and for all ages!  Remember, one of the concepts of the All-Inclusive option is to give people like you and I a break when it comes to having to pay for things we would paid for separately like food and activities. It’s a good idea to utilize this feature!

 Now, of course, we know the option to go without your family’s vacation being All-Inclusive could amount to as much as your monthly mortgage payment depending on how many your traveling with! Yup! It’s true.

The biggest question I ask my clients when vacation planning is, are you taking the kids? That pretty much sums it up! As a Travel Professional, I recommend that if you are taking children on vacation with you, you want to consider All-Inclusive packages or take a cruise. These options will cover all food & beverage expenses. Except for cruises where carbonated beverages are additional. Plus, with these options also comes unlimited activities and entertainment. The best thing about this is, the fee is paid upfront and incorporated in your package so there are no surprises!  

In sum, there are many options resorts will offer to you and your family to help make your vacation one that is memorable. The last thing you want is for your spending money to go on food for 7 days. Why not take advantage of your vacation and stay with resorts that will take care of you and your family including unlimited meals, beverages, snacks and entertainment? It’s a true money saver indeed!