With each new year, many aspects of the IRS tax code is adjusted for inflation. Inflation is very low right now, and for the first time since I can remember many of tax code amounts are holding steady from 2009 to 2010.
The FICA max remains steady at 106,800. [Link]
401K maximum contribution amount remains at 16,500 and the catch-up max remains at 5,500 [Link]
IRA Contribution limits remain at 5,000 and 1,000 for catch-up participants. [Link]
If you are over 70 1/2 then you are required to take distributions from your traditional IRA. In 2009 the IRS waived this requirement due to the economic hardships that many are facing. If you have already taken your RMD and you didn't want to, you can roll it over to a new IRA account so that it doesn't face taxation.
"Individuals generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to roll over the distribution. "
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"Individuals generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to roll over the distribution. "
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Some basic rules for housing allowances for ministers:
- The housing allowance must be officially designated before the compensation is received and the declaration should come from the payer, not the recipient.
- The housing allowance is not including in gross wages on the W-2 or 1099, but it should be noted in box 12 of the W-2 or an additional statement accompanying the 1099. The reason is because this income is subject to self-employment tax.
- Housing allowances are not subject to income tax, but they are subject to self-employment tax.
- Note that if you are exempt from social security taxes, then housing allowances are free from any taxation.
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Educational expenses are usually deductible, but how you should deduct them is another matter that is more difficult.
If the education maintains or improves your skills in your current job or it is required by your employer to keep your salary, status, or job, then you can deduct them as a business expense (Either on your corporate return, Sch. C, or Sch. A as a misc. itemized deduction).
If the education is to meet the minimum educational requirements to qualify for a trade or business, or if it is part of a program of study to qualify for a new trade or business, then it can't be deducted as a business expense. Instead it should be deducted with the tuition and fees deduction or the various tuition credits. Note that only tuition and fees qualify for these deductions though.
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If the education maintains or improves your skills in your current job or it is required by your employer to keep your salary, status, or job, then you can deduct them as a business expense (Either on your corporate return, Sch. C, or Sch. A as a misc. itemized deduction).
If the education is to meet the minimum educational requirements to qualify for a trade or business, or if it is part of a program of study to qualify for a new trade or business, then it can't be deducted as a business expense. Instead it should be deducted with the tuition and fees deduction or the various tuition credits. Note that only tuition and fees qualify for these deductions though.
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Documenting your travel and mileage expenses can be a real task, but it needs to be a priority if you want to be able to take the deduction on your tax return.
The IRS says that deduction documentation needs to be: "Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense." They also add that it needs to be updated in a timely manner, and they suggest weekly. Developing this list at the end of the year is not acceptable according to IRS standards.
So buy a small notebook or print off this sample mileage record log that you can use [Link] and keep it in your car. That way you can write down the miles as they happen and it won't get away from you.
Keep in mind that this chore is much less painful than an IRS audit would be.
The IRS says that deduction documentation needs to be: "Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense." They also add that it needs to be updated in a timely manner, and they suggest weekly. Developing this list at the end of the year is not acceptable according to IRS standards.
So buy a small notebook or print off this sample mileage record log that you can use [Link] and keep it in your car. That way you can write down the miles as they happen and it won't get away from you.
Keep in mind that this chore is much less painful than an IRS audit would be.
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If you receive payments from a disability insurance policy, odds are that is not taxable to you. Since you didn't deduct the premiums that you have been paying over the years, the benefits are not taxable (similar to life insurance policies).
However, if the policy was provided through your workplace and your employer has been paying (and deducting) those premium payments through the years, then the benefits would be taxable to you. So this would be the exception to the rule.
Note that if you have a policy where some of the policy is paid by your employer and some is paid by you with after-tax money, then you could exclude a portion of the benefits from taxation based on the ratio of who paid the premiums.
However, if the policy was provided through your workplace and your employer has been paying (and deducting) those premium payments through the years, then the benefits would be taxable to you. So this would be the exception to the rule.
Note that if you have a policy where some of the policy is paid by your employer and some is paid by you with after-tax money, then you could exclude a portion of the benefits from taxation based on the ratio of who paid the premiums.
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Most new small businesses want the self employment tax benefits of an S Corporation. They are still faced with a choice becuase an LLC can be taxed as an S Corporation. So the choice of forming an LLC or a corporation can be a difficult one.
Both structures offer great liability protection over your personal assets.
One benefit that I have read about is that LLC's offer greater protection of your business assets if you have a personal liability problem (an auto accident, someone falls at your house and sues you personally). It would be a travesty to lose your business ownership due to a personal liability suit. [Source]
LLC's also have lower administrative requirements, like keeping annual board meeting minutes and electing officers. While not difficult to do, if you neglect this practice for your corporation then the courts could disallow your corporate structure and that would expose you to liability and loss.
LLC's do have a greater price tag in NC. Starting them up is the same ($125 to the Secretary of State), but maintaining them is not equal. LLC's pay an annual fee of $200, while corporations pay an annual fee of $60. Consider that extra fee like an insurance policy that gives you the above mentioned protections.
There is a reason that many people are organizing LLC's rather than corporations these days, but these are just a few of the considerations when starting a new business. Be sure to call and discuss this with me before making a move, as well as with your attorney.
Disclaimer: I am not an attorney and you should not rely simply on the above information when making your decision about organizing your business. These are just things you should consider and discuss further with you attorney so that you make the best choice.
Both structures offer great liability protection over your personal assets.
One benefit that I have read about is that LLC's offer greater protection of your business assets if you have a personal liability problem (an auto accident, someone falls at your house and sues you personally). It would be a travesty to lose your business ownership due to a personal liability suit. [Source]
LLC's also have lower administrative requirements, like keeping annual board meeting minutes and electing officers. While not difficult to do, if you neglect this practice for your corporation then the courts could disallow your corporate structure and that would expose you to liability and loss.
LLC's do have a greater price tag in NC. Starting them up is the same ($125 to the Secretary of State), but maintaining them is not equal. LLC's pay an annual fee of $200, while corporations pay an annual fee of $60. Consider that extra fee like an insurance policy that gives you the above mentioned protections.
There is a reason that many people are organizing LLC's rather than corporations these days, but these are just a few of the considerations when starting a new business. Be sure to call and discuss this with me before making a move, as well as with your attorney.
Disclaimer: I am not an attorney and you should not rely simply on the above information when making your decision about organizing your business. These are just things you should consider and discuss further with you attorney so that you make the best choice.
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