1040 Tax Articles
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Good news! The IRS is offering an increased mileage rate from 2014.
The mileage rate will go up to 57.5 cents per mile for all business miles driven for 2015.
So, be sure to track your mileage for the year so that you may take this deduction on your tax return.
Automobile Expense Deduction Tips:
As a company, you have two options when it comes to deducting auto expenses: actual expenses or mileage.
If you choose the actual car or truck expenses, expense you may deduct include: depreciation, lease payments,
registration fees, licenses, gas, insurance, repairs, oil, garage rent, tires, tolls, parking fees. If business use of the
vehicle is less than 100 percent, expenses must be allocated between business and personal use. Only the
business use percentage of each expense is deductible.
If you choose the standard mileage rate, you may not deduct actual expenses, such as depreciation, lease
payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration
fees. However, business-related parking fees and tolls may be deducted in addition to the standard mileage rate.
You might consider a pocket calendar to track business related auto mileage by day, or even a simple
notepad. Also, there are many phone apps that can help with this task. These usually can be imported into a
spreadsheet and then printed from a computer.
Reminder:
For Corporations, S-Corporations,and Partnerships, the proper way to handle business mileage is for the owners to
track the mileage on their vehicles through a mileage log. Then, monthly, quarterly, or annually, turn in the
mileage log to the business for reimbursement. Your company should cut a check to you for reimbursement
based on miles driven times the applicable IRS mileage rate.
For more information on deduction for auto expenses, click HERE
The mileage rate will go up to 57.5 cents per mile for all business miles driven for 2015.
So, be sure to track your mileage for the year so that you may take this deduction on your tax return.
Automobile Expense Deduction Tips:
As a company, you have two options when it comes to deducting auto expenses: actual expenses or mileage.
If you choose the actual car or truck expenses, expense you may deduct include: depreciation, lease payments,
registration fees, licenses, gas, insurance, repairs, oil, garage rent, tires, tolls, parking fees. If business use of the
vehicle is less than 100 percent, expenses must be allocated between business and personal use. Only the
business use percentage of each expense is deductible.
If you choose the standard mileage rate, you may not deduct actual expenses, such as depreciation, lease
payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration
fees. However, business-related parking fees and tolls may be deducted in addition to the standard mileage rate.
You might consider a pocket calendar to track business related auto mileage by day, or even a simple
notepad. Also, there are many phone apps that can help with this task. These usually can be imported into a
spreadsheet and then printed from a computer.
Reminder:
For Corporations, S-Corporations,and Partnerships, the proper way to handle business mileage is for the owners to
track the mileage on their vehicles through a mileage log. Then, monthly, quarterly, or annually, turn in the
mileage log to the business for reimbursement. Your company should cut a check to you for reimbursement
based on miles driven times the applicable IRS mileage rate.
For more information on deduction for auto expenses, click HERE
Tuition & Fees Deduction:
This deduction is available for any person who paid tuition and fees required for enrollment or attendance at an
eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room
and board. Tuition and fees from the school are reported on Form 1098-T.
The deduction is available for parents whose dependents attend college, but only if the parents claim the
student as a dependent. The deduction is not available for married couples who file separate tax returns. The
tuition deduction is not restricted based on what year of college you are in, or if you are a part-time or full-time
student. Taking even once class can qualify you for this deduction.
This tuition deduction is temporary: These deductions have been extended through the 2017 tax year.
The maximum amount of the tuition and fees deduction you can claim is $4,000 per year. This deduction reduces
the amount of your income subject to tax.
However, the deduction is further limited by income ranges:
American Opportunity Credit:
The American Opportunity credit is a tax credit of up to $2,500 of the cost of qualified tuition and related expenses
paid during the taxable year. Also, under this provision 40% or $1,000 of the credit is refundable.
The American opportunity tax credit can be claimed for expenses for the first four years of post-secondary
education. Eligible expenses include tuition, fees, and required course materials (so keep your textbook receipts!).
The full credit is available to individuals, whose modified adjusted gross income is $80,000 or less, or $160,000 or less
for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels.
Lifetime Learning Tax Credit:
The lifetime learning credit is available for any post-secondary tuition, including graduate school or
undergraduate education beyond four years, and is available for any course-load (the student does not have to
be enrolled at least half-time).
The lifetime learning credit is a non-refundable credit. For the tax year, you may be able to claim a credit of up
to $2,000 (20% of out-of-pocket expenses) for qualified education expenses paid for all eligible students. There is
no limit on the number of years the lifetime learning credit can be claimed for each student.
The credit is phased out for taxpayers with modified adjusted gross income of $110,000 for married filing jointly and
$55,000 for single, head of household, or qualifying widow filing statuses.
For more information on available education tax credits, click HERE
This deduction is available for any person who paid tuition and fees required for enrollment or attendance at an
eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room
and board. Tuition and fees from the school are reported on Form 1098-T.
The deduction is available for parents whose dependents attend college, but only if the parents claim the
student as a dependent. The deduction is not available for married couples who file separate tax returns. The
tuition deduction is not restricted based on what year of college you are in, or if you are a part-time or full-time
student. Taking even once class can qualify you for this deduction.
This tuition deduction is temporary: These deductions have been extended through the 2017 tax year.
The maximum amount of the tuition and fees deduction you can claim is $4,000 per year. This deduction reduces
the amount of your income subject to tax.
However, the deduction is further limited by income ranges:
- $4,000 max for income up to $80,000 ($160,000 for joint filers)
- $2,000 max for income over $80,000 up to $90,000 (over $160,000 up to $180,000 for joint filers)
- No deduction for income over $90,000 ($180,000 for joint filers)
American Opportunity Credit:
The American Opportunity credit is a tax credit of up to $2,500 of the cost of qualified tuition and related expenses
paid during the taxable year. Also, under this provision 40% or $1,000 of the credit is refundable.
The American opportunity tax credit can be claimed for expenses for the first four years of post-secondary
education. Eligible expenses include tuition, fees, and required course materials (so keep your textbook receipts!).
The full credit is available to individuals, whose modified adjusted gross income is $80,000 or less, or $160,000 or less
for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels.
Lifetime Learning Tax Credit:
The lifetime learning credit is available for any post-secondary tuition, including graduate school or
undergraduate education beyond four years, and is available for any course-load (the student does not have to
be enrolled at least half-time).
The lifetime learning credit is a non-refundable credit. For the tax year, you may be able to claim a credit of up
to $2,000 (20% of out-of-pocket expenses) for qualified education expenses paid for all eligible students. There is
no limit on the number of years the lifetime learning credit can be claimed for each student.
The credit is phased out for taxpayers with modified adjusted gross income of $110,000 for married filing jointly and
$55,000 for single, head of household, or qualifying widow filing statuses.
For more information on available education tax credits, click HERE
How a worker is classified depends mainly on the degree of control an employer has over the worker. According
to the IRS, “the general rule is that an individual is an independent contractor if the payer has the right to control
or direct only the result of the work and not what will be done and how it will be done.” (Taken from the IRS
website HERE)
The main differences between independent contractors and employees are:
- Independent contractors usually operate under their own business name.
- They maintain their own business checking account, send out their own invoices, and keep their own business
records. - They have their own equipment and set their own hours.
On the other hand, an employee is someone who is told by an employer what work should be done, how it
should be done, and when it is to be done. The worker has little control over their schedule and typically only
works for one employer.
If your worker is considered to be an employee, then the company is responsible for paying the worker’s wages
through payroll. This means the company will need to withhold federal, state taxes, & FICA taxes. The company
will also need to submit quarterly payroll reports and issue their workers W-2’s at the end of the year.
If your worker is considered to be an independent contractor, then the company is responsible for issuing each
worker a 1099 at the end of the year. The worker will then be responsible for paying self-employment tax on
his/her earnings. To assist your company in preparing 1099’s at year end, your company should have each
independent contractor fill out a W-9 form. To download this form, click HERE.
If you would like more assistance in determining whether your company should classify your workers as employees
or independent contractors, feel free to call our office at 918-392-7879 or email us.
Effective July 1, 2014, the sales and use tax rates for Tulsa City and Tulsa County will be changing. Tulsa City’s
sales and use tax rate will decrease from 3.167% to 3.10. Tulsa County’s sales and use tax rate will increase from
.85% to .917%, effective July 1, 2014. The Oklahoma state sales and use tax rate will remain unchanged at 4.5%.
Although there will be a change to both the Tulsa City and County sales and use tax rates, the total sales and
use tax rate to be collected will remain at the current 8.517% rate. If your business is using accounting sotware
to calculate the company’s sales tax due, these new rates will need to be changed in your software
beginning July 1, 2014.
If your business does not use accounting software to calculate the company’s sales tax due or your business is
not required to collect sales tax, there is no action necessary at this time. If you would like to schedule a tax
consultation for this or any other tax issue, please contact our offices at (918) 392-7879 or email us.
sales and use tax rate will decrease from 3.167% to 3.10. Tulsa County’s sales and use tax rate will increase from
.85% to .917%, effective July 1, 2014. The Oklahoma state sales and use tax rate will remain unchanged at 4.5%.
Although there will be a change to both the Tulsa City and County sales and use tax rates, the total sales and
use tax rate to be collected will remain at the current 8.517% rate. If your business is using accounting sotware
to calculate the company’s sales tax due, these new rates will need to be changed in your software
beginning July 1, 2014.
If your business does not use accounting software to calculate the company’s sales tax due or your business is
not required to collect sales tax, there is no action necessary at this time. If you would like to schedule a tax
consultation for this or any other tax issue, please contact our offices at (918) 392-7879 or email us.
This is a brief overview of the Meals & Entertainment deduction available on your business tax return or Schedule
C. Meals include any amounts spent for food, beverages, taxes, and tips. Entertainment includes any activity
generally considered to provide entertainment, amusement, or recreation. Entertainment may also include the
cost of a meal you provide to a customer, client or employee, whether the meal is a part of other entertainment
or by itself.
In order to deduct 50% of the cost of business meals and entertainment expenses, you must meet two separate
tests: the general rule and the directly related test or the associated test.
The general rule is that the business meal or entertainment expense must be an “ordinary and necessary”
expense in your trade or business. In addition, to meet the directly related test, the entertainment activity needs
to take place in a clear business setting, the main purpose of entertainment is to conduct business, and you
engaged in business during the time. To meet the associated test, the entertainment activity must be associated
with your business and the entertainment activity occurred before or after substantial business discussion.
The IRS does not allow a deduction for meals and entertainment expenses that are lavish or extravagant.
Items you may want to jot down on the back of your meal and entertainment receipt in order to help with
record keeping and to validate the business expense are:
o Name of client, customer, or employee
o Business purpose or nature of business discussion
o Business relationship (such as names, titles, or other designations)
Business meals that are related to business travel are also subject to the 50% deduction. In order for these travel
meals to be deductible, the travel must be overnight or for a length of time that would reasonably require you to
stop for substantial rest or sleep. Meals you buy for yourself while doing jobs around town do not qualify for the
50% meals and entertainment deduction.
Some business meals and entertainment are 100% deductible. These include company picnics or holidays
parties, as well as occasional meals you provide for your employee’s for your convenience such as meals brought
in during company meetings.
For more information regarding the meals and entertainment deductions, check out this IRS link HERE.
C. Meals include any amounts spent for food, beverages, taxes, and tips. Entertainment includes any activity
generally considered to provide entertainment, amusement, or recreation. Entertainment may also include the
cost of a meal you provide to a customer, client or employee, whether the meal is a part of other entertainment
or by itself.
In order to deduct 50% of the cost of business meals and entertainment expenses, you must meet two separate
tests: the general rule and the directly related test or the associated test.
The general rule is that the business meal or entertainment expense must be an “ordinary and necessary”
expense in your trade or business. In addition, to meet the directly related test, the entertainment activity needs
to take place in a clear business setting, the main purpose of entertainment is to conduct business, and you
engaged in business during the time. To meet the associated test, the entertainment activity must be associated
with your business and the entertainment activity occurred before or after substantial business discussion.
The IRS does not allow a deduction for meals and entertainment expenses that are lavish or extravagant.
Items you may want to jot down on the back of your meal and entertainment receipt in order to help with
record keeping and to validate the business expense are:
o Name of client, customer, or employee
o Business purpose or nature of business discussion
o Business relationship (such as names, titles, or other designations)
Business meals that are related to business travel are also subject to the 50% deduction. In order for these travel
meals to be deductible, the travel must be overnight or for a length of time that would reasonably require you to
stop for substantial rest or sleep. Meals you buy for yourself while doing jobs around town do not qualify for the
50% meals and entertainment deduction.
Some business meals and entertainment are 100% deductible. These include company picnics or holidays
parties, as well as occasional meals you provide for your employee’s for your convenience such as meals brought
in during company meetings.
For more information regarding the meals and entertainment deductions, check out this IRS link HERE.
There are several expenses you are allowed to itemize on your tax return that will reduce the amount of income
on which you are taxed. These include: medical expenses, non business taxes, charitable contributions, and
miscellaneous expenses. The following paragraphs provide a brief overview of each category.
Medical expenses: You can deduct expenses you paid for medical care during the year for yourself, your
spouse, and your dependents. Medical expenses include payments to doctors for treatment and prevention of
diseases, cost of equipment and supplies for medical care purposes, as well as insurance premiums paid for
medical care or qualified long term care insurance. For a complete list of qualified medical expenses, go HERE.
However, only the amount by which your total medical expenses for the year exceed 10% of your adjusted gross
income are deductible.
Non Business Taxes: The five types of deductible non business taxes are: State, local and foreign real estate taxes,
State, and local personal property taxes, State, local and foreign income taxes or State and local sales taxes,
and Qualified motor vehicle taxes. In order for these taxes to be deductible, you must have paid them during
the tax year.
Interest: Qualified Residence interest or home mortgage interest is deductible, as long as the acquisition debt
does not exceed $1 million. If you refinanced your mortgage or purchased a new home, “points” paid (prepaid
interest) may be deductible in the current year or over the life of the loan. Mortgage interest paid is reported to
you by your lender on Form 1098. Important Note: personal interest is not deductible-such as interest on personal
credit cards and vehicles.
Charitable Contributions: For contributions to be deductible, you must give cash, check, or other monetary gift to
a qualified tax exempt organization. You must also keep a record of your contribution, such as a receipt from
the organization or canceled check from your bank to prove the amount, the date, and the name of the
organization you contributed to. For non cash contributions, like clothing or household items given to Goodwill or
other charitable organizations, you must have a receipt from the organization and list of items you gave, the
date, and value of the items donated.
Miscellaneous Expenses: There are three types of expenses that fall into this category: unreimbursed employee
expenses, tax preparation fees, and other expenses. Items under this category need to exceed 2% of your
adjusted gross income in order to be deductible.
More in-depth information on each of these categories HERE.
on which you are taxed. These include: medical expenses, non business taxes, charitable contributions, and
miscellaneous expenses. The following paragraphs provide a brief overview of each category.
Medical expenses: You can deduct expenses you paid for medical care during the year for yourself, your
spouse, and your dependents. Medical expenses include payments to doctors for treatment and prevention of
diseases, cost of equipment and supplies for medical care purposes, as well as insurance premiums paid for
medical care or qualified long term care insurance. For a complete list of qualified medical expenses, go HERE.
However, only the amount by which your total medical expenses for the year exceed 10% of your adjusted gross
income are deductible.
Non Business Taxes: The five types of deductible non business taxes are: State, local and foreign real estate taxes,
State, and local personal property taxes, State, local and foreign income taxes or State and local sales taxes,
and Qualified motor vehicle taxes. In order for these taxes to be deductible, you must have paid them during
the tax year.
Interest: Qualified Residence interest or home mortgage interest is deductible, as long as the acquisition debt
does not exceed $1 million. If you refinanced your mortgage or purchased a new home, “points” paid (prepaid
interest) may be deductible in the current year or over the life of the loan. Mortgage interest paid is reported to
you by your lender on Form 1098. Important Note: personal interest is not deductible-such as interest on personal
credit cards and vehicles.
Charitable Contributions: For contributions to be deductible, you must give cash, check, or other monetary gift to
a qualified tax exempt organization. You must also keep a record of your contribution, such as a receipt from
the organization or canceled check from your bank to prove the amount, the date, and the name of the
organization you contributed to. For non cash contributions, like clothing or household items given to Goodwill or
other charitable organizations, you must have a receipt from the organization and list of items you gave, the
date, and value of the items donated.
Miscellaneous Expenses: There are three types of expenses that fall into this category: unreimbursed employee
expenses, tax preparation fees, and other expenses. Items under this category need to exceed 2% of your
adjusted gross income in order to be deductible.
More in-depth information on each of these categories HERE.
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