House, Senate seek to expand tax-free employer educational assistance to paying down workers' student debt

Some sales of beneficial insects could be tax-free

Bees are critical for pollinating not just flowers, but food crops. That's why in some cases, states exempt them and other beneficial insects from taxes. (Photo via Wikimedia Commons)

Don't squash that bug! It might be worth a tax break.

"While many states offer sales and use tax exemptions for agricultural products used for farming purposes, the states differ in their tax treatment of beneficial insects," writes Emilie Burnette at BNA's SALT Talk Blog. (For non-tax types who found this post by Googling "insect," SALT is the acronym for state and local tax.)

She cites California, where the Golden State's Board of Equalization specifies that sales of beneficial insects and earthworms are taxable. However, people who raise such crawly creatures may purchase feed for them tax-free.

But a couple of states eastward, New Mexico is a bit more bug tax friendly toward some bugs. Land of Enchantment tax law says that sales of insects "used to control [the] populations of other insects" to people in the farming and ranching business are exempt from sales tax.

Note that the sales tax breaks tend to apply only to commercial enterprises.

That means the price of that bag of ladybugs you picked up at your local nursery to take care of the aphids on your backyard rose bushes probably will include state and local tax.

In her post on insects and taxes, Burnette also discusses such things as the tax treatment of insecticides and pesticides. But I thought specific bug taxes would "bee" of more interest to most readers.

You also might find these items of interest:

• Bed bugs bugging IRS
• Tax deductible donations to environmental groups
• Could a flatulence tax on cows slow global warming?

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source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/QpN9bp7EiCM/tax-free-treatment-of-some-insect-sales.html

Armed Forces Day thanks to our military via celebrations, military-related tax breaks and tax-rewarded jobs

The first Armed Forces Day was celebrated on this day 67 years ago.

President Harry S. Truman led the effort to establish a single holiday to thank U.S. military members for their service in support of our country.

On Aug. 31, 1949, Truman's Secretary of Defense Louis Johnson announced the creation of Armed Forces Day to replace the separate Army, Navy, Marine Corps and Air Force Days. It was a logical move given the unification under Truman's administration of the Armed Forces under the Department of Defense.

President John F. Kennedy established Armed Forces Day as an official holiday in 1962. It now is observed each year on the third Saturday of May.

If there's a parade or other Armed Forces Day festivities today in your area to honor our men and women in uniform, go, pay your respects and enjoy the event.

Business tax break for hiring vets: If you're an employer, consider showing your appreciation for those who have completed their tours of duty.

There's even a possible tax bonus. Hiring a veteran, including those disabled during their course of service, could provide your business a tax break.

The Work Opportunity Tax Credit, or WOTC, is a long-standing income tax benefit that encourages employers to hire certain types of workers who face significant barriers to employment.

There are now 10 categories of WOTC-eligible workers. They are:

• Unemployed veterans, including disabled veterans
• Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
• Ex-felons
• Designated community residents living in Empowerment Zones or Rural Renewal Counties
• Vocational rehabilitation referrals
• Summer youth employees living in Empowerment Zones
• Supplemental Nutrition Assistance Program, also known as SNAP or food stamp, recipients
• Supplemental Security Income (SSI) recipients
• Long-term family assistance recipients
• Qualified long-term unemployment recipients

These 10 categories of WOTC-eligible hires are this week's By the Numbers figure.

Tax credit steps: The credit amount is generally based on wages paid to eligible workers during the first two years of employment.

To qualify for the credit, an employer must first request certification by filing Internal Revenue Service Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. Other requirements and further details can be found in 8850's instructions.

Eligible businesses then claim the WOTC on their income tax return. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800.

Though the credit is not available to tax-exempt organizations for most categories of new hires, a special rule allows them to get the WOTC for hiring qualified veterans. These organizations claim the credit on Form 5884-C.

The WOTC page at IRS.gov has more information.

Military tax considerations: There also are several special tax provisions for the men and women being recognized today.

They include a later filing deadline in some situations, special consideration in claiming the Earned Income Tax Credit and some state tax breaks, too.

Rather than rewrite these military tax matters, you can find more in my previous blog posts listed below:

• Tax tips for members of the military    
• Later filing deadline for combat zone taxpayers   
• State tax breaks for military personnel   
• Tax help for military members, veterans   
• Thanks to veterans via tax breaks

A bit of tax help is the least Uncle Sam can do for those who volunteer to put themselves in harm's way to protect the United States. He and I thank you, today and every day.

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source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/H_zc6d-HtZE/armed-forces-day-military-tax-breaks.html

Workplace tax-free benefits help those who bicycle to work every day, not just on National Bike to Work Day

Today, May 19, is National Bike to Work Day, the high point of National Bike to Work Month. 

I didn't bike to work today or any other May day, mainly because I work from home. I just walk down the hall to my office and get started. OK, after first eating breakfast, thumbing through the newspapers and brewing a cup of coffee.

The other reason I don't bike to work is obvious in the photo below.

Both tires on my bike (the red on in front), as well as on the hubby's, are flat. As flat as the proverbial pancakes. They've been flat so long that that hand pump, partially pictured at the back of the bikes, probably wouldn't even do the job.

Excuses Reasons for no longer biking: We got our bikes when we lived in Florida. Our neighborhood there was flat, filled mostly with retirees who drove around 5 mph, and most of the year the weather was great for a turn through the streets.

Since we arrived back in Texas, our bikes have been unused. Yes, that's because, as you can see, the tires are flat.

But the main reason we've abandoned our bikes to a corner of our garage is that our Austin neighborhood is hilly. Very hilly.

I see competitive bicyclists using it as a training course and if they're struggling there's no way in heaven or hell I could manage these streets on two wheels. Walking them is tough enough.

So I missed Bike to Work Day. But millions participated, many here in Central Texas where it's already 90 degrees and 90 percent humidity. Good for them.

Good also for the companies that offer their environmentally and health conscious employees benefits for biking to work every day, not just a month or one day a year.

Tax-free workplace commuting benefits: Companies have long offered tax-free commuting benefits to their workers. That's generally reimbursement for parking or taking mass transit.

But many companies also offer bicycle commuting reimbursement.

In 2015, the Census Bureau estimates that nearly 900,000 workers in the United States. rode a bicycle to work, up from about 730,000 in 2010 and 620,000 in 2006.

Employers, if they decide to do so, can provide up to $20 per month to as a tax-free benefit to employees who regularly bike to work.

Officially, the worker must complete a qualified bicycle commuting month. This means that for each two-wheeling employee, a qualifying month is one in which the worker regularly uses a bicycle for a substantial portion of travel between home and work and doesn't take any other transportation benefits.

That means you can't drive to work and get workplace parking compensation or take mass transit and be reimbursed by your workplace for those bus or subway passes and also decide to bike to work on nice days and get the bicycle benefit.

There's some good news, though, on the bicycling benefit. It also can help cover reasonable bicycling expenses, which include the purchase of a bicycle and the vehicle's improvements, repair and storage. Again, these are covered as long as the bicycle is regularly used for travel between your home and work.

Four+ wheels benefits beat two wheels: Yes, I agree. A $240 annual maximum for pedaling yourself to the office is not much.

And it is a bit of a slap in the face when you consider that workplaces provide much more generous transportation benefits for mechanized vehicular commuting costs.

Under the Omnibus Appropriations and Tax Extender Package, usually referred to as the Protecting Americans from Tax Hikes (PATH) Act, that was signed into law in December 2015, parking and mass transit tax-free fringe benefits were given the same weight.

That means for the 2017 tax year, a workplace can provide workers who use more traditional means to get to their jobs monthly tax-free benefits of up to $255 for transit and eligible van pooling passes and $255 for qualified commuter parking. The amount will be indexed in future tax years for inflation.

Yep, one month of parking your car at work is more than what is provided for a full year of bicycling to work.

But at least bike commuters do get at least some workplace benefit consideration.

As for bringing it up to more equitable levels for other modes of transportation, let your Senators and Representatives know that you'd appreciate their support in equalizing workplace commuting benefits for every type of transportation.

I hope your bike to work was as fun as PeeWee Herman's ride. You can see more fun bicycling GIFs at Twitter's #BikeToWorkDay hashtag.

You also might find these items of interest:

• Tax breaks for getting to and from work   
• Electric vehicle tax credits favor the wealthy
• Washington State lawmaker says bicycles are bad for the environment

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source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/EL1FHHkNimI/workplace-benefits-help-those-who-bicycle-to-work-every-day-not-just-on-national-bike-to-work-day-or.html

What's simple about a postcard size tax return?

The House Republican tax reform blueprint touts that the individual system would be so simplified that individuals would have a postcard-sized return. Speaker Paul Ryan's 5/19/17 op ed in the Kenosha News states: "Imagine being able to file your taxes on a postcard." 

This isn't a new suggestion. The Hall-Rabushka flat tax first introduced in 1982 touts that both individuals and businesses would file postcard-size returns (also see chapter 3 of their Flat Tax book).

My concerns with the postcard size return include:

• It sounds like something filled out by hand and mailed in. Why not instead say that it will be so simple that your tax adviser or if you chose, the IRS, can compute your taxes for you and securely text or email you the amount owed which you can use your bank app or Paypal or some type of debit card option to receive a refund or pay an amount owed.
• The size of the return is not tied to complexity. Even today, we can file on a postcard if the IRS would be fine just knowing our AGI, taxable income, total credits (including withholding), tax and amount owed or to be refunded.
• The House blueprint postcard is missing a lot of information such as the taxpayer's name and contact information, signature line, where you want your refund (if any) deposited, and the penalty of perjury statement.
• Gen Z filers might wonder what a postcard is.

What is a better / alternative message to sell simplification via tax reform to individuals?  Letting taxpayers know they can log into their secure online IRS account by February 1 to see their tax calculation based on all of the information returns the IRS has including W-4 information on filing status and number of dependents. If they have other transactions, they can easily add them in. If they prefer, they can set up with a tax return preparer or software provider to have this information show up on an account the taxpayer has created with them. This would also aid the filer with state tax obligations and more complicated aspects of income tax calculations such as dealing with partnership or other business income, retirement plan deductions or distributions, etc. 

Another part of the message that can help, perhaps is that the standard deduction is higher and personal and dependent allowances are in the form of a single tax credit (rather than having deductions and credits).

What do you think?

source http://21stcenturytaxation.blogspot.com/2017/05/whats-simple-about-postcard-size-tax.html

3 big tax breaks for Americans who go into home debt

Americans have again dived into the deep end of the personal debt pool

"Americans have now borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse," write Michael Corkery and Stacy Cowley in today's New York Times' DealB%k column.

The $12.73 trillion in debt reported in the first quarter of 2017 is comprised mainly of housing-related borrowing. But there is a bit of good news here.

Here's hoping that the new residents find being homeowners as sweet as these house warming cupcakes. (Photo by Danl Lurle via Flickr CC)

While mortgage debt represents 68 percent of households' total debt, that's down from 73 percent during the same period nine years ago. In fact, housing's share of personal debt has fallen back to 2003 levels. (The household debt figures are not adjusted for inflation, notes the newspaper.)

Even more comforting, the broader economic picture looks far less precarious than it did in late 2008, according to Corkery and Cowley. "The amount of monthly income that Americans must spend paying off their debt is smaller, and employment is flush."

Possible tax changes for home tax breaks: Will U.S. debt continue along this path, particularly when it comes to loans for residential real estate?

Maybe not if tax reform under the Trump Administration makes major changes to how the Internal Revenue Code treats residences. The outline released April 26, however, is woefully short on details.

As for housing, it is mentioned in just one bullet point:

• Protect the home ownership and charitable gift tax deductions.

It's unclear whether that means all current residential tax breaks, or just the biggie, deductible interest on most home loans.

That uncertainty is frustrating some lawmakers on Capitol Hill who must flesh out any tax cuts or code overhaul. "To date, they have not given us very much — one page — I've had drugstore receipts that were longer," said Sen. Ron Wyden of Oregon, the Senate Finance Committee's ranking Democrat. "The clock is really ticking down, and they need to get us some specifics soon."

Existing home debt tax breaks: Homeowners, current and prospective, also would like to know what, if any tax breaks they will get along with their residences.

As for the debt portion or the home owning equation, here's a look at the three big home-related tax breaks that a residential property owner homeowner can claim.

1. Mortgage interest 
The loan you get to buy, build or improve your main home is known in tax speak as acquisition debt. And for homeowners, especially in the early years of owning the residence, the biggest tax break comes from the interest paid on this acquisition debt.

All of that mortgage interest is deductible as an itemized expense as long as the loan is not more than $1 million. If you can get a lender to help you move into that multimillion-dollar mortgaged mansion, the Internal Revenue Service will limit your deductible interest.

What if you happen to also own a vacation home? Interest for a loan to buy a second home also counts as acquisition debt and therefor is fully deductible, too, as long as the total mortgages on all your properties don't exceed the $1 million limit.

Also note that your second home — or your first one, for that matter — doesn't have to be the traditional structure in a fenced yard to qualify for the mortgage interest deduction.

A home, for tax purposes, that house or a condominium, a cooperative apartment, a mobile home, a boat, a recreational vehicle or any similar property that has sleeping, cooking and toilet facilities.

2. Refinanced home debt 
Although home interest is deductible, no one likes to pay a higher interest rate than they have to. If you refinance your home loan at a lower rate the new mortgage's balance also is treated as acquisition debt up to the balance of the old mortgage.

3. Home equity loan or HELOC interest 
If you use your residential property to obtain extra cash, interest on that added home-related debt also offers in many cases another tax break.

The interest on a home equity loan, whether taken out separately or as part of a refi, or a HELOC, aka home equity line of credit, is deductible as long as the added debt is $100,000 or less.

Be careful, though. Your interest deduction here could be limited if the combined balances of the debt you go into to buy the home (known as acquisition debt) and the home equity debt happen to be more than your home's fair market value at the time you take out the home equity loan/line of credit.

You can read more about more home-related tax breaks in one of my earlier posts.

IRS Publication 936 has details on home mortgages, including a nifty flow chart to help you determine whether all or just some of those interest payments are deductible.

Schedule A and its instructions also have more on claiming your home's interest payments, as well as the other big home-related expense: property taxes.

Home sweet home for most, not all: The hubby and I have owned five primary residences, the latest one being the casa we call home here in Austin, Texas. We've also refinanced three times over the years.

So as you might surmise, we're a big fan of not only owning our own place, but all the tax breaks they have provided over the years.

But homeownership is not for everyone. And even if you do find that buying a house is the best move, be sure you don't overextend yourself.

Home loans typically are considered good debt as compared to revolving debt such as owed on a credit card. But borrowing more than you can afford, whether it's to buy a house or a totally new wardrobe, can be dangerous.

So do your budgetary and home buying homework.

Don't just buy for potential tax breaks. They might not always be there!

And when you do get the keys to your new place, enjoy! It's not an investment. It's where you and your family will live and make some great memories.

You also might find these items of interest:

• Home sales provide most owners a major tax break
• Homeowner hazard insurance is crucial, but not tax deductible
• Popular property tax deduction among those threatened by Trump's tax reform proposal

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source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/LfIlvDfonmM/3-big-tax-breaks-for-americans-who-go-into-home-debt.html

4 Reasons Why You Should Recruit and Train Tax Preparers in House

Is your tax business growing?

Did you have tax preparers leave or retire after the season?

Could you use some help next tax season?

If you answered yes to any of these you’re probably looking to hire tax preparers next season. Before you put the word out that you’re hiring “experienced tax preparers” read this blog post! At Peoples Tax, our sister company, we discovered long ago that recruiting and training tax preparers in house was actually better than hiring experienced tax preparers. In fact, that’s how The Income Tax School got started!

You’re probably wondering, why spend all that time teaching and developing new tax preparers when you could just hire someone who already knows what they’re doing?

Most national tax firms actually offer income tax classes to recruit and train tax preparers. In fact, operating an income tax school has become recognized as a best practice. Here are some reasons why.

1. You get to train them on your own terms

Sometimes when you hire experienced professionals you get their bad habits as well. So why not start with a blank slate and train preparers exactly how you want them to approach taxes? This way, you can hire someone who is people oriented rather than numbers oriented and get the chance to develop them into a customer service focused tax preparer. Yes, being good with numbers is important, but as a tax preparer you are performing a service. Having the ability to develop strong relationships is what keeps clients coming back year after year.

2. You have a bigger pool of people to hire from  

Clients want to come to the same tax preparer year after year. Yet it’s hard to retain employees when you can only offer part time work. That’s why finding the people who only need seasonal work and training them to prepare taxes is a great solution. It also increases your hiring pool! We’ve found the best long-term prospects to be:

• Homemakers with children in school.
• Early retirees who like to travel and spend time with their grandchildren during the summer.
• Moonlighting professionals.
• College seniors and graduate students who need experience.

Look for people who see tax preparation as a rewarding career because they like to help others.

3. Operating a tax school will provide a revenue stream in the off-season.

You don’t have to take a leap of faith and hire someone blindly, operating a tax school where students pay tuition to attain the knowledge needed is a great way to vet students. Set-up a basic income tax course that students can take for a fee with the potential for coming on board once they’ve completed the course. This way, you earn revenue on your time and materials, you get the ability to observe students in class, and you can choose which students to bring on board.

4. Retention increases when you develop people

Growth, development and opportunity are all important to employees. Training and developing tax preparers will increase loyalty and retention because you’ve invested in that person’s future.

Where to recruit

There are several places you can advertise your tax school to gain prospects. Here are some places we’ve found to be effective.

• Employee Outplacement Services
• Women and Senior Support Groups
• The military
• Colleges and Career Schools
• Your clients
• Employee referrals

Essentials for Training

In order to operate your own tax school, you will need:

1. A qualified instructor
2. A course curriculum
3. Instructional materials
4. A classroom
5. A plan to recruit students

Finding and keeping good tax preparers is essential to building and growing a quality tax service. Qualified seasonal tax preparers are scarce and competition for experienced tax preparers is stiff. Experienced tax professionals command a high price and may not become your best long-term employees. In order to maintain client relationships, you need preparers who will be with you for years to come. A proven best practice is running a tax school in the off season to recruit and train entry level preparers and then develop them into experienced professionals.

Want to learn more? Download our whitepaper:

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source http://www.theincometaxschool.com/blog/recruit-train-tax-preparers-in-house/