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Early Withdrawals from Retirement Plans Tax Rules

IRS Tax Tips

ret2Taking money out early from your retirement plan can cost you an extra 10 percent in taxes. Here are five things you should know about early withdrawals from retirement plans.

1. An early withdrawal normally means taking money from your plan, such as a 401(k), before you reach age 59½.

2. You must report the amount you withdrew from your retirement plan to the IRS. You may have to pay an additional 10 percent tax on your withdrawal.

3. The additional 10 percent tax normally does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost in participating in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

4. If you transfer a withdrawal from one qualified retirement plan to another within 60 days, the transfer is a rollover. Rollovers are not subject to income tax. The added 10 percent tax also does not apply to a rollover.

5. There are several other exceptions to the additional 10 percent tax. These include withdrawals if you have certain medical expenses or if you are disabled. Some of the exceptions for retirement plans are different from the rules for IRAs.

For more information on early distributions from retirement plans, see IRS Publication 575, Pension and Annuity Income. Also, see IRS Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

5 IRS Tax Credits that Can Reduce Your Taxes

ImageIRS Tax Tips

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).

5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.

Taxable and Nontaxable Income

From the IRS…

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Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:
• Child support payments;
• Gifts, bequests and inheritances;
• Welfare benefits;
• Damage awards for physical injury or sickness;
• Cash rebates from a dealer or manufacturer for an item you buy; and
• Reimbursements for qualified adoption expenses.
Some income is not taxable except under certain conditions. Examples include:
• Life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
• Income you get from a qualified scholarship is normally not taxable. Amounts you use for certain costs, such as tuition and required course books, are not taxable. However, amounts used for room and board are taxable.
All income, such as wages and tips, is taxable unless the law specifically excludes it. This includes non-cash income from bartering – the exchange of property or services. Both parties must include the fair market value of goods or services received as income on their tax return.

2013 Mileage Rates

The Internal Revenue Service has issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56.5 cents per mile for business miles driven
  • 24 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

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Web Business Advertising

 

Google Ads? Facebook Marketing? What are the most economical ways to advertising online without spending too much money?

Listen to the BOSS Business Brief where Steve Pellegrino from The Spin Doc and host Toby Mathis discuss the different web business advertising strategies. From what is free and can reach potential customers organically to what actually works on the web.  We will also talk about  how your website can be impacted with your marketing techniques all in our radio show.

http://www.bossoffice.com/boss_business_brief/web_business_advertising

 

MERGER OF BOSS BUSINESS SERVICES, ACORN CORPORATE SERVICES AND ANDERSON LAW GROUP IMMINENT

BOSS Business Services, Acorn Corporate Services, and Anderson Law Group unite and form one new company under its new name: Anderson Business Advisors.  Please read below to find out the details:

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BOSS Business Services, Acorn Corporate Services along with Anderson Law Group will be merging their companies to become one in order to be a new uniform entity.  The company’s new name change will occur before the end of the year and be known as Anderson Business Advisors.

Why the change? For years, the ownership group has been acquiring complementary service companies and discussed merging the various companies together.  This summer, they finally agreed to take the plunge and become one.  The merge will benefit all three since each company offers an additional service the other does not from tax services to registered agent services.

“We wanted to create a uniform experience for our clients and provide them with the upmost services available for small business owners, and the three companies working together is the best option” says Toby Mathis, President of BOSS Business Services. “The current clients of BOSS Business Services, Acorn Corporate Services and Anderson Law Group will not be affected at all whatsoever, as the transition will be seamless.  The only change the clients must be aware of is the new name change: Anderson Business Advisors.”

About BOSS Business Services

BOSS is a repeat Inc. 5000 honoree. Since 1993, BOSS Business Services has been a leader in asset protection planning, tax advice, tax preparation, estate planning and business entity structuring. Our clients are located throughout the nation, as well as throughout the world. We are a “one-stop-shop” for business owners handling everything from pre-formation planning to succession planning. BOSS can form your business, help you keep a paper trail of important decisions and meetings, keep your business books and file any necessary tax returns.

About Anderson Law Group

Anderson Business Advisors is a Seattle-based business planning and consulting firm with a focus on providing high-quality services and resources to small business owners, small businesses, other professionals and individuals. Our consultants consist of attorneys and planners who travel nationwide to speak at conferences and seminars on subject matters concerning asset protection and business planning. We have taught tens of thousands of people how to make better business decisions and properly prepare to meet their goals and we have worked with thousands of clients to help them obtain their goals.

About Acorn Corporate Services

Acorn Corporate Services specializes in Nevada entities, and now offer registered agent services throughout the US. We do this through our relationships with affiliates and partners. The benefit to you is excellent Acorn service at no additional cost and a single place to go to handle all of your registered agent needs.

For more information, contact:

Toby Mathis

BOSS Business Services

3225 McLeod Dr., Suite 100

Las Vegas, NV, 89121

888-969-2677

tmathis@bossoffice.com

http://bossoffice.com

How to Benefit with Crowdfunding

As many of you know, 2013 will be a big year for Crowdfunding and small business financing. Listen to the BOSS Business Brief where we answer questions from what is crowdfunding? How can small business benefit from it, to what some new rules are.

 

 

All in our latest radio show- BOSS Business Brief.

Listen in

 

How to Build a Business Website

Listen in to this Boss Business Brief as business websites are discussed.  Did you know you can build a fully functional and effective business website for practically nothing?  What about SEO?  How does it all work?

Learn how to accomplish more for less on this Boss Business Brief…

http://www.bossoffice.com/boss_business_brief/business_websites

Tax Tips for Charitable Giving

From the IRS…

Six Tips for Charitable Taxpayers

Contributing money and property are ways that you can support a charitable cause, but in order for your donation to be tax-deductible, certain conditions must be met.  Read on for six things the IRS wants taxpayers to know about deductibility of donations.

1. Tax-exempt status. Contributions must be made to qualified charitable organizations to be deductible. Ask the charity about its tax-exempt status, or look for it on IRS.gov in the Exempt Organizations Select Check, an online search tool that allows users to select an exempt organization and check certain information about its federal tax status as well as information about tax forms an organization may file that are available for public review. This search tool can also be used to find which charities have had their exempt status automatically revoked.

2. Itemizing. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3. Fair market value. Cash contributions and the fair market value of most property you donate to a qualified organization are usually deductible. Special rules apply to several types of donated property, including cars, boats, clothing and household items. If you receive something in return for your donation, such as merchandise, goods, services, admission to a charity banquet or sporting event only the amount exceeding the fair market value of the benefit received can be deducted.

4. Records to keep. You should keep good records of any donation you make, regardless of the amount. All cash contributions must be documented to be deductible – even donations of small amounts. A cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity that includes the charity’s name, contribution date and amount usually fulfill this record-keeping requirement.

5. Large donations. All contributions valued at $250 and above require additional documentation to be deductible. For these, you should receive a written statement from the charity acknowledging your donation. The statement should specify the amount of cash donated and/or provide a description and fair market value of the property donated. It should also say whether the charity provided any goods or services in exchange for your donation. If you donate non-cash items valued at $500 or more, you must also complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a contribution of noncash property worth more than $5,000, you typically must obtain a property appraisal and attach it to your return along with Form 8283.

6. Timing. If you pledge to donate to a qualified charity, keep in mind that for most taxpayers contributions are only deductible in the tax year they are actually made. For example, if you pledged $500 in September but paid the charity just $200 by Dec. 31 of that same year, only $200 of the pledged amount may qualify as tax-deductible for that tax year. End-of-year donations by check or credit card usually qualify as tax-deductible for that tax year, even though you may not pay the credit card bill or have your bank account debited until after Dec. 31.

Bottom line: your support of a qualified charitable organization may provide you with a money-saving tax deduction, but conditions do apply. For more information, see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property.

Dirty Dozen Tax Scams

The Internal Revenue Service has issued its annual “Dirty Dozen” tax scams list, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

Here are five of the Dirty Dozen tax scams for 2012:

Identity theft  In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued and is working to help victims of identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.

An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page on this website.

Phishing  These scams are typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure potential victims into providing valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information that can help you protect yourself from email scams.

Return preparer fraud  About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and must enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

  • Do not sign the return or will not include a Preparer Tax identification Number on it.
  • Do not give you a copy of your tax return.
  • Promise larger-than-normal tax refunds.
  • Charge a percentage of the refund amount as preparation fee.
  • Require you to split the refund to pay the preparation fee.
  • Add forms to the return you have never filed before.
  • Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see Tips for Choosing a Tax Preparer.

Hiding income offshore  Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

“Free money” from the IRS & tax scams involving Social Security  Fliers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives. Scammers prey on low-income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but the scammer uses inflated amounts to complete the return for a larger refund they’ll run off with.

These are some of the Dirty Dozen Tax Scams for 2012. For a complete list, see IRS Releases the Dirty Dozen Tax Scams for 2012.
Links:

IRS Releases the Dirty Dozen Tax Scams for 2012