Archive for the ‘Income Tax’ Category

Are Work Clothes Tax Deductible?

Wednesday, July 23rd, 2014

Authored By: Tara Williams is a CPA in the Logan office of Cook Martin Poulson, P.C. Tara enjoys interacting with clients and working with them to create solutions to problems. Tara is a native of Layton and earned a bachelor’s degree in accounting from Utah State University and a master’s degree in accounting from Weber State University.

Generally, clothing costs aren’t allowable as ordinary and necessary business expenses. They are characterized as nondeductible personal expenses. The IRS describes clothing that would qualify for a deduction as “required by the employer and not suitable for everyday use.” Most clothing worn to work could be required by an employer depending on the environment, but the key is that it cannot be adaptable for everyday use outside of work. Clothing that would qualify as a deduction include:

• Uniforms worn by firefighters, police officers, letter carriers, healthcare workers, professional athletes, and delivery workers.
• Clothing that protects workers from injury, i.e., glasses, hardhats, work gloves, and safety shoes. See IRS publication 529 for more information.

In a 2011 tax court case, Leyla Diaz was employed as an assistant to the operations manager at a company that owned and operated 11 Midas locations. According to Leyla, she was required by her employer to wear “standard khaki pants, a red polo shirt, and sneakers.” She explained that she did not wear her work clothing other than in connection with her employment. She attempted to deduct $1,400 of clothing and shoe expenses on her tax return as unreimbursed employee business expenses. The court ruled that because the clothing was adaptable to general use, she was not entitled to a uniform and shoe expense deduction. Had Leyla been a service technician that was required to wear a uniform and safety gear, those expenses would have been allowable.

Before taking the uniform tax deduction, keep in mind the two steps that are required for the deduction. Uniforms must be required by your employer and cannot be suitable for everyday use. If you have any questions feel free to contact your CPA at Cook Martin Poulson, PC.

America’s Small Business Tax Relief Act of 2014

Thursday, July 17th, 2014

Authored By Daniel Smith, Shareholder

H.R. 4457 has passed the House of Representatives on June 12, 2014. If it passes the Senate and is signed by the President, the Internal Revenue Code will be permanently amended to extend increased expensing limitations. When enacted, this act will allow certain small businesses to expense up to $500,000 of depreciable property under Section 179.

Under this pending law, limitations under Section 179 will be adjusted for inflation. Cost-of-living adjustments are to be determined each year and will be rounded to the nearest multiple of $10,000.

Businesses owners will welcome this extension of increased Section 179 deductions. Without this change the current law limits Section 179 to $25,000 in 2014 (adjusted for inflation). H.R. 4457 will give small businesses more opportunity to compete. They will be able to expense capital purchases needed for their businesses. Absent this change, small business owners are limited in the amount of current deductions they can take as deprecation.

All will welcome the passage of this law. In the coming weeks, look for the enactment of these changes to Section 179 of the Internal Revenue Code.

My Top 10 Questions of Tax Filing Season: Numbers 5-7

Friday, April 25th, 2014

Authored by David Cash, CPA, MAcc. Dave has worked in the Logan and Salt Lake City offices of CMP. He spent 2 years in the Logan office and has been in the Salt Lake City office for over 5 years. Dave specializes in oil and gas taxation, pension administration and reporting, and individual and business tax planning and compliance.

Back on February 21, 2014 my first 4 questions and answers, of the most asked questions that I receive related to Income Taxes, were posted on our blog. This edition will have Questions and Answers to numbers 5, 6, and 7. (more…)

What Does The 2014 Farm Bill Mean For Your Dairy?

Wednesday, April 2nd, 2014

Nathan Shields, CPA, Jr Manager has been with the firm 6 years and spends a lot of time helping dairy clients understand accounting, taxes and the farm bill.

The 2014 farm bill was signed by President Obama on February 7, 2014. It is an expansive bill that is also known as the “jobs bill,” “innovation bill,” “research bill,” or “conservation bill.”

The two focuses of the bill are to help rural communities and provide food assistance to poor families and children. I am going to focus specifically on the impact the farm bill will have on dairies. (more…)

What are Some Common Red Flags that Could Prompt the IRS to Take a Closer Look?

Thursday, March 6th, 2014

Authored By: Sheri Lewis, Staff Accountant, who has worked at Cook Martin Poulson since November 2011. She recently received her Master of Accounting Degree and is in the process of taking the CPA exams.

Although the IRS will audit less than an estimated of 1% of all the individual tax returns each year, the chance of being audited is a common fear of many clients. While no one can predict with certainty who will be audited, there are some common “red flags” that could increase your chance of audit. The IRS won’t come right out and provide a list of items they consider for audit, but there have been recent articles by tax professionals that outline some key areas that past data has shown to have been more heavily scrutinized by the IRS.

Some of the common “red flags” are as follows: (more…)

 

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