Tax Questions

Topic: Bonus depreciation vs first-year expensing (the Section 179 deduction)

Q: What's the difference between bonus depreciation and first-year expensing?

How do I calculate bonus depreciation and what tax form is it claimed on?

Answer...

Topic: Credit card charges for business

Q: I'm a sole proprietor. Can I deduct the interest on my personal credit card if I use it to charge business expenses?

Answer...

Topic: Deducing S corporation health insurance premiums

Q: How does an S corporation deduct health insurance premiums paid on behalf of shareholder/employees?

Answer...

Q: How do shareholder/employees of an S corporation deduct health insurance premiums?

Answer...

Topic: IRA Losses

Q: I own various stocks in my IRA and have taken a beating. Can I deduct these losses?

Answer...

Topic: EIN for Sole Proprietor

Q: I'm a sole proprietor with no employees. Although I don't need a separate federal employer identification number, is it a good idea to get one anyway?

Answer...

Topic: Single-Member LLC and EIN

Q: I'm the sole owner of an LLC. Do I need a federal employment identification number (EIN)?

Answer...

Tax Tips

Vehicle Registration Fees:

Part of your vehicle's registration fee may be deductible on Schedule A, line 7 as personal property tax.

This may be the case if you live in a state that bases the fee on your vehicle's VALUE rather than some other basis, such as weight.

Call your motor vehicle department.

Did You Donate Property?

What's that T.V. you donated to your favorite charity worth? Or your old computer?

If you're not sure, use IRS Pub 561 to help you value the items you donated.

Note: This is the latest edition of Pub 561 as of January 9, 2012.

Quick Links

Paychex Payroll Services: Sign up Today!

Need Deductions for 2011?

Don't overlook these!

10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

:: INTEREST ON YOUR VEHICLE LOAN

If you're self-employed, used your vehicle for business during 2011, and paid interest on a loan for that vehicle during 2011, the interest is deductible.

Get the facts and follow the example. 

If you're an employee, sorry, you're not allowed to claim car loan interest, even if you used your car 100% for your job.

:: COMMUTING MILEAGE LOOPHOLE

If you're self-employed and operate your business from a facility away from your home, such as a restaurant or retail store, the cost of traveling from your home to your place of business and back home is not deductible. The IRS classifies travel between your home and your place of business as commuting mileage, which is a nondeductible personal expense.

Now here's the good news! If you're self-employed, there's a loophole that allows you to convert those commuting miles to deductible business miles. Learn how...

Need a Federal Employer ID Number?

Download your Federal Employer Identification Number (EIN) and keep the printout for your records. Here's the link: Online application for EIN.

You need an EIN if...

  • You're self-employed and have one or more employees.
  • Are the sole owner of an LLC with employees.
    • If you have employees, you'll need to get the EIN in the LLCs name instead of your own name.
    • If you don't have any employees, you don't need an EIN, unless any of the items listed below apply.
  • You hired or will hire employees in the next twelve months, including household employees.
  • You formed a corporation (you'll need an EIN in the corporation's name).
  • You formed a partnership (you'll need an EIN in partnership's name).
  • You need an EIN for banking purposes (i.e., to open a business checking account).
  • You changed the legal structure of your organization (for example, you change from a sole proprietorship to a corporation. Or take on a partner and form an LLC).
  • Purchased a going business.
  • Created a pension plan as a plan administrator.
  • Your state requires an EIN.

TIP: If you're self-employed, you may want to get an EIN even if you're not required have one.

Here's why...

If you're self-employed and hire any independent contractors to perform a service for your business, you will have to issue a Form 1099-MISC to any contractor you paid $600 or more by January 31 of the year following the year you paid such contractor.

Instead of entering your social security number on Form 1099-MISC in the payers box and risking misuse of it, you can use your EIN.