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Employers are required by law to mail all employee W2’s by the end
of January each year.  So, January 31st has come and gone and you
haven’t yet received your W2. What should you do?

First, consider whether or not you’ve allowed enough time for the
mailing to reach you.  Employers need only mail the document by the
31st of January, not have it in your hands by that date.

Ok, you’ve patiently waited out the normal delivery time frame of
your postal service and still no W2; what now?  Your first step at this
point should be to contact your employer; normally the Human Resources
department.  Most often, it’s as simple as that.  If it’s simply a
matter of delivery, your company should be able to easily supply you
with another copy. 

If you absolutely can’t get a W2 from your employer - because
they’ve gone out of business, they don’t have good records, etc. - then
you can download Form 4852, which is a substitute W2, from the IRS website, and use this form to prepare your tax return.

I frequently hear from small and home based business owners that they don’t take the home office deduction because they are afraid of being audited.

The home office deduction has been labeled as a red flag for years, but I think this deduction has too many benefits to just ignore it.

Robert Flach of The Flach Report agrees with me.  In his post "Three Cheers for the Home Office Deduction" Robert tells us why the home office deduction is great:

 1. It moves part of a deduction that would have been claimed on
Schedule A (real estate taxes and mortgage interest) to Schedule C and
as a result reduces your Adjusted Gross Income (AGI). While
a home office cannot generally be used to create a loss on Schedule C,
you can generate a net loss to the extent of the business use
percentage of real estate taxes and qualified mortgage interest. A home
office deduction in general will reduce your AGI, and reducing your AGI
can increase a whole laundry list of deductions and credits. See my
WANDERING TAX PRO post on “The Most Important Number on Your Tax Return”.

2. It reduces not only your federal and state income tax but also your self-employment tax. The home office deduction could provide 40% to 50% in total tax savings!

3. And, perhaps most important, it establishes your home as a place of
business for the purpose of deducting business mileage. You have no
“commuting”. Every time you leave your home to drive to another business location (a client, the office supply store, your business bank) you have deductible round-trip business mileage.

You no longer have to be afraid of claiming a home office
deduction. I do not believe that it raises the same “red flag” with the
IRS that it did in the 1980s and most of the 1990s. And you no longer have to pay tax on the business use percentage of the gain when you sell your residence.
All you have to do is “recapture” the depreciation claimed after May 6,
1997. Prior to 1997, if you had a $100,000 net gain on the sale of your
residence and you used 10% of the building as a deductible home office
you would have to pay tax on $10,000 plus the total amount of
depreciation claimed on the home office over the years.

 

This is the sixth year that free tax filing options have been available for qualifying individuals at the IRS website.

There are 19 companies that offer free tax filing (you can see the list here), and each has their own set of rules regarding who qualifies for free filing.

Most programs offer free filing for taxpayers who earn less than
$54,000, however many of the companies also require you to be over age
50. 

Turbo Tax and H&R Block’s Tax Cut are two of the companies participating in this program.

For more information, please visit the IRS website and click on 2008 Free File Opens.

How do you like our new header?  I changed the name of this blog from "Tax Tips for eBay Sellers" to "Ebiz Tax Tips" to reflect that the tax tips on this blog are not just for eBay sellers.

While I originally started this blog to answer tax questions for eBay sellers, the tax tips on this blog are really for all online businesses - whether you sell on eBay, run affiliate programs, have a service business, or have another home-based business, this blog applies to all of you!

So if you’re a WAHM, a service business, an affiliate marketer, or some other online business owner, I would like to welcome you to my blog.  I look forward to sharing tax tips for all online business owners in 2008!

WASHINGTON — The Internal Revenue Service announced today that the
upcoming tax season is expected to start on time for everyone except
certain taxpayers potentially affected by late enactment of the
Alternative Minimum Tax “patch.”

Following extensive work in recent weeks, the IRS expects to be able to
begin processing returns for the vast majority of taxpayers in
mid-January. However, as many as 13.5 million taxpayers using five
forms related to the Alternative Minimum Tax (AMT) legislation will
have to wait to file tax returns until the IRS completes the
reprogramming of its systems for the new law.

The IRS has targeted Feb. 11, as the potential starting date for
taxpayers to begin submitting the five AMT-related returns affected by
the legislation. The February date allows the IRS enough time to update
and test its systems to accommodate the AMT changes without major
disruptions to other operations related to the tax season. As the IRS
has said previously, it will take approximately seven weeks after the
AMT patch was approved to update IRS processing systems completely.

Continue Reading AMT Patch May Delay Filing for Some Taxpayers

by Klaus Marre - TheHill.com

The Senate late Thursday passed a one-year fix to the alternative
minimum tax (AMT), setting up a potential confrontation with the House,
which passed a much different version of the bill earlier.

Democrats want to offset the cost of the patch, which would
shield millions of Americans from becoming eligible for the higher tax.
However, Republicans are balking at the idea and in the Senate they
have enough support to block such a plan. 

"I
am relieved that the Senate has acted this evening to extend AMT relief
for 19 million taxpayers – including nearly 100,000 Nevadans,” Senate
Majority Leader Harry Reid (D-Nev.) said following the vote. “But I
want to make it perfectly clear that I am very disappointed Republicans
prevented the Senate from passing AMT relief in a fiscally responsible
manner.  Instead, Republicans insisted that the $50 billion cost of
this proposal be added to the national debt – a debt that is already
growing at a rate of $1 million a minute.”

Continue Reading Senate Passes AMT Patch