Thanks to Kay Bell for another great tax carnival.

Appropriately named The Dog Days of Summer, this week’s carnival features some great posts, such as…

Andrea of Queercents wonders, “Should we be able to claim pets as dependents?” Check out her thoughts in Reducing Pet Costs: Tax Deductible Pets?

Dave warns Donating Clothing? Beware For-Profit Drop Boxes. It’s posted at Money Under 30.

For your viewing pleasure, Overlooked Tax Deductions, A Photo Essay, presented by Silicon Valley Blogger and posted at The Digerati Life.

And Ebiz Tax Tip’s own contribution, IM Courses May Be Tax Deductible.

Enjoy!

Related Posts:

• Tax Carnival #30

On July 30, 2008, President Bush signed H.R. 3221, the Housing and Economic Recovery Act of 2008 (the “Act”).

The Housing Act is intended to revamp the housing finance industry, encourage home ownership and help prevent foreclosures. Below is a summary of some of the tax provisions in the bill that will affect current and future home owners:

* The Hope for Homeowners Program: The Act creates a new Federal Housing Authority (FHA) program designed to help borrowers in danger of losing their homes to foreclosure. Eligible homeowners may be able to pay off their original (foreclosing) lenders with a fixed-rate, 30-year-term mortgage for up to 90 percent of the appraised value of the property. Eligible homeowners are those who originated their loans before January 1, 2008, spend more than 31 percent of their monthly income on their mortgage, and are currently in danger of foreclosure. Borrowers would have to share future equity with the FHA. The program is completely voluntary; banks may elect not to participate. The program begins on October 1, 2008 and ends in September of 2011.

* Temporary mortgage foreclosure protection for military members: The Act provides mortgage foreclosure protection for members of the U.S. Armed Services by temporarily increasing (through December 31, 2008) the maximum loan guarantee for VA loans. The period a lender must wait before initiating foreclosure proceedings after a service member returns from service is extended from 90 days to 9 months. Increases in mortgage interest rates above 6 percent are suspended during the period of service and for one year after a service member ends service. This provision will sunset on January 1, 2011.

* Temporary tax “credit” for first-time homebuyers: First-time homebuyers of a principal residence purchased after April 8, 2008 and before July 1, 2009 may take a refundable tax credit of 10 percent (up to a maximum of $7,500; $3,750 for married persons filing separate returns) of the purchase price of the property. The credit is phased out for individual taxpayers with adjusted gross incomes (AGIs) ranging from $75,000 to $95,000 ($150,000 to $170,000 if married filing jointly). However, taxpayers must repay the credit taken over 15 years in equal installments as a surcharge on their annual income tax return.

* Temporary standard property tax deduction for taxpayers who don’t itemize their deductions: For 2008 only, taxpayers who do not itemize their deductions will be allowed to take a real property tax standard deduction (in addition to the standard deduction) of up to $1,000 if married filing jointly ($500 for all other filers).

* Reduced homesale exclusion for nonqualified use: For sales and exchanges of a principal residence after December 31, 2008, the $250,000 ($500,000 if married filing jointly) homesale exclusion won’t apply to the extent the gain is allocated to periods (not including any period before January 1, 2009) during which the property is not used as the principal residence of the taxpayer or the taxpayer’s spouse.

These are just a few of the provisions in the new act. For more information, please visit ‘Housing Rescue Bill…’

More Posts:

• What taxes are you responsible for as an eBay seller?
• Making the Internet tax moratorium permanent
• IRS to audit more small businesses

Buried deep in the housing act that was just passed is a provision that requires credit card processors - including companies like eBay and PayPal - to report annual gross receipts of it’s merchants to the IRS.

Credit card processors will be required to file Form 1099 for each merchant that has at least $10,000 in gross sales and 200 transactions.

Companies have until 2011 to comply with this new law.

The purpose of this new law is to raise revenue for the housing recovery package and to close the tax gap that exists.  The IRS estimates that it loses billions of dollars in tax revenue from small businesses who under-report (or don’t report) income.

While I’m worried that this new law will cause the cost of business for small and online business owners to go up (in the form of higher eBay fees, higher PayPal fees, etc.), I also think that all small business owners should pay their fair share of taxes (I pay my taxes, why shouldn’t all small business owners?).

So here are some tips to help online business owners comply with the new tax law, without paying too much to Uncle Sam:

• Treat your business like a business.  Register a business name, hire an accountant, keep good records.  The more you can do to treat your business like a business, the less likely the IRS will reclassify your business as a hobby.
• Keep separate accounts and records - have separate eBay, PayPal and checking accounts for your personal and business activities.
• Report your income!  Even if you don’t receive a 1099 from eBay, PayPal or the other companies that will be required to file one, you should still report all of your profits from your online business.
• Learn what’s deductible and what’s not deductible - you’d be surprised how many people do not deduct business expenses because they don’t know they can.
• Don’t be afraid of the home office deduction, and other deductions that have been labeled as a red flag.  Being a small business owner is a red flag, but that doesn’t mean you should go out of business, or worse, not report your income!

To read more about the new IRS rules, and how they affect online business owners, please visit Online Sellers Face New IRS Rules in today’s WSJ.

Related Posts:

• The IRS and eBay: Tax Season Is Here
• Do You Pay Taxes On eBay Income?
• It’s Tax Season! Are You Ready?

Are you a new online business owner?  Do you know what your tax responsibilities are as a small business owner?

Starting a new business is a very exciting experience.  But you may have a lot of questions, like…

• what taxes am I responsible for?
• do I need a tax ID number?
• what expenses can I deduct?
• should I hire an accountant?
• do I have to make estimated tax payments?

These are important questions that you should address before you start your business.

New!  The New Biz Tax Consultation is a one-hour consultation where we talk about the questions above and other tax tips that you should be aware of so that you minimize the taxes you pay and keep more of your profits.

Ready to get started?  Contact Kristine to schedule your New Biz Tax Consultation today!

Related Posts:

• List of Tax Deductions for Online Biz Owners
• Can I Deduct Internet and Phone Expenses?
• What’s the Best Way to Keep Track of My Income and Expenses?

If you’re an online business owner, you’ve probably noticed a LOT of product launches this year.

Many of us are on a budget, and struggled with the decision to purchase a product, even if it was something we really needed to grow our business.

Well, don’t forget that ordinary and necessary business expenses - including courses that you take, or course materials that you purchase for your business - are tax deductible.  Keep in mind, it does need to be business related, but if it helps you learn your business, or if it helps you market your business, then it is probably a deductible expense.

Which means that the $400 product you’ve got your eye on may only cost you $250-350 after taxes, depending on what tax bracket you are in.

Let me give you an example: let’s say you are in the 15% tax bracket and you operate your business as a sole proprietor.  Your total tax percentage is approximately 35% (15% Federal tax + 15.3% self employment tax + 5% state income tax).

When you purchase an item for your business that is tax deductible, you’ll get approximately 35% back in tax deductions, meaning a $400 product will cost you only $260 after taxes.

So if you’re got your eye on a marketing course, or the latest and greatest product that is being launched, and you’re only objection is the price, don’t forget about the tax benefits of being a small business owner.  You may be able to afford that new info-product that’s being launched today after all

Related Posts:

• IRS Increases Mileage Rates For the Remainder of 2008
• Can I Deduct Internet and Phone Expenses?
• Year end tax tips for home businesses

In recognition of recent gasoline price increases, the IRS has raised the standard mileage rate for the final six months of 2008.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through December 31, 2008. The rate for the first half of 2008 is 50.5 cents.

The IRS normally updates the mileage rates once a year, but given the significant increases in gas prices this year, the IRS has made a special rate increase in the middle of the year.

Taxpayers may use the standard mileage rates to calculate the deductible costs of using their personal automobile for business, charitable, medical or moving purposes.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Whichever method you choose, it is important to keep track of your mileage to substantiate your deduction. Because the rates were increased in the middle of the year, it’s also important to keep track of the dates you use your vehicle for business to make sure the proper rate is used.

Related Posts:

• IM Courses May Be Tax Deductible
• Organizing Your Tax & Financial Paperwork
• Get a Jump on Next Year’s Taxes Now

I was recently interviewed by Cara of The Household Helper about getting your tax and financial records organized NOW for next year.

Some of the tips we talked about include…

- Create a system NOW: a folder for 2008 taxes where you can easily insert paperwork related to your taxes.

- Rule of thumb: keep copies of anything you will be deducting for 7 years. Keep the tax return as well as the back-up for that return.

- If you are NOT deducting things like utility bills or credit card bills, you DO NOT need to keep those statements (I usually keep them until I know the last check/payment cleared).

- If you are deducting things for home office expenses, you must keep those receipts/statements with your tax return (mortgage interest, internet, utilities, phone charges, etc.)

- We talked about more tax deductions, and I even surprised Cara with a deduction she missed this year!

To listen, please visit The Household Helper Podcast and click on Show #17 - Organizing Your Tax and Financial Paperwork.

Related Posts:

• IRS Increases Mileage Rates For the Remainder of 2008
• Get a Jump on Next Year’s Taxes Now

With the economy slowing, gas prices rising, and unemployment rising, more and more people are turning to eBay to earn extra cash.

The IRS has always had an eye on eBay and even tried to force them to report details of it’s top sellers last year. While eBay resisted, the IRS is still trying to find ways to track people who sell online - especially since they suspect that over half do not report the income earned!

from DenverPost.com on 6/7/08

Selling Stuff on eBay? IRS Wants It’s Cut

Basement clutter and attic knickknacks have always been the cornerstone of eBay — after all, one man’s trash is indeed another’s treasure — but tough economic times seem to bring them out faster and in abundance.

The Internet has turned into the fastest and easiest method of turning unwanted items into a quick — sometimes desperately needed — few bucks or more.

But experts and government officials warn that although the treasure is for the selling and the extra dough is for the getting, it’s not all for the keeping.

“You’re supposed to report any profit from those sales,” said IRS spokeswoman Jean Carl. “It’s a voluntary system for taxpayers to report it, and people are trusted to do that.”

And it’s not just eBay. Users of online marketplaces or auction services such as Craigslist.com and uBid.com are liable as well.All this comes as a surprise to many casual sellers who are doing little more than clearing out some space in their homes.

“I had no idea that if I wanted to sell on eBay that I have to pay the IRS,” said Ann Tran, a Golden resident who is contemplating eBay for some extra bucks.

Click here to continue reading…

Related Posts:

• PayPal and Ebay Must Report to the IRS
• Q&A: Do I Have to Pay Tax on Personal Items Sold on Ebay?
• List of Tax Deductions for Online Biz Owners

Did you miss the ‘Learn How to Avoid the Top 4 Mistakes Small Business Owners Make With Their Cash Flow’ teleclass? No problem… the recording is now available to download!

To download the teleclass, go to:

http://www.onlinebusinesstaxtips.com/TeleclassEPWDownload.html

In this call you will learn:

- How to learn the simple System to control cash flow in just 15 minutes per week.

- The 4 secrets why you are not in control of cash flow, even if you are doing what all the “experts” say you should do.

- How to make powerful decisions about pricing, whether to launch a new product or service, and if a joint venture is a good investment for your business.

- The 2 financial reports you MUST use … and neither of them come out of QuickBooks!

Ready to take the next step? For templates, examples, and a step-by-step process for implementing what Elizabeth explained in the call, go to:

http://growupstrategies.com/kristine

Enjoy!

Related Posts:

• New Teleclass in May!

“Learn How to Avoid the Top 4 Mistakes Small Business Owners Make With Their Cash Flow”

Attention Coaches, Virtual Assistants, Internet Marketers and Other Small Business Owners…

Join me for a free teleclass with special guest Elizabeth Potts Weinstein on Tuesday, May 20th.

Title: Learn How to Avoid the Top 4 Mistakes Small Business Owners Make With Their Cash Flow

If you’re a small business owner, then you know that ‘cash is king’. Unfortunately, most small business owners don’t have a good handle on their cash flow, which could lead to business failure down the road.

Elizabeth Potts Weinstein - Attorney, financial advisor, and author of “Grow Up! Strategies: The 7 Legal & Financial Strategies You Need to Up-Level Your Small Business” - is joining me on this free teleclass to help you learn how to take control of your cash and reduce the financial stress in your small business.

Here are just a few things you’ll learn on this teleclass:

• How to learn the simple system to control cash flow in just 15 minutes per week.
• The 4 secrets why you are not in control of cash flow, even if you are doing what all the “experts” say you should do.
• How to make powerful decisions about pricing, whether to launch a new product or service, and if a joint venture is a good investment for your business.
• The 2 financial reports you MUST use… and neither of them come out of QuickBooks!
• How other business owners just like you have used these strategies & tools to troubleshoot income and reduce stress about their finances.

Note: This teleclass has already taken place. See Cash Flow Teleclass Recording Now Available to download a recording of the teleclass and to learn more about taking control of your cash flow.

Related Posts:

• Cash Flow Teleclass Recording Now Available