Standard Mileage Rates To Go Down In 2010

The IRS announced the standard mileage rates for 2010 this week.  The standard mileage rate is the amount used to calculate the cost of using a personal vehicle for business, charitable or medical purposes.

Starting on January 1^st, the standard mileage rates will be:

Business: 50 cents per mile
Medical or moving: 16.5 cents per mile
Charitable: 14 cents per mile

The standard mileage rates are lower than the 2009 rates to reflect the decrease in the cost of gas.  The IRS studies the cost of operating vehicles to determine the appropriate rate to use for deducting car expenses each year.  If the cost of gas rises significantly during the year, such as it did in 2008, the IRS can do a mid-year increase in the standard mileage rates.

Taxpayers have the option of deducting either the actual cost of operating their vehicle or using the standard mileage rate.  However, the standard mileage rate can not be used for a vehicle if the taxpayer has deducted depreciation on the vehicle, or if they have taken the Section 179 deduction for that same vehicle.

The standard mileage deduction is beneficial for taxpayers because it reduces the amount of recordkeeping that needs to be done, but it can result in a lower tax deduction than the actual cost method for people who have purchased new vehicles.

Source: IRS Announces 2010 Standard Mileage Rate

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W-2s and 1099s Due Monday!

If you have employees or independent contractors, you only have a few days left to prepare and issue W-2s and 1099s for them.  January 31 is the official due date, but since it falls on a Saturday this year, you have until Monday February 2 to complete your forms.

Just to be clear, employees get Form W-2, independent contractors get Form 1099-MISC reporting their income.

Since most of the people visiting this blog are more likely to have independent contractors than employees, we will focus on the Form 1099-MISC for the rest of this post.

Do you need to prepare Form 1099 for anyone in your business?

Basically, you must prepare a 1099 if you paid $600 or more to an individual to perform services for you.  Some examples would be web designers, eBay assistants, virtual assistants, affiliates, accountants, etc.

Continue Reading W-2s and 1099s Due Monday!

Final Tax Estimate for 2008 Approaching Quickly

Just a reminder that your fourth quarter 2008 tax estimate is due on January 15, 2009.

This estimate goes towards your 2008 tax liability so it reduces the amount you will owe on your 2008 tax return when you file.

To avoid the penalty for not paying enough estimated tax, you need to pay in at least 90% of your 2008 tax liability or 100% of your 2007 tax liability, whichever is less.

Alternatively, you can choose to file and pay your 2008 taxes by January 31, 2009 to avoid any underpayment penalties.

Use Form 1040-ES to submit your estimated tax payment.

For a refresher on estimated tax payments, see ‘Do I Need to Make Estimated Tax Payments?’

Recovery Rebate Credit for 2008

If you didn’t receive a rebate check in 2008, or if you think you should have gotten a larger check than you did, you can apply for the Recovery Rebate Credit on your 2008 tax return.

The Recovery Rebate Credit is a special one-time benefit that most people received last year in the form of an Economic Stimulus Payment. But people who did not receive the maximum amount of the Economic Stimulus Payment, or whose circumstances have changed, may be eligible now.

In most cases, the IRS will calculate whether a person is eligible and how much of the credit may be due automatically. To allow the IRS to calculate this automatically, simply file your 2008 tax return and follow the “Credit Figured by the IRS” instructions. However, may choose to calculate the Recovery Rebate Credit themselves instead.

Continue Reading Recovery Rebate Credit for 2008

Good Reads: Interesting Tax Posts This Week

I’m reading my favorite tax blogs and found several posts worth sharing:

• Ask the taxgirl: Girl Scout cookies – In the case of the Girl Scouts, Girl Scouts of the USA is a nonprofit 501(c)(3) organization. The “Cookies from Home” program allows you to pay for the cost of a box of cookies and instead of taking the cookies home and eating them …

Speaking of charitable donations, don’t forget that you must have receipts for all donations in order to deduct them.  This is trickier for non-cash donations, such as clothing given to Goodwill or the Council of the Blind.  Here’s a valuation-guide you can use to help you assign values to your non-cash donations.

Continue Reading Good Reads: Interesting Tax Posts This Week

Standard Deduction and Personal Exemptions Increased For 2009

The IRS adjusts key tax numbers each year, including personal exemptions and the standard deduction amounts.  These are cost of living adjustments required by law.

The effect of these adjustments is that the tax brackets widen (so you can earn more income before you jump into the next tax bracket).

Here are a few of the changes in effect for 2009:

• The personal and dependency exemption, available to most taxpayers, increased $150 to $3,650.
  Continue Reading Standard Deduction and Personal Exemptions Increased For 2009

Savers Credit Helps Low to Middle Income Taxpayers Save for Retirement

Not many people are aware of the saver’s credit, which helps offset part of the first $2,000 that taxpayers contribute to IRAs , Roth IRAs, 401K and other retirement plans.  This credit is also known as the retirement savings contributions credit.

The saver’s credit is available in addition to other tax deductions and credits that a person may qualify for, so taxpayers who take a deduction for contributions made to IRAs, 401Ks and other tax-deferred retirement accounts, and who also qualify for the saver’s credit, essentially get a double tax break.

You still have time to make contributions to your retirement accounts and get the saver’s credit, if you qualify.  The deadline for setting up or adding money to IRAs and still get credit for 2008 is April 15, 2009.  But if you’re planning on contributing to your 401K or other employer sponsored plan, you need to get your contributions in by the end of the year.

Continue Reading Savers Credit Helps Low to Middle Income Taxpayers Save for Retirement

Reporting 1099 Income

I first started the Ebiz Tax Tips blog because I was getting a lot of questions from eBay sellers about taxes – whether they needed to report their income, what they could deduct, etc.

That was a couple of years ago.  Since then the number of bloggers, affiliate marketers and other people making money on the internet has exploded.  And the IRS has taken notice!

The number of 1099s that will be issued and received this year will probably be much larger than ever before.

So, you may be wondering, will you get a 1099?  And what should you do if you do receive a Form 1099?  How do you go about reporting 1099 income?

Continue Reading Reporting 1099 Income