A Guide on Business Conventions: Why Professionals Should Take Part in One

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A Guide on Business Conventions: Why Professionals Should Take Part in One

Mar 14, 2017 Posted by Sanjiv No Comments

In the age of social media where everyone can share information in a few clicks, some professionals may think they no longer have to attend an industry conference or seminar.

While social media channels, LinkedIn in particular, may have become popular platforms for information sharing and networking, the truth is that it is still a must for professionals to attend conferences, seminars, and meetings.

These events are usually short, typically 2 to 3 days. During that short amount of time, professionals like you can learn from several industry experts. Moreover, you can network with other people in your industry.

There are many reasons why you should attend an industry event, such as:

  1. Learn how industry trends are being implemented. In a typical business convention, top notch speakers and resource persons share the latest trends and how these are being used in your industry. They can enhance your knowledge base, and teach you something valuable that you can apply when you go back to your office.
  1. Meet new suppliers. Most professionals tend to shy away from business conventions because of the salespeople that introduce various industry products and services. But in truth, business conventions and conferences can introduce you to innovative products and services that you or your company may find necessary to stay competitive.
  1. Network with peers. Industry events provide the best platform for professionals to grow their network. They can learn best practices and referrals from competitors, especially those from other regions or countries.
  1. Free travel. For many professionals, their participation in industry events can give them the opportunity to get some much needed rest and relaxation. They can claim travel expenses related to their participation in a business conference or convention, from lodging to transportation to incidental expenses.

There is no shortage of business conventions that professionals can participate in. The following is a discussion of particular fields and some of the more notable meetings, conferences, and exhibits that professionals can join in.

Information Technology

The I.T. Industry is constantly evolving, so it is understandable why there are lots of business conventions held for people and organizations in this field. There are lots of technology conferences held all year round. The good news is that most of these events offer live streaming options, which augurs well for IT professionals who are too busy or those who have exhausted their travel budget.

The Google Cloud Next conference is one of the most highly anticipated events among I.T. professionals. This will take place in San Francisco from March 8-10 this year.  Google Cloud developers will benefit greatly from taking part in this event, what with Google CEO Sundar Pichai and Alphabet chairman Eric Schmidt expected to talk about Google’s initiatives this year.  The conference is expected to draw thousands of participants, who will see what the future of cloud development will be like.

Another highly anticipated business convention in the I.T. industry is the Bluetooth World 2017. This yearly, two-day conference is expected to draw more than 1,000 thought leaders to Santa Clara, California. It will showcase how Bluetooth technology is changing the world, and how the Internet of Things is making life easier for everyone.

Accounting

There are also lots of business conventions that accountants can take part in.  Perhaps the most prestigious of these is the MNCPA Tax Conference held yearly in Minnesota.  This is also one of the longest-running tax conventions in the United States, with its first staging held more than 60 years ago.   CPAs, CPOs, tax practitioners, and financial professionals looking to expand their knowledge of tax-related developments are encouraged to participate in this convention.

The American Institute of CPAs (AICPA) offers more than 60 conferences all year round. These events cover almost every topic there is in the accounting field. Some events are held simultaneously in multiple cities and most conferences can earn continuing professional education (CPE) credits for its participants.

One of the biggest events that the AICPA is holding is its CFO Conference. It will be held in Phoenix, Arizona this year, with hundreds of CFOs, CEOs, investment bankers, attorneys, chief audit executives, and academics expected to join.  The conference will tackle issues such as cybersecurity, strategic planning, risk management, and the current political, tax, and economic landscape in the U.S.

Engineering

Engineers also have tons of options when it comes to business conventions.  Engineering associations are usually at the forefront of these events, providing engineers with the opportunity to hone their skills, earn more certification, and be updated with the latest advancements.

Electrical engineers, for instance, can attend the International Solid-State Circuits Conference organized by the Institute of Electrical and Electronics Engineer. This year’s event held in San Francisco, California tackled developments in the Internet of Everything.

For mechanical engineers, the Mechanical Engineering Congress and Exposition is a prestigious event to take part in.  This is reputed to be the biggest interdisciplinary mechanical engineering convention in the world.  It has been going on for more than a century now, with the first meeting in New York held in 1880. For some historical perspective, this is also the same convention when Willis Carrier presented his concepts on air conditioning back in 1911.

This year’s Mechanical Engineering Congress and Exposition will be held in Tampa, Florida.

Academe

Conferences and education events for members of the academe are designed to provide educators with tried and tested strategies in connecting with students, connect with peers, and bolster their practice.

One of the biggest gatherings of educators in the United States is the International Society for Technology in Education (ISTE) Conference. In 2016, the conference had more than 18,000 participants composed of educators, school leaders, policy makers, tech coordinators, school administrators, and library media specialists. This year, the organizers hope that the event will have more attendees. The event is scheduled to be held in San Antonio, Texas.

The ASCD, meanwhile, organizes its annual conference called Empower. It is designed not just for teachers but also principals, school superintendents, instructional coaches, and central office staffer. This year’s conference scheduled in Anaheim, California has more than 200 sessions on deck.

There are also certain conferences held onboard cruise ships. The International Interdisciplinary Business-Economics Advancement Conference, for example, will be held at the Navigator of the Sea, a five star luxury cruise ship. The cruise will depart from Miami, Florida and stop at the Bahamas and Mexico before returning to Miami.

The conference is expected to attract scholar students, scientists, and researchers who will share their insights on business and economics.

Sales & Marketing

With the Internet changing the way people buy products and avail of services, it is not surprising that many business conventions geared towards professionals in the sales and marketing field are focused on e-commerce.

One event, Brand Innovators Summit, is conducted in multiple cities across the US throughout the year. These summits teach sales and marketing professionals and entrepreneurs how the best brands are using digital media to promote their products and services. Topics range from content marketing, monetization, and enhancing customer experience.

Mozcon Local is similar to the said event as it teaches sales and marketing executives how to use digital media, particularly local marketing and search engine optimization.  Participants will learn tips and tricks for optimizing their websites and make them rank higher on Google.

Adobe, a popular creative product, also holds its own conference. The Adobe Summit is scheduled in March, with participants converging in Las Vegas to learn how to create engaging content viewable across various devices.

Another event that sales and marketing professionals should consider joining is the Social Media Marketing World set sometime this March in San Diego. The event promises to impart some distinctive social media marketing techniques from industry leaders.

Finally, Ragan’s Social Media conference to be held at Disney World will teach attendees when and how to implement various social media techniques. This event will also impart knowledge like building a social media following, strengthening online communities, and tapping key audiences.

 

Healthcare

One of the fastest growing industries in the world, the healthcare sector has hundreds of trade shows and conventions held in various parts of the globe. These conventions are attended by medical professionals, researchers, medical technology suppliers, among others.

Arab Health is one of these events. It is considered to be the biggest healthcare exhibition and medical congress in the Middle East, and the second biggest in the world.

This event attracts more than 4,400 companies that proudly display their latest innovations.  The event aims to promote and improve healthcare services in UAE and nearby territories.

Another event that attracts many healthcare professionals around the world is the Digital Health Summit.  This event, which was most recently held in Las Vegas, tackles the substantial role that technology has in advancing medicine.

The Government Health IT Conference and Exhibition, organized by the Healthcare Information and Management Systems Society (HIMSS), is another big event that attracts thousands of healthcare workers. The event particularly is geared at healthcare IT workers, with the most recent staging focusing on how the new administration will impact the healthcare sector.

Business Leaders and Entrepreneurs

Business leaders and entrepreneurs also have lots of choices as far as business conferences and conventions are concerned.

One of the biggest and most prestigious is the CEO Space Forum, which its organizers have dubbed as a business growth accelerator event.  Participants can learn many things from the event’s resource speakers like traditional funding, strategic planning, leadership, business finance, among others. This year’s gathering will happen in Orlando, Florida and run for five days.

Young professionals, or those who belong to the Millennial generation, are the target participants of the Next Gen Summit.  This event is relatively young, with its first meeting held in 2015. It is backed by partners such as Uber and Verizon.

What’s impressive with this business convention is that it has grown exponentially in the past two years. In 2016, there were more than 500 attendees. More than 10 venture capitals were supported by $1.6 billion in capital.  This year, the organizers hope to bring in a minimum of $3 billion in capital funds.

Aspiring entrepreneurs as well as bosses of start-up businesses should also check out the Start Up Conference 2017.  This is one of the biggest entrepreneur events in Silicon Valley, attracting more than 2,000 businessmen.

As the name suggests, this conference caters mainly to entrepreneurs looking to jumpstart their startup enterprises.  Topics include pitching venture capitals, finding co-founders, promoting a product, and reaching influencers, among others.

Media and Creatives

With social media taking over the world, media practitioners will learn a lot from business conventions. Events like the Print and ePublishing Conference slated this June in Chicago, for example, will teach them how to deliver the best content that’s accessible across all platforms. The BlogHer conference, meanwhile, attracts women bloggers and promotes economic empowerment and education. This conference is open to all bloggers, and provides a good platform for networking.

A similar event is Blogcademy held in multiple cities. This two-day blogging conference and worship teaches participants how to improve their content, so they can earn more from their blogs or websites. It can also teach them how to secure book deals and other publishing agreement.

Web designers, art directors and those in the creative field may also get into courses like Future of Web Design workshop. Scheduled this April in London, said workshop is expected to be participated in by engineers, web developers, and designers.

 

There is no denying that there are a lot of business conferences, seminars, workshops, and similar events that professionals can participate in. These events are all geared towards updating the skills and knowledge of participants, provide a venue for networking, and in some instances, allow attendees to earn continuing education credits.

Professionals should be wise enough to attend these events, as this won’t only help in advancing their career. They can get the chance to travel for free, as they can claim their expenses as deductible in their next tax returns.

Deducting Your Trip To India – Detailed Business Expense Guide

Feb 21, 2017 Posted by Sanjiv No Comments

Suppose that you have just arrived from a two week trip to Europe, where you were able to close some deals while visiting some old friends. You’re so happy not only because you were able to snag more business, but you were able to bring home some souvenirs for your family and friends. And of course, you were able to squeeze in some time for relaxation and got to see top sights like the Big Ben and the Eiffel Tower.

But did you know that you can even reduce your next tax bill by declaring your recent trip abroad? Indeed, jet setting can save you a significant amount of money, but only if expenses satisfy certain conditions.

Business Related Travel Expenses are Tax Deductible

According to the Internal Revenue Service (IRS), you can deduct ordinary and necessary expenses for travel away from home or business as long as these are connected with your business or job. This applies to both domestic and international travel.

What are ‘ordinary’ expenses? The IRS defines this as a common or accepted expense in your trade or business. For instance, you can consider the costs associated with distributing promotional literature like newsletters and holiday cards as ordinary expenses.

On the other hand, a necessary expense is defined as something helpful and appropriate for your business or work.  Your business trip, which allowed you to close new deals, can be considered as one.

The IRS says that for travel to be considered deductible, it should be ‘away from home.’ This stipulation is almost always  satisfied for international travel. The IRS will consider  you to be away from home if you are on travel outside your tax home (where you live or work)  for a time longer than a typical day’s work.

Keep in mind, though, that eligible deductions for business travel are only for temporary work on the road. If you spent more than a year on the road for a business travel, then it is considered an indefinite assignment and thus doesn’t qualify you for a tax liability. Even short assignments to the same place during a fiscal year may be considered by the tax authorities as an indefinite assignment.

Eligible Business Travel Tax Deductibles

Now you may ask—what are the travel related costs that you can normally deduct on your tax bill?

Among the travel related costs that you can deduct on your next tax bill are:

  1. It doesn’t matter whether you travel by plain or car; you can normally reduce the expenses related to getting to and from a business destination as long as it is not close to your tax home.

For example, you took a cab to get from the airport to the hotel where you met your client. You can deduct the cab fare as a work-related transportation cost. You can also declare car rentals, and even costs incurred when you took your own car (gasoline expenses, parking and toll fees, for example.) You can even claim the expenses of operating and maintaining a vehicle such as repairs, washing, oil change,  and tire replacement as tax deductibles.

What if your client provided you with a free ticket? Or a friend in London gave you a ride? Obviously, you can’t declare these as deductibles.

But what if you took an ocean liner on your way to London? Can you also deduce the costs on your next tax bill?

The IRS has special rules when it comes to luxury water travel. There is a daily limit on the amount that you can deduct. The amount varies depending on the time of the year. It is typically 200% of the highest federal per diem rate allowable during the time of your travel.

For instance, the highest federal per diem for the period January 1 to March 31 is $428. The daily limit on luxury water travel is double that amount, which is $856.

So let’s say that your total bill for a five-day cruise to London from New York for a business travel conducted in February is $5,000. You can only claim $4,280 as your deductible because you exceeded the daily limit of $856 per day.

  1. Shipping and Baggage. You can also deduct expenses that you incurred for shipping almost anything you need for your business or job while on travel. For instance, the $100 bill that you incurred for sending props or other materials required for a presentation.
  1. You can also deduct the full cost of the hotel room or other accommodations if your trip is overnight. Thus, you can reduce a $7000 per night stay at The Savoy on your next tax bill.
  1. You can deduce up to half of the cost of your meals if you are traveling for business. However, the meals should not be lavish or extravagant. There’s no clear-cut definition for a lavish or extravagant meal, but you can expect to get audited if you claimed a meal consisting of lobster and champagne as a deductible.
  1. You can also deduct any communication-related expenses like phone calls and faxes while you are traveling for business. This also includes international calls.
  1. Cleaning – this includes expenses for washing and ironing your clothes during the trip. Because you have to be presentable during your meetings with clients, right?
  2. Tips— you can also deduct the tips that you handed out to waiters, bellboys, and other workers.

Travel Considered Entirely for Business

The IRS maintains that only foreign travel which is spent solely for business is fully deductible. This means that if you spent your entire stay abroad on business-related activities, then you can claim all your travel expenses as tax deductible.

Since you did go spend time visiting friends and sightseeing during your trip, then you’ll have to allocate between tax deductible business expenses and the non-deductible personal ones.

But let’s face it–you do want to deduct the entire cost of transportation during your entire trip abroad, right?  You can deduce your travel expenses even if you didn’t spend the entire trip on business-related activities if you meet any of these conditions:

  1. You don’t have substantial control. According to the IRS, you don’t have substantial control over your trip if you are not a managing executive, or you are not related to your employer. The IRS defines a managing executive as an employee who has the authority and responsibility to decide on the necessity for business travel.

You also don’t have substantial control if you are merely an employee who was ordered by your boss to go to say, Paris, for a business trip.

But if you’re self-employed, then you might not satisfy this condition at all.  The IRS maintains that self-employed individuals and business owners have substantial control over arranging their business trips.

  1. You were outside the US for less than a week. The IRS will consider your travel entirely for business if you were out of the country for a week or less. However, you will have to count the day you return to the US, and not the day that you left.

This can get a bit confusing if you were traveling to different parts of the US before you left for London. For instance, say your home is in Denver. You left for New York on Tuesday, stayed there for a few days for a series of meeting, before flying to London on Saturday morning.

You had several business meetings in London on Sunday and Monday, then spent the next two days sightseeing. You went back to the US on Thursday before going back to Denver on a Saturday.

Although you were away from your home for more than a week, you were out of the US for less than a week. Remember that the IRS won’t count the day you left your home.

So, you may be able to claim the costs of your stay in London from Saturday and Sunday, but you won’t be able to do so for Tuesday and Wednesday.

  1. You spent less than a quarter of your travel on personal activities. But what if you spent more than a week outside the US? Does this mean that you can’t claim that as business related, and thus make you unqualified for tax deductibles?

You can, as long as you spent less than a quarter of your trip on personal activities.

So let’s say that you spent 14 days in London, and only got to see the sights and visit your friends in 1 to 2 days. You deduct the cost of the round trip plane fare, cost of meals, lodging, and other related expenses as mentioned earlier.

  1. Vacation was not a major consideration in arranging the trip. You can claim deductions on your tax bill if you can prove that a vacation was not a major consideration in arranging the trip.

Tips in Filing Business Travel Expenses

Now that you have an idea which business-related travel expenses you can claim as a tax deductible, here are some tips that you should remember so that you will be able to maximize your savings the next time you file your tax returns:

  1. Keep track of all your receipts and records. You can save a lot of time in looking for receipts when you keep every slip that you get during the course of your travel. You should also write on the back of each slip the location and date, the name of the person that you met, as well as the reason of the expense. This way, you won’t have to scavenge for slips when it is time to file your tax returns.
  1. Document everything. If you’re taking a client to a fancy dinner, you can claim that as a deductible. But you should be able to justify to the IRS that the nature of the meeting warranted such a fancy dinner. Thus it is recommended that you document the business you discussed so that you can justify the claim or pass an audit.

If you attended conferences or meetings while on travel, it would be a good idea to keep the programs or brochures you received. You can also keep the emails sent to you by people whom you met during the business meetings as proof to back up your claim.

Make it a habit to write down the names and business relationship of all the people you met during your travel. Write down their names as well as the business discussed.

You should also know that the IRS does not require receipts for travel expenses less than $75. So if you checked in a hotel for an overnight stay at a discounted price of $70, you’re not obligated to show the actual receipt.

  1. Try apps. If you have too many documents to keep track of, you might want to download and use apps for travel expenses. There are apps such as Tax Tracker that can help you in documenting business and travel expenses.

Mobile apps can monitor your travel expenses, time spent on the road, and miles traveled so you can file taxes and claim deductions quick, easy, and accurately.

  1. Be honest. The best way to avoid a date with the IRS is to be honest about declaring your tax returns. Deduct only the expenses that you are entitled to. Keep all supporting documents just in case you are called for audit. Remember, you not only end up losing deduction but also pay additional tax, interest, and penalties if the tax authorities find out that you make unsubstantiated claims.

Worse, the IRS may subject your tax return to further scrutiny. And you don’t want them to start digging.

The bottom-line is that you can make a lot of exemptions when you travel abroad for business purposes. Now that you know which travel expenses you can deduct, start saving those receipts and recording every expense. You’ll be surprised at the amount that you can save during the tax season.

Tax Deduction Strategies for Small Businesses

Apr 12, 2015 Posted by Sanjiv No Comments

As a small business owner, you can utilize a proactive approach and seize all opportunities available for conducting tax deductions as provided for under the law. Overlooking certain crucial write-offs leads to a bloated tax bill. Changes to the recent tax law have altered how Section 179 on deduction on bonus depreciation works. You can maximize write-offs for your home office and get deductions for business travel and automobiles, along with tax shelters for real estate property.

  1. Tapping into Major Tax Savings as per Section 179 Depreciation

A small business can benefit through huge increment in First-Year depreciation allowance as covered by Section 179. Following this law, you can deduct full cost of most used and new business personal property. The maximum amount provided for here got gradually boosted for 2009 from $25,000 to $250,000. Later on, the 2012 American Taxpayer Relief Act (ATRA) preserved the $500,000 maximum deduction adopted by the 2010 Small Business Jobs Act for two years. This provision was backdated to 1st of January 2012 and remained effective through 31st December 2013.

  1. Claiming Bonus Depreciation for All Qualified Assets

A business can lay claim to “bonus depreciation” for assets which are qualified and placed in service during the whole year. This business tax credit applies to the following:

  • Property with 20 years or below of cost recovery period
  • Qualified leasehold improvements
  • Depreciable software which is not amortized for over 15 years
  • Water utility property

 

  1. Triggering Quicker Write-Offs as per Section 179 Depreciation

It is possible to maximize Section 179 expensing deduction by undertaking some shrewd planning of your taxes through the ways below:

  • You can claim the allowance accrued through compensation payments if your company zeroes out its taxable income. The tax law limits annual deduction to amount of income taxable.
  • Boost the limit of your business income, which should include that accrued from your active businesses.
  • Maximize business percentage if claiming allowance for assets partially utilized for non-business reasons.

 

  1. Larger Deductions for ‘Heavy’ SUVs according to Section 179

If you opt to deduct annual expenditure as opposed to using standard mileage allowance, take note of an appreciably large tax advantage if owning heavy-duty vans, pickups and SUVs. These vehicles have gross vehicle weight rating or GVWR of over 6,000 pounds from the manufacturer and are viewed as “trucks” for purposes of taxation.

Such heavy-duty vehicles depreciate more rapidly than regular passenger vehicles, when used intensively for business purposes.

  1. Deductions of Fuel Tax for Business Vehicles

You may deduct automotive expenses via a standard mileage rate, set each year by the IRS. Doing this sets you free from having to account for actual expenditure incurred. For instance, business drivers got 56.5 cents for each mile in 2013.

  1. Tax-Free Family Vehicles as part of Business Deductions

Operation and maintenance costs are deductible for cars utilized in doing business, which includes depreciation. Your auto repair firm may provide cars for the whole family in this case. The business you own can deduct the entire amount of operating costs if your family members are employed by the enterprise. Car expenses which are deductable include:

  • Cost of gasoline
  • Repairs,
  • Insurance
  • Interest on car loans
  • Depreciation
  • Licenses
  • Taxes
  • Garage rents
  • Parking tolls and fees

 

  1. Writing off Home Furniture and Computer as part of Self-Employed Tax Deductions

Under Section 179, many taxpayers who are self-employed may deduct purchases for equipment, as opposed to capitalizing them. This section applies to the vast number of business assets, including furniture and computers meant for domestic use.

  1. Owning Your Business Premises

Once profits of your company start growing and business stabilizes, consider owning as opposed to renting your quarters. When evaluating the comparative costs, think of a reasonable time-period, such as of 10 years and factor into your calculations purchase price of your desired building at a prime location.

  1. Sheltering Real Estate Property of up to $25,000

Prices of real estate have recently gone down in many places, presenting great opportunities for investment. As well, business owners can enjoy tax shelters for investing in property. One has to own a 10 percent minimum portion of such investment property without involving limited partnership interests, apart from actively managing it. Business tax credit of 10 percent is available too for fixing old buildings, which changes to 20 percent if the building has historic significance.

  1. Turning Home into Rental Property

Many home owners have been adversely affected by recent devaluation in real estate property. This even gets worse due to inability of deducting loss from selling your principal residence.

Turning your home into rental property is a brilliant strategy in such situations. You only require holding it out for rent while relocating, before deducting losses once the place is sold. This is a shrewd tax move which capitalizes on an important distinction that applies to business or investment property.

Business Travellers Tax Deductions

Mar 17, 2014 Posted by Sanjiv No Comments

You might be surprised at some of the business expenses that are tax deductible for business travelers. It is important that you keep proper records and receipts. Handwritten notes are also important to keep track the reason for the expense, name of the person who met with you, the date and location.

There are many people who do not take advantage of all the deductions they are eligible for. Most of the time it is because they are lazy or do not keep proper records. All little extra time and organization can save you a lot of extra money.

If you travel for business and your employer does not reimburse all of your expenses, you are able to deduct any expenses you pay out-of-pocket that exceed 2% of your AGI. If you are the business owner or are self-employed, you do not even have to reach the 2% threshold.

Anything relating to your business is fair game including gasoline, airfare, fees for baggage, lodging, taxis, supplies, meals and phone calls. You are even allowed to deduct your dry cleaning, laundry service or bar tab while you are traveling.  The expenses have to be both necessary and ordinary. That means that they are typical business traveling expenses in your industry and necessary for your business. In other words, you need to prove you are trying to make money on the business trip.

What Happens When You Mix A Business Trip With Pleasure?

Business travelers need to be aware that the IRS is big on watching business travel related expenses because they know there is plenty of room for manipulation. They come across many tax payers that try to group personal expenses with business travel expenses. If you want to make the whole trip tax deductible, you need to make the primary purpose of the trip for business. You are able to take some personal time.

There is not anything wrong with mixing business with pleasure as long as you make the distinction very clear. Do not try to pass any personal expenses off as business expenses.

Also make sure that any conferences or conventions you attend are related directly to your profession or trade. The IRS wants to make sure they are really not disguised vacations. Make sure you keep any materials you receive at the convention.

What Is Deductible As A Business Related Travel Expense?

There are many things that you can deduct as a business related travel expense. If you attend a seminar or conference that lists an optional excursion for meet and greet purposes, you can deduct the expense even if is a balloon ride or trip to a winery. You need to keep the paperwork from the seminar listing the excursion. The trick is to keep meticulous records of all the expenses you incur when you are traveling for business.

If you cannot substantiate your tax deduction you will face serious penalties. In addition to losing the deduction and being required to pay the tax, you will have to pay interest and penalties. When your taxes are recalculated, you could get a 20% penalty for understatement if your taxes were understated by $5,000 or 10%.

It does not stop there. If the IRS finds a discrepancy, they will question what other deductions are personal or bogus. It is hard to get them to stop once they start digging.

Business Ttools

Dec 26, 2011 Posted by deepak No Comments

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Where is Your Tax Home?

May 25, 2017 Posted by Sanjiv 1 Comment

If your job requires you to travel from time to time, some of the expenses that you incur while traveling away from home may be entitled to tax deductions. In this sense, however, home does not necessarily refer to the place where you live but the place where you work. This is what the Internal Revenue Service (IRS) refers to as your tax home.

Determining where your tax home is is the first and most fundamental thing that you need to do if you want to determine if you are really traveling away from home.

Basically, your tax home refers to the general area of your workplace, regardless of where you actually live. So, if you work in New York, your tax home is New York.

Do not be confused if the place where you work is different from the place where you lay your head at night, because your tax home designation has nothing to do with where you live. In fact, you may travel miles from your permanent residence to your workplace every day, but your workplace will still and always be your tax home.

 Why You Need to Determine Your Tax Home

Often, when you attend a cocktail party and are asked where your home is, your answer is your current place of residence. However, that is not necessarily the case if the one asking you is from the IRS.  While their tax home is the same as their personal home for some taxpayers, the story is different for those who frequently travel for work or business. Don’t think that your tax home doesn’t deserve a thought, because it does matter especially for taxpayers like you.

According to the IRS, your travel can be considered deductible if your work or business requires you to be away from home longer than your normal work hours. Given that, it is clear that the key criterion in determining if your travel expenses are deductible is if your travel takes you away from your tax home.

Differentiating your tax home from your personal home is crucial because only those expenses incur while you are away from your tax home are considered by the law as deductible.

Your Tax Home, As Per the IRS

 IRS’ definition of tax home is plain and simple—Your tax home is your regular place of business or post of duty, regardless of where you maintain your family home.

Basically, your tax home covers the general area or the entire city where your business or workplace is located. If your office is somewhere in Cortlandt Street in New York, then your tax home is New York. If you travel to Louisville every week for your business but return to your permanent residence in Nashville on weekends, your tax home is still Louisville even if you call Nashville home.

 Why Your Workplace Must Be Your Tax Home

There is a reason the IRS requires every taxpayer to know their tax home, and there is a reason the tax home designation exists in the IRS law. The purpose of the tax home designation is for the deduction of travel expenses associated with work or business. This explains why in the eyes of the tax-collecting agency, your workplace is your home and not your apartment.

Imagine living miles outside Louisville but working in the city. If there is no tax home designation, then you must also be counting your house in Nashville out as your tax home. If that is the case, then theoretically, you can declare each and every expense you spend in Nashville as a business or work-related expense. The IRS is wise enough not to fall for such tricks.

When You Have More Than One Regular Place of Business

 Some taxpayers find it hard to determine their tax home because they have multiple places of business. Should that be your case, then your tax home must be your main place of business or the place where you conduct majority of your business. So, if you have offices in Nashville, Louisville and Franklin, then you must declare the place where you do most of your work as your tax home. In this case, the IRS expects you to consider the following in determining your tax home:

  • How much is the total time that you normally spend in each workplace?
  • How much work do you usually accomplish in each workplace?
  • How much money do you make in each workplace? Is the income you earn from conducting business there significant or insignificant?

Of the above mentioned criteria, the first one is the most important since the IRS states that the place where you conduct most of your business should be your tax home. Logically, the workplace where you spend most of your time is the same place where you conduct majority of your business.

Take this as an example. You reside in Birmingham since you have a seasonal job there for nine months each year. Annually, you earn around $50,000 from your seasonal job there. For the rest of the year which is equivalent to three months, you work in Atlanta where you earn $20,000. In that case, you may consider Birmingham as your main place of business since you spend most of your time there and you earn most of your significant income there.

When You Do Not Have a Regular or Main Place of Business

 Taxpayers who have more than one regular place of business and those who do not have a regular or main place of business usually have the same dilemma in determining their tax home. According to the IRS, for taxpayers whose nature of work causes them to not have a regular or main place of business, their tax home must be the location of their residence or where they regularly live.

Say you are a freelance web designer and do not have a regular office where you conduct business. Since your job requires you to visit offices of your clients to discuss business with them, and since you do not really have a workplace of your own, then your tax home is your house.

Freelance workers and travel bloggers are perfect examples of taxpayers who do not have a regular workplace, since they do not have a fixed place where they conduct business. In this case, you do most of the work at home so your tax home may be your actual home or your personal residence.

Take a look at these factors which the IRS considers in determining your tax home if you do not have a regular place of business:

  • You at least perform part of your business in the area of your personal residence and use it for lodging while conducting business.
  • There are living expenses in your personal residence that you are compelled to duplicate because your job or business needs you to travel away from home.
  • You do not abandon the area of both your place of lodging and personal residence are located, members of your family live with you in that residence, and you use that home for lodging most of the time.

Remember that you need to meet all the three criteria so you can consider your personal residence as your tax home. If you meet all the three factors, then any travel expense that you may incur away from your personal home can be considered deductible since they meet the “away from home” requirement for business travel deductions.

Unfortunately though, if you only meet one of the three factors, then the IRS can consider you as not having a true tax home so you can write off none of your travel expenses.

For example, your family residence is located in Indianapolis. In that city, you work 15 weeks a year. For the rest of the year, you work for the same employer in Cincinnati, where you dine in expensive restaurants and sleep in a rented apartment. For you, it doesn’t really matter whether you are in Indianapolis or in Cincinnati because your salary is the same whether you are in one city or the other. However, since you conduct most of your business in Cincinnati, that city is considered your tax home. That means that even if your expenses there are bigger than when you are in Indianapolis, you cannot deduct any of your expenses for meals and lodging while you are there. When you return to your family home in Indianapolis, you are away from your tax home so you can deduct the cost of your round trip between Indianapolis and Cincinnati, as well as part of your family’s living expenses for meals and lodging while working in your personal home.

When You Do Not Have a Fixed Workplace and a Fixed Home Address

 In determining your tax home, there is something much worse than having more than one regular workplace or not having a regular workplace at all– Not having a regular place of business or post of duty and no personal residence at the same time.

While determining your tax home is not that easy if you have more than one regular workplace, it becomes easy when you finally determine which among your workplaces is your tax home. And while determining your tax home is not that easy when you do not have a regular workplace, it becomes easy when you have a personal residence which you can call your tax home.

However, things become a bit complicated when you do not have a regular place of business and you do not have a place where you regularly live at the same time. In that case, the IRS considers you as an itinerant.

The IRS law states that the tax home of an itinerant or a transient is wherever he works. If you belong to this category, then you are not entitled to travel expense deductions because no matter where you work, you are never considered to be traveling away from home.

Since as an itinerant, everywhere you work is your tax home, you are never really away from home, which means that you cannot write off any of your travel expenses.

An outside salesman is an example of an itinerant. Say you are an outside salesman whose sales territory covers different states. The main office of your employee is in Memphis but you do not work or conduct any business there. Your work assignments are relatively temporary and you have no idea about the locations of your future assignments. Your sister is renting out a room somewhere in Saint Louis so you stay there for a couple of weekends each year, but you do not conduct any business in that area. You do not pay for your accommodation there either. Since you do not satisfy any of the previously mentioned factors that will make your regular home your tax home, then you are considered an itinerant and therefore have no deductible travel expenses.

 When Traveling is Considered Traveling Away from Your Tax Home

 Regardless of which of the abovementioned categories you fall under, all the said criteria boil down to the fact that determining your tax home is critical in determining your tax liability when traveling. Once you have already identified your tax home, it will become easier for you to know which of your travel expenses you should write off and which you should not.

It is also worth mentioning that these tax home rules are the same whether you are an employee or a self-employed individual, although there are certain instances when the degree to which you can write off your business travel expenses may differ.

For instance, employees can only deduct work-related expenses that they have not reimbursed from their employers, while self-employed individuals can deduct the full amount of their travel expenses as long as they are incurred away from their tax homes. In any case, remember to keep well-organized records like receipts, checks and other documents to support your deduction claims.

Tips to Reduce Self-Employment Taxes

Mar 25, 2018 Posted by deepak No Comments

Tips to Reduce Self-Employment Taxes

Self-employed individuals must know that aside from income tax, they must pay self-employment taxes which support Social Security and Medicare programs. There are ways that can reduce the amount that they owe.

More and more individuals opt for self-employment as opposed to being employed because they can set their own hours and are not pressured to punch in a fixed schedule each morning. However, when the day ends, they still have similar tax obligations as full-time employees. Aside from the income tax that they have to pay, they must secure payment for self-employment taxes such as Medicare and Social Security. The fact that they have their own businesses definitely increases the exertion of record-keeping that must be done for tax purposes. Whenever the self-employed digs through countless boxes of business receipts, they envy those who are just required to enter their over-all income from their W2 form.

Self-employment is synonymous to freedom. It is also synonymous to responsibility and therefore, lots of expenses. There are self-employed individuals who choose this path because they prefer the first two, but they cringe every time it is tax time. This is because they are not completely aware of some of the tax-write offs that they are actually entitled to.

It may seem daunting at first but there are various ways that allow the self-employed individual to reduce the amount owed.

Educational Expenses

When it is time to file income tax returns, self-employed individuals must not hesitate to take claim of their benefits simply because they are their own boss. For example, an expense that they can get paid for is “educational expense.” This is a deduction that is often overlooked. If the self-employed is taking courses or even buying material that is needed for research, then this is considered a deductible because it makes one’s work more effective.

Individual Retirement Plans (IRAs)

The best tax write-off for those who are self-employed is their retirement plan. This is because they have no employees that they are required to set individual 401k plans for. However, for those who are self-employed and have employees, it is recommended that they opt for SIMPLE or what is also known as the Savings Incentive Match Plan for Employees IRA. This is an IRA based plan that provides small employers a method that is simplified and easy to understand so that they can also contribute to the retirement of their employees.

Therefore, retirement plans are the best kind of tax deduction. To top this off, the government even assists in funding this.

Self-employment taxes 101

Self-employment taxes are up and about so that the programs from Social Security as well as Medicare are funded. Employees must pay similar taxes by going through what is known as employer withholding. Employers make additional tax contributions and they do this for their full-time employees. Self-employed individuals must pay all these taxes on their own.

Tax Deduction for SE

The IRS or the Internal Revenue Service requires those who make $400 or above this amount in being self-employed to file a tax return. The return must have a Schedule SE. This is used to calculate how much taxes that the self-employed individual owes. However, when 1040s are being filled out, the IRS lets the self-employed deduct a percentage of their tax payments and also adjust to their income. They can also deduct around 50 to 57% of the self-employed tax payments. The exact amount depends primarily on how much the self-employed can earn.

S Corp Savings

 If the self-employed create a business as a corporation or an LLC (Limited Liability Company), then making the S Corp election with IRS can present opportunities that also reduce their self-employment tax liability. With S-Corp,  individuals pay a reasonable salary from their earnings. They can also distribute the profits that remain to themselves as well as the other shareholders and even the partners and leave the remaining in the business. There are situations that the money is in excess to the salary that is calculated for the income tax but is not exempted for the employment taxes.

For example, if the self-employed operates the business and lists this as a sole-proprietorship then they earn $100,000 for that given year. Self-employment taxes are then due on that amount. However, there are also appropriate circumstances along with the S Corp that the amount may also exceed the salary that is reasonable for the self-employed to not be subject to self-employment taxes.

Reducing Net Profit

The Schedule C-EZ or popularly known as the Schedule C calculates the net profit of the self-employed individual. They must then include and list this as an income on their 1040. They can use this on Schedule SE so that self-employment taxes can be calculated. The net profit is also equal to the gross recipients that the individual earned after business expenses have been deducted. This lowers the net profit number. The lower the amount is, then the lower the employment tax bill is.

In order to reduce self-employment taxes, the individual must also be extremely accurate and thorough when filing and preparing the Schedule C. This ensures that the deductions are possible. The business expenses must be necessary in order to operate the business as a deductible. This cannot be filed as personal in nature. There are various types of deductible business expenses. These are cost of acquiring as well as maintaining a business vehicle, office rent, calls made and office equipment and supplies.

Using the home or dwelling for business

Most self-employed individuals start their businesses as home-based businesses. Therefore, they must determine which business costs are deductible. They should always keep track of the expenses that are related to their housing costs because their houses are the locations for their business.

If the taxpayer’s gross income from the business exceeds the total expenses, then they can deduct all the expenses that are related to their business use in their home. If the gross income is less than the total expenses, then the deduction is also limited to the difference of the gross income and the sum of every business expense that the individual would pay if the business is not conducted in the home. These expenses also include the Internet, phone lines and other costs that the business accumulates.

The individual must have a home office that is exclusively used for the business. This is because the Internal Revenue Service requires self-employed individuals to document this.

Deducting Automobile Expenses

If the individual travels for the business, even if it is short distances in the city, this must be deducted and documented as business miles traveled on the tax return. The taxpayer can also file the over-all actual expenses that has been incurred and use the standard mileage rate that is prescribed by the IRS. The IRS also has a mileage rate that is allowed and should be checked each year that they can change.

If the taxpayer decides to use the actual and over-all car expenses, they have to include depreciation, insurance, registration, payments, licenses, maintenance, repairs, garage rent, fees for parking and too. If taxpayers decide to use the standard mileage rate, it would be best that they keep a log. Document daily, weekly and monthly usage of miles and also distinguish the business use from the personal use.

Depreciation of equipment

There are some people who are self-employed and can purchase the equipment and property for the business. If they expect that the property will last longer than a year, it could also be depreciated on the tax return. According to the IRS, claims regarding property must meet these criteria: the taxpayer must own the property and it must be held and used to generate income. The property must have a useful life, meaning the individual can guess how long the owner can generate income from it. It may not be considered a useful life if it is just a year or less and it can also not be disposed and purchased in the very year.

There are certain repairs on the property that has been used for the business that can also be deducted. Another advantage is that it facilitates the system that lets the individual track the changes conducted every year.

Other areas to explore

There are deductions that can be missed especially in advertising as well as promotional expenses, air, bus and train fare and banking fees. Restaurant meals along with other entertainment costs are also easily written off as long as these are necessary and important business expenses.

In addition, self-employed individuals are suggested to consider health insurance premiums which represent a credit and not a tax deduction. This is because the credit directly goes against the taxes and not a reduction of the income.

No matter which expenses that the taxpayer discovers can be written off, the important thing to remember is that records must be accurate throughout the year. Save the receipts, as well as email receipts and log and file these so that it is easy to retrieve them during tax time.

Long-term tax saving strategies

Individuals are encouraged to not look at the last-minute write-offs especially when considering the tax deductions from being self-employed. They should think about laying long-term strategies connected to saving money especially in an annual context. This is highly suggested if the taxpayer earns a lot.

Accountants are trained to tell their clients what they have to pay. They are not working to come up with strategies for payment reduction.

To reduce the gross taxable income, taxpayers are also asked to consider setting up a benefit pension plan that is well defined. The basis of this plan are age and income. The older the individual is and the higher his earnings, the more they are allowed to contribute. Another alternative plan is an age-weighed profit-sharing plan. This is similar and beneficial to entrepreneurs that hire several employees.

Another strategy for business owners who earn higher than average have their own building through LLCs or limited liability companies. A similar business structure is required to pay rent. This rent is then used to pay the mortgage. However, this is also regarded as a business expense strictly for tax purposes.

Self-employed professionals are required to have liability insurance and they should consider setting up their very own insurance company. A captive insurance company insures the risks that any businesses can accumulate. The premiums are also tax-deductible.

However, they are warned that if the money has been accumulated along with claims that are minimal, then the money is taken out and filed as taxable under capital gains. This is actually not a retirement strategy, but it saves them money and lets them pay this by themselves instead of getting an insurance company to deduct this as premiums. With these long-term strategies that end up complicated, financial planners and business attorneys must be consulted in order to ensure that the best plan possible is made for the business to thrive.

Being self-employed also means taking on costs and risks that are not encountered when they are employed by someone else. They are responsible for obtaining customers and generating income. They also have to constantly prove the value of the service and the product. They also have to pay the internet bills and phone bills that are incurred to get and also retain these customers. Other costs include travel expenses for meetings and above all, liability insurance just in case they are sued.

Numerous tax codes have been written in order to soften the blow of covering tax costs. Everyone must claim the business tax deduction that they qualify for. The profitability of the business depends on minimizing the costs as well as maximizing the resources. There are small business tax deductions that are regarded as more complicated. Remember that any time that the cost is an expense that is legitimate, then the IRS will eventually examine this and see if it can be audited.

You will pay more taxes this year unless you set up a corporation

Feb 22, 2018 Posted by deepak No Comments

Using Corporations as Tax Shelters

A great form of protecting assets is creating a corporation. However, not a lot of people are aware that corporations can be made into tax shelters as well. Tax shelters are legal ways that allow to minimize or decrease the taxable income. This reduces the tax liability overall.

It is important to note that it is not as simple as incorporating this so that a tax shelter can be automatically granted. The real advantage of this route is that expenses are deducted in the business expense. This is not personally deductible. Businesses are taxed based on the profits that they make, and not the gross revenue that they accumulate. In a nutshell, businesses are taxed per dollar that they earn. This is extremely different from individual tax returns. The latter are taxed depending on their gross income.

To explain it thoroughly, individuals then earn money, but their income is taxed so whatever they have left from that is what they take home and spend. On the other hand, businesses and corporations earn money, spend what is necessary and are only required to pay taxes by setting it alongside the profits that they made.

There are businesses that incorporate so that they can avoid or lessen the taxes that they required to pay. This action is illegal. Business owners must have a legitimate reason and a motive to incorporate. If the business is sole proprietorship, then incorporating can also help with protecting the assets as well as time saving.

Timing Is Important

For those who are considering to start a new business, this is the perfect time. As a general rule, it is not practical to recharacterize the expenses the minute they are incurred. This means that if businessmen start their businesses, they should also incorporate this in the very year that their tax savings are captured of its costs. Failure to do so means that the entrepreneur can easily miss out on the significant cost savings.

Here is an example. There are people who can ultimately turn their hobbies into businesses they can do on the side. There are others who can also make this into a full-time business. This depends on the demand of their chosen entrepreneurial endeavor. These business owners must know that they should report this extra income that they are acquiring to the IRS. They will be taxed on it as if it was their income from the regular nine to five job.

These entrepreneurs can reduce their taxes if they can put the supplies that they purchased their expenses. However, all these costs must be listed as such or this will not be tracked. A way to do this efficiently is to be sure that this is incorporated during the tax year and then tracked. Startup costs can also be documented before the actual businesses started to make money. These can also be regarded as expense costs and can easily go through the incorporation process.

Unique Tax Deductions on Small Businesses

Small businesses can also make the tax deductions that the regular tax payers cannot. An example of this is education. If the employee is required to undergo some kind of further training in order to advance his or her skills in the profession that he or she is in, then the employee can deduct the costs related to tuition as business expenses. Education costs can also include more than just the traditional “college” setting. This also includes expenses incurred by trade shows, seminars and other avenues that are used to continue and pursue further education. CDs, books, DVDs and magazines that are purchased by industries and businesses can also be deducted. Looking at this example, it proves that investing in learning at any craft is good for a business.

Travel expenses can also make good business deductions. If individuals have to travel because they are expected to visit clients and attend shows or conferences, then the expenses from that travel are entirely deducted. This includes expenses from flights, cabs, hotels, gas and on-the-road costs. Food can also be in the budget.

Employees of a small business can also be good sources for deductions. There are small companies that resort to not hiring employees because there are complicated employment laws that also come with tax requirements but if the need for it arises because the business is growing, then it may just be worth considering. These are employee-related experience can also be regarded as deductible business expenses:

  1. Employee wages and salaries
  2. Benefits of employees (life insurance, health plans and educational assistances to name a few).
  3. Office related expenses like supplies, desks, computers and others.
  4. Profit-sharing or pension plans

Entrepreneurs who can manage to run the retirement savings of their company can also decrease the over-all taxes that they are expected to pay.

The Kind of Corporation is an Factor

“S” Corporation do not pay any income taxes by itself. It resorts to a “pass-through” entity. What this means is that the shareholders can include what they have in the company and its profits on the tax return that they file. They can pay these on the profits depending on their tax rates as individuals.

Whereas with “C” corporations, they have their own tax rules. It is also taxed separately and per entity. Because of this, there are some deductions that are only exclusive to C-Corporations. Companies pay the taxes on the profits that the shareholders do not possess. What happens is that shareholders are then taxed on the total income that is provided to them by the C Corporation. This results to double taxation. The first level is the corporate and the next level is the personal. This can be avoided by small businesses when their directors and managers expense out the profits of these companies through the form of salaries and other perks.

While both of the types of these corporations are offered in the form of tax advantages so that these can corporate the protection of the owners, then the S Corp is then viewed as the best deal for the companies that are on the start-up level. There are many businesses that tend to lose money during the first few years upon starting. The S Corporation lets these losses “pass through” so that the individual tax returns of the owners can reduce the taxable incomes. An example of these is that S Corps can enable the owners of the business to pay less on the Social Security Taxes and Medicare.

Key Facts:

  • Avoiding taxes by using corporations as tax shelters consist of 1/3 of the federal revenues.
  • US corporations amount to $90 billion in the form of dodged income taxes and this is done by shifting the profits and then turn these to subsidiaries.
  • US corporations acquire $2.1 trillion in profits – a number of this has not been taxed in the States.
  • General Electric, because of its outsourced businesses that is set offshore, managed to accumulate a total of $27.5 billion from 2008 through 2012. However, they only claimed tax refunds that amounted to $3.1 billion.
  • Apple also managed to acquire $74 billion on worldwide sales from 2009 to 2012. This excludes the United States. They paid almost nothing in American taxes.
  • There are 26 profitable firms on the Fortune 500 that did not pay federal income taxes from 2008 to 2012. 111 of these corporations are large and profitable and did not pay federal income taxes.

 Points To Consider

  1.  Tax breaks for corporations that merely ship jobs and also earn profits offshore must be ended. America is worth investing in so that there are jobs created for Americans.
  2. Whenever the corporations resort to tax havens so that they can avoid paying taxes, those that do the right thing have to do this for them. Families end up paying higher taxes and they get fewer services. Everyone else get a big deficit from this.
  3. Large corporations that dodge taxes do this by putting small businesses, so they can go around the rules and take advantage of this. Every business must be on the same level of the playing field.
  4. Corporations also claim that there are 35% in the form of corporate income tax and this is the highest when set to taxes around the world. This makes the business uncompetitive and also decreases job opportunities. Corporations fail to pay enough in taxes. There are many who even pay too little. The average American family pays more in income taxes in a year than General Electric. There are also large corporations that are highly profitable and pay tax rates amounting to less than 20%. They pay absolutely nothing. If these corporations pay less, then everyone else have to pay more. Corporations must pay what is required of them to make this fair.
  5. Corporations reason that repatriation tax holidays allow them to tabulate the profits and then invest and also create jobs. However, truth of the matter is that this can only result to failure. Companies have to cut jobs and also line up pockets for the corporate executives and the big shareholders. Tax holidays can also give tax breaks to the corporations that have accomplished the most in the aspect of dodging their taxes and paying what is expected of them.

Overview

A number of US corporations go through offshore taxes and perform a number of accounting gimmicks so that they don’t have to pay a whopping $90 billion per year just for federal income taxes. This is the large loophole when discussing US tax law. It also enables the corporations to avoid paying the taxes on the foreign profits unless these are brought home. This tactic is commonly regarded as deferral. It provides huge incentives to keep the profits offshore and for as long as this can be done. The corporations choose to not bring the profits home and at the same time not pay the US taxes that come with this.

Deferral in the corporate setting is an enormous incentive and can also be used as an accounting trick so that it would appear the profits were earned and then generated in the tax haven. The profits are eventually funneled in the form of the subsidiaries. This is often done by companies that have few employees and not as much business activities. This is effective because firms eventually launder the profits so that paying taxes can be avoided.

Loopholes used to Shift US profits to Tax Havens

  • US firms can start a subsidiary outside US soil and just focus offshore so that there are channels for the billions of dollars in profit to go through. This makes it disappear for US tax purposes. There is actually a box that can be checked on the IRS form.
  • Corporations can also sell the right to the patents as well as the licenses in a low price. This can then be licensed back to US ground and set the price so steep when sold within America. The goal is “transfer pricing” because it makes it seem that the company can generate profits in the tax havens but not in United States.
  • Wall Street banks along with credit card companies and the other corporations that have large financial units can also move the US profits offshore and then regard this as a loophole and call it “active financing exception.”
  • US corporation can also do the inversion by then buying a foreign firm and then eventually claiming this as the new company that is merged and regarded as foreign. This then reincorporates in the country that is the tax haven and put this in a lower tax rate. The process then takes place on paper and the company does not have to be moved to the headquarters in the offshore setting. The ownership is also unchanged, and the privileges can be enjoyed upon operating and for the taxes to be payed at such a low rate in foreign settings.

 

The way to solve this is to just end the deferral. Corporations should pay the taxes based on the income that they get offshore as opposed to indefinitely paying the income taxes in the US setting. This can also remove the incentives that are shifted by the US profits and to the tax havens.

Visiting Your Dream Destination While Winning the Audit: Here’s How You Do It

May 8, 2017 Posted by Sanjiv No Comments

Taking a trip to the destination of your dreams sounds fun, but nothing is more fun that taking a trip while winning the resulting audit at the same time.

Yes, you read it right. Turning your vacation into an honest-to-goodness tax deduction is possible. In fact, you can travel throughout the Mediterranean with no or very little travel costs. The key is by making your trip either a passive or an active business trip. Remember that the only way you can reduce your transportation expenses is by making business the primary purpose of your trip.

As a business owner, you know that taking a vacation doesn’t come easy. Aside from the fact that you don’t have paid vacation leaves, you can’t just entrust your business to someone else while you’re away. However, your advantage is that when it comes to business, you are free to mix pleasure with business. If you do it right, you make it possible for you to enjoy a vacation while reducing your tax bill.

 Why Need to Make Your Trip a Business Trip

 If your purpose is to lower your travel expenses, making your vacation a business trip is a must. This is because it becomes a lot easier to deduct transportation expenses if the purpose of your trip is business.

You should also not forget to count up the number of days allotted for business and for personal activities in your planned trip. As a rule of thumb, make sure that majority of your travel days is spent on business activities. A weekend that is squeezed in between workdays can also be counted as business days. Hence, you can fly to Hawaii on a Thursday and meet a client the following day, stay there for the entire weekend, have meetings again on Monday and Tuesday, and fly back home the following day. That way, you’ve already had seven business days and you can enjoy Hawaii and still expense your transportation costs.

 How to Make Your Vacation Look like a Business Trip

 Now that you know that the key to reducing your travel tax is by writing it off as a business trip, the next thing you have to figure out is how to actually do that. Well, of course you cannot just take off for your dream destination with your business cards and pretend that you are going there for pure business.

Today, for your trip to be considered a business trip, you have to have a prior set business purpose. That is as per the requirements set by the IRS. Simply put, you need to schedule at least one business appointment before leaving for your trip. If you fail to do it, then you will never be able to expense your transportation costs.

There is nothing wrong with deducting part or your entire trip by deducting your travel costs as business expenses. In fact, this is the reason many professional groups host their annual conventions in popular tourist spots. Combining your vacation with business travel is not a bad idea at all, as long as you do it right.

 The IRS Rule on Travel Expenses and Deductions

 If you love the idea of traveling with minimal travel costs, it is necessary that you identify which among your travel expenses are tax-deductible and which are not. Once you have identified that, then you can finally let your tax savings pay for the deductible part of your trip.

Writing off some of your travel expenses may invite scrutiny, but don’t hesitate taking deductions if you think you are entitled to them. However, you have to be careful when it comes to this part and remember the IRS rule. You cannot simply claim that your trip is a business trip just because you have to visit an office somewhere. The IRS made it clear: “The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip.”

Expenses that are Considered Deductible

 You know that in every trip, your transportation costs–taxi fare, airfare, airport parking, etc.)–make up a huge part of your travel expenses. If you are good and careful enough, you can fully offset such costs so long as you meet the criteria set by the IRS. Aside from your transportation costs though, there are other expenses that can be added up, too.

The IRS Pub 463 has laid out the details when it comes to these expenses, but just to give you an idea, here are some of the basic things that you should take note of:

  • For each day that is considered business day, you are allowed to deduct the entire cost for your lodging, car rentals and tips. That means that if your weeklong trip to Hawaii includes five days of business and two days for your personal getaway, then you can legally deduct your hotel bill for all those five business days.
  • For each day that is considered business day, you can deduct 50 percent of the total amount you spent for food.
  • You can also deduct other miscellaneous expenses that are “ordinary and necessary” to your travel, like dry cleaning and baggage fees.
  • The catch is, you cannot deduct the amount spend for your family, in case they joined you in your trip.

 Simple Steps to Follow When Writing Off a Trip

  1.  Choose any place in the U.S. where you want to go.
  2. Decide how you want to write off your trip–as an active or a passive trip.
  3. Find a conference, convention or any event in that destination that is related to your business or profession.
  4. Book the trip.

 Things to Remember if You Want to Write Off Your Trip

 You have to go a long way to be able to write off your trip. The IRS has existing rules stipulating which particular expenses can be written off and which cannot, so it takes a dose of wisdom to avail of tax deductions without a hitch.

  1.  S. Trip vs International Trip. Deductions for business trips within the U.S. differ from deductions for international trips. If your trip is pure business and is just within the U.S., then you can expect your transportation to be fully deducted both ways. However, if your business trip is out of the country, then it has to be at least 75 percent business to be written off your plane ticket. If you go less than 75 percent, then the amount to be deducted will be just the percentage related to business.
  1. The Importance of Traveling via a U.S.-registered cruise. In the event that you are in a business-related cruise, make sure that you are aboard a ship that is registered in the U.S. and not in any other country. However, the rule is that a business-related cruise in a U.S. ship entitles you to only a deduction of up to $2,000 a year, regardless of how long or how frequent your trip is. Also, this has to come with a detailed written statement with tax return.
  1. On Overstaying. If you stay in Hawaii for a full week but the days dedicated for business is just five days, that’s fine. You do not need to work all day and end your staycation as soon as your business is done. Remember that spending a few more days in your destination will not disqualify you for deductions, but you have to ensure that your primary purpose for that trip is business and everything is well-documented.
  1. Family’s Expenses. When it comes to the expenses incurred by your family throughout the trip, the story is different. Unless they are employees in your company too, any of your family members is not entitled to a deduction because you cannot deduct expenses for anyone who is not really part of the business trip.

If you want a way out of this rule, the trick you can do is to find a means through which you can overlap what you have to pay for yourself with what a family member can pay for himself. For example, when you drive him in your car, your deductible transportation also gets him to the destination since both of you are riding the same car. Same trick applies if you share a single hotel room. It is important to note, however, that the costs incurred for the added occupants, the need for a larger room, for instance, are not covered by the deductions.

 

  1.  Miscellaneous Fees. We’ve been talking here of transportation costs like airfare, hotel expenses and food. But how about other fees that you may incur in the course of your travel? Well, it is normal for any trip to rack up some incidental costs, including laundry charges, tips, taxi fares, internet access fees and phone calls. The rule for such fees is simple. If these expenses are related to your business trip in any way, then you are free to write them off. Otherwise, you pay for them.
  2. Meal Deductions. When you go on a business trip with your associates, you are entitled to a deduction of 50 cents per dollar, which means you get to eat out at only half of your total meal cost.
  3. Record-keeping. As previously mentioned, the key to getting as much deductions as possible for your trip is to be careful. Since many business organizations abuse this area of the law, it is highly likely for the IRS to interrogate you when it comes to your deductions. When that time comes, you have to be ready to justify everything. Make sure that you keep all the necessary records, which do not only include the receipts but everything that will prove that you were actually out there for a business trip. Hence, you have to be meticulous in keeping even your itineraries and agendas.
  4.  Extravagant Expenses. You don’t want to be called an abuser of the law, so be reasonable. While you are free to write off some of your expenses since it’s a business trip, the IRS has the power to foul on whatever expenses it may find too extravagant. As the law stipulates, your expenses must be reasonable based on facts and circumstances.

On Documenting Your Trip

 As previously mentioned, you have to document everything so you will have something to present in case the IRS asks you to prove that your trip was actually a business trip. This may sound a bit demanding, but if that’s too big a deal to you, here’s the deal: You don’t really need to keep a pocketful of receipts for expenses smaller than $75.

While the IRS does not require you to keep receipts for a travel expense that’s worth under that amount, that doesn’t necessarily mean that you are already off the hook when it comes to record-keeping. Remember, your goal is to make as much expenses deductible as possible, so be responsible enough to document all your deductible expenses. That means if you stayed at a hotel that’s worth $75, you still ought to have a copy of its receipt so you can expense it.

Tax Strategy

 The only best way for you to avoid trouble when it comes to tax strategy is to be honest. Do not deduct expenses that you are not entitled to and keep all the necessary documents that you will eventually need to back up your claim for deductions. Remember that substantiating your claim is important because if you fail to document your expenses, you are entitled to serious penalties such as losing all the deductions altogether and having to pay additional tax on top of penalties and interest.

The bottom line here is that there are existing rules on travel deductions and you’re not supposed to push these rules. However, there is no reason that you cannot tack on some days of fun when you are out there for business.

Thinking About Becoming An Enrolled Agent ?

Mar 25, 2017 Posted by Sanjiv No Comments

 Do you want to be called a tax expert? Is it your goal to represent taxpayers before the IRS? Do you desire to be respected as a professional?  If so, you should work towards becoming an enrolled agent or EA.

Enrolled agents are specialists who represent the cream of the crop when it comes to taxation. They are the only federally recognized tax practitioners who can represent taxpayers before the Internal Revenue Service.

EAs and CPAs can help taxpayers facing the various tax problems:

  • Tax evasion
  • Tax fraud
  • Tax debt
  • Failure to file/pay tax penalties
  • IRS audit
  • Tax liens
  • Tax levies
  • Unfiled tax returns
  • Appeals
  • Collection issues

There are only less than 50,000 practicing EAs in the United States, according to the National Association of Enrolled Agents (NAEA).

The relatively small number of practicing enrolled agents in the US can be attributed to the expertise necessary to become one, as well as the stringent requirements for maintaining the license.

While it isn’t easy to become an enrolled agent, the rewards are more than worth it, so to speak.  Enrolled agents are highly in demand. They are needed by law and accounting firms.  These professionals can also find employment in banks and investment firms. Some pros also choose to put up their own private practice.

How to Become an Enrolled Agent

 Unlike other professional designations, there is no educational requirement for a person wanting to become an enrolled agent.

However, you must prove your knowledge on tax related matters by either passing the EA exam or working with the IRS for at least five years.

The EA exam is also called the Special Enrollment exam. It consists of three parts, with each one testing your knowledge on taxation.

The first part concerns individual taxpayers, covering sections on income and assets, deduction and credits, taxpayer information, taxation and advice, and returns for individuals.

The second part focuses on business entities with sections on businesses, specialized returns and tax payers, and business financial information. It is widely considered by EAs as the toughest section in the exam.

The third part focuses on representation, practice, and procedure.

Aside from passing the test, you will be subjected to a thorough investigation conducted by the IRS.

Maintaining Certification 

If you successfully passed the exam, you will be federally recognized as an enrolled agent. However, you will need to do the following to maintain your certification:

  1. Renew your Preparer Tax Identification Number (PTIN) annually.
  2. Renew your status as an EA every three years
  3. Undergo 72 hours of continuing education (CE) every three years. There’s a minimum requirement of 16 hours of CE per year, with at least two hours on ethics.  The need to undergo at least two hours of ethics training annually is in line with the Department of Treasury’s Circular 230.

 Joining Professional Organizations

 There are numerous professional organizations of enrolled agents. The NAEA is perhaps the biggest and most prestigious of them.

The Washington, DC-based organization aims to promote the highest level of professionalism, skills, and knowledge among its members. It is also a staunch advocate of taxpayer rights.

Established in 1972 as an offshoot of the Chicago-based National Association of Enrolled Federal Tax Accountants, the NAEA has grown into a large organization with more than 11,000 members.

Those members are demanded to take 30 hours of CE every calendar year, or 14 hours more than the 16 hours set by the IRS. They are then required to report the number of hours of CE they’ve garnered in the past year for renewal of their membership in the upcoming year.

The NAEA lets its members earn missing CE hours in the next calendar year to make up for the less than 30 hours that they accumulated in the previous year.

NAEA Membership Benefits

 While there are other professional groups of enrolled agents, the NAEA is widely considered to be the most prestigious in the country. Aside from completing annual continuing education that surpasses the requirements of the IRS, NAEA members are known to abide by a code of ethics. They also conduct themselves in a very professional manner.

Once you become an enrolled agent, you should aim to join the NAEA. Becoming a member of this organization opens the door to numerous professional benefits such as:

  1. Continuing education. Members of NAEA can participate in seminars, conferences, and conventions that can update their skills and knowledge, and set them up for success. Some of the more common CE topics include ethics, tax preparation, accounting, advanced IRS summons, among others.
  1. Participation in year-long events. NAEA conducts seminars, conventions, and meetings during the entire year. These events provide networking and educational opportunities to its members.

A key event in the NAEA calendar is the NAEA national conference. This is the only annual educational event in the country designed particularly for Circular 230 practitioners looking to focus on client representation before the IRS. The event is anchored by the National Tax Practice Institute.

  1. Enhanced reputation. NAEA works to spread the word about the benefits of hiring an enrolled agent. It taps both traditional media such as print and broadcast and social media to effectively increase the public’s knowledge about enrolled agents, and thereby enhance the potential value of EA to taxpayers. Simply put, the organization strives to make the taxpaying public more appreciative of the value of enrolled agents.
  1. Information sharing. The NAEA offers a tax knowledge base where members can look for answers to some of the more frequently asked questions of tax practitioners.
  1. Marketing tools and membership discounts. The organization offers discounts for office supplies and software that their members can use in their respective offices.

Participating in NAEA Courses

 The NAEA as well as its state affiliates are known to host numerous continuing education (CE) courses. These courses are held all year-round and provide an opportunity for current EAs to hone their skills and keep themselves updated on the latest taxation issues.

Should you become an EA and eventually a member of the NAEA, you can browse the organization’s website, www.naea.org to find and apply for an organization-sanctioned course.

The website features the “Continuing Education” section where you and other EAs associated with the group can learn more about the requirements for continuing education credits.

There’s also the “Calendar” section in the website where NAEA events for the entire year are posted.  The events range from quarterly meetings, annual conventions, and seminars. Attending these events not only provide enrolled agents with the opportunity to earn CE credits, but also get some relaxation in a world-class resort.

For 2017, some of the cities where NAEA courses are scheduled to be held are Orlando, Las Vegas, Denver, and Reno.

Enrolled agents, thus, can improve their skills and knowledge, maintain their certification, and renew their NAEA membership while getting treated to a few days of leisure and vacation.

From a professional standpoint, NAEA courses also provide enrolled agents with the opportunity to network with some of the most dedicated tax professionals and learn from accomplished  tax authorities in the country.

NAEA and its state affiliates, in fact, offer its courses even to non-members.  There are seminars which are open to enrolled agents who are not members of the NAEA and its state affiliates. Signing up for a NAEA course may also benefits like complimentary membership, special member discounts, and access to special publications.

It is also possible to get discounts if a group of enrolled agents participates in a NAEA course. The NAEA and its state affiliates usually give discounts to groups of three or more colleagues who are joining a seminar, convention, or conference.

Enrolled agents can also attend one or two days of multiple-day seminars. The NAEA offers one-day only rates for most of its courses, meaning that EAs don’t have to attend the entire course.

The easiest way to register to any NAEA course is through the Internet. The NAEA website, as well as those of NAEA’s state affiliates, usually have downloadable PDF registration forms which enrolled agents can fill out to signify their participation in a particular course.

How to Save in NAEA Courses Participation

 Truth to be told, participation fees in NAEA courses and events aren’t cheap. The cost of participating in a continuing education course can run to hundreds of dollars. The cost may also be affected by other factors such as the location as well as the number of days of the event.

Yet enrolled agents can deduct the costs of their participation in NAEA courses in their next tax returns. After all, these are considered travel expenses which are defined by the IRS as common and accepted in a trade or business.

Enrolled agents can claim most of the expenses they incur while attending a NAEA organized event or conference. They can write off registration costs, lodging expenses, 50 percent of their meals, and incidental expenses.

Communication-related expenses during a NAEA convention, such as business calls and fax machine fees, may also be written off by enrolled agents. The same goes for other ordinary and necessary expenses related to the business travel like dry cleaning and laundry as well as tips paid for any expenses during the convention.

Transportation expenses can also be written off by enrolled agents who participate in a NAEA course. These include airfare, bus fare, or taxi fare between the enrolled agent’s home and the location of the event.

Since most NAEA events are held in the United States, enrolled agents should have no problems claiming the expenses they incurred in participating in a NAEA continuing education course. However, it is worth mentioning that even conventions held outside the United States may be deducted as a legitimate travel expense.

These include countries such as Aruba, Bermuda, Bahamas, Dominica, Dominican Republic, Costa Rica, Republic of Palau, Panama, Trinidad & Tobago, Jamaica, and Honduras, among others.

Of course, enrolled agents know very well that there are also other factors to be considered in justifying the location of a convention. These include, among others, the residence of the participants, purpose and activities of the convention, and locations of previous events.

Claiming travel expenses in the next tax return isn’t the only way for enrolled agents to save the next time they participate in a NAEA course. They can also seek the assistance of professional EA groups. There are numerous organizations of EAs – and not just the NAEA– that offer scholarship programs to  both current and aspiring enrolled agents.

For example, the California Society of Enrolled Agents offers scholarship to California residents wishing to pursue accounting, finance, and other courses in preparation for the special enrollment preparation.

It also offers scholarship to current EAs in California who wish to take up courses like Tax Court in their desire to broaden their knowledge in the field of taxation.

The NAEA, meanwhile, has its own scholarship program funded by its members. This grant covers the registration expenses of educational programs offered at NAEA conferences.

Joining Online Courses

Enrolled agents may also join online courses or webinars offered by the NAEA.  Online courses are a lot cheaper than seminars, conventions, and other continuing education classes offered by the organization.

Moreover, these courses are suited for enrolled agents who don’t have the time to attend seminars or meetings organized by the NAEA. Participants of online courses can also earn continuing education credits.

There is also a lot of variety in the topics discussed in online courses. Some may be aimed at enhancing the knowledge and skills of enrolled agents such as seminars on tax update, while others may be focused on enabling EAs to improve their practice such as using social media to reach out to more potential customers.

There are a lot of career opportunities awaiting enrolled agents in the United States. Organizations particularly the NAEA are more than willing to help professional growth of EAs. One way to  achieve this is the offering of various NAEA courses such as seminars, conventions, and meetings.  Enrolled agents should be pragmatic enough to grab the opportunity and participate in NAEA courses, whether held in or outside the US.