Are you deducting unreimbursed partnership expenses on your tax return? Unreimbursed expenses are ordinary and necessary expenses incurred which are not reimbursed by the partnership. Examples are: travel, mileage, business meals, professional organizations and supplies.
The IRS is cracking down on these expenses. A partner cannot deduct expenses incurred on behalf of the partnership if the partnership should have reimbursed the partner. The partnership agreement must say that they will not reimburse the partner for specific expenses in order to be deducted on the personal return.
It may be time to dust off your partnership agreement and take a look at what it says about expenses incurred by partners.
Let us know if your partnership agreement needs to be updated or if your partnership needs to start reimbursing you for more expenses?
The new laws make tax planning essential.
How many have purchased an item online because you did not have to pay sales tax?
The growth of online retailers has sky rocketed giving them an advantage over the brick and mortar store. Therefore, the U.S. Supreme Court recently ruled in South Dakota v. Wayfair, Inc. that internet retailers are required to collect sales tax even in states where they have no physical presences. One of the largest online retailer, Amazon, already charges.
In Tennessee, if merchandise is bought through the internet, over the telephone, from catalogs, etc. and sales tax is not collected, the purchaser is responsible for paying the use tax. Use tax is the same as sales tax, but it is called a use tax when the purchaser pays the tax instead of the seller. Tennessee has current laws to insure out-of-state dealers collect Tennessee sales tax but is not enforcing them at this time.
Watch receipts and see if sales tax has been charged. Let us know if assistance is needed regarding additional sales tax to the Tennessee Department of Revenue.
These new court rulings will also affect businesses. If a business ships products out-of-state and has not charged sales tax, it may be liable to collect sales tax for that state. At this time, we don’t know how each state will handle this, but be prepared for changes. If you regularly do business in another state, give us a call; so we can research for you.
2018 Standard Mileage Rate Released
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
14 cents per mile driven in service of charitable organizations.
Tax Reform for 2018
The House and Senate have both passed Tax Legislation! Now they have to come together to make it a law. Click here to see a comparison of each bill.
Permanently Extended Tax Provisions
Educator Expenses: Deduct up to $250 out-of-pocket expenses incurred for books, certain supplies, equipment, and supplementary materials used in the classroom. The PATH Act of 2015 makes this deduction permanent and provides for indexing the $250 ceiling for inflation after 2015 ($250 in 2016). In addition, beginning in 2016, this deduction includes professional development expenses, which are expenses for courses related to the curriculum in which the educator provides instruction.
State and local Sales Tax Deduction: Taxpayers can elect to deduct state and local general sales taxes instead of state and local income taxes. Since we don't have a state income tax, this is a great option for taxpayers in TN. You can either use actual sales tax expense or an optional IRS sales tax table. You may also add sales tax paid for specific large items such as a motor vehicle, a boat, construction or major renovation of your home.
Charitable Distribution From IRA: Individuals age 70 1/2 and older can make a tax-free qualified charitable distribution from an IRA directly to a qualified charitable organization. You can exclude no more than $100,000 from income. For joint filers, each spouse can exclude up to $100,000. This distribution does count toward the required minimum distribution.
The American Opportunity Tax Credit: credit of up to $2,500 for qualified educational expenses. The credit phases out when adjusted gross income reaches $80,000 for single taxpayers and $160,000 for married filing jointly taxpayers.
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