Deducting Moving Expenses

By Peter D. Rudolph

To deduct moving expenses, there are three requirements:

1. Related to the start of work The move must be closely related, both in time and in place, to the start of work at your new job location. Moving expenses within one year of the start date at a new job location are typically deductible. There are other rules that apply to this requirement.

2. Distance Test The distance from your new job and your former home must be at least 50 miles farther than your previous workplace was from your previous home. For example, if you used to commute 5 miles from home to your old workplace, your new workplace must be at least 55 miles from your old home. When it is your first job or you were unemployed, the job location must be at least 50 miles from your old home.

3. Employment time test After the move, you must work full-time at your new job for at least 39 weeks the first year. For taxpayers who are self-employed, the amount of the time test is increased. Self-employed must work full-time for a total of at least 78 weeks during the first two years at the new job site. When the income tax return is due before this test has been met, you can still take deductions for moving expenses if you expect to meet it.

When these three requirements are satisfied and you are able to claim this deduction. Here are a few types of moving expenses to consider when completing your tax return:

Travel - Transportation and lodging expenses for you and members of you household while moving from the old home to the new home are deductible. Travel meal costs are not deductible.

Household contents and utilities - The costs of packing, crating and shipping your things are deductible. You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home. The cost of connecting or disconnecting utilities is also deductible.

Certain expenses that are not deductible - Taxpayers cannot deduct as moving expenses any part of the purchase price of a new home or the cost of selling a home, or the cost of entering into or breaking a lease.
Reimbursed expenses - When the employer later pays for the cost of a move that has been deducted on your tax return, you may need to include the payment as income. The taxable amount is income in the year the payment is received.

Notifying the IRS of an Address Change - To update your address with the IRS use Form 8822. Generally, it takes 4 to 6 weeks for the IRS to process your change of address.

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Experts Can Help You Understand Business Tax Rules

By Alfred Ardis

A necessary part of running your own company is your business tax. Depending on your company type and size, you may qualify for incentives or considerations regarding your local or state obligations. You will be required to file paperwork for tax purposes as well, which involves much more than a simple, straightforward return. Make sure you work with an accountant who is experienced in the tax laws and rules in your area and for your type of business.

Based on where your company is located, you may have to pay local taxes on the property. Many local governments will, however, offer a reduced rate in return for you bringing jobs or other revenue to the area. If you are a small business, this may not apply.

State government may also offer incentives if your company is large enough to bring significant jobs to the area. This would mean, hopefully, that more people move to the area and thereby increase the economy. These incentives may be in the form of credits if your business hires and performs based on certain criteria. Annual state returns must be filed, so you'll want to understand your obligations as well as all the credits you may be due.

Federal obligations will include your annual return. You may also be required to make estimated payments throughout the year. If you have employees, you must pay according to certain criteria for each person. Not only do you need an accounting professional to help you understand what applies, but you also need a competent staff that is knowledgeable about withholding and legal requirements when hiring and paying employees.

An excise tax may apply if you manufacture certain products, operate specific businesses, use various kinds of facilities, equipment or products in your operations, or receive payment for certain services. Your accounting professional should be able to tell you what applies to your company.

If you are considering opening a new business and are exploring the best locations, you will want to investigate the laws in the area that may be the best for your situation. Some areas of the country are more eager than others to have certain types of establishments open to increase the economy and bring jobs to their particular city. In addition to those incentives, however, make sure you understand the long-term implications of opening a business in that specific area as far as your business tax obligations will be.
 What may sound like a good deal to start with may turn into a larger expense for your company down the road.

No matter if your company is large or small, spanning one local area or many states, consult a professional to understand the business tax rules and credits that apply to you.

For information on all things business tax, Michigan residents visit the Michigan Chamber of Commerce. Learn more at http://www.michamber.com/explore-the-issues.
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6 Surprising Truths About Tax Preparers

By Caroline Grimm

Choosing the right tax preparer for your business is a decision best not left until April. A former tax preparer and small business mastermind offers insights into the secret world of tax preparers.

1. All tax preparers are not created equal.

It stands to reason, somewhere in the country is the Worst Tax Preparer. The bad news is you may have already booked your appointment with him. Preparing taxes is a complex activity. So complex that many of us simply throw in the towel, pack up our receipts, and head for the nearest tax office. When you arrive at the office, you fully expect our tax preparer to be highly competent and completely vested in getting you the best deal in town.

Back in my tax preparing days, I worked for one of the big name tax preparation franchises both as a preparer and as a tax return editor. I worked with seasoned professionals and total neophytes. I well remember the first time I stepped up to the plate as a new preparer. I was terrified. Terrified the customer would know I was inexperienced. Terrified I'd make a huge blunder and the customer would pick up on it. Terrified the more experienced preparers would laugh at my mistakes.

I quickly realized that as inexperienced as I was, I still knew way more than my clients did. And because the franchise had great systems, others would be checking and re-checking my work so my mistakes and oversights would be caught before I did any damage to the client.

As a tax return editor, I saw and corrected more mistakes than you would feel comfortable knowing about. Which brings me to a very important point, tax preparation is not a cut and dried, read the manual, do the formulas, follow the instructions, and poof! you're done kind of activity. The tax codes in this country are complex and open to interpretation.

Tax preparers have a wide range of experience from none to grizzled veteran. They also span the continuum from ethical to completely fraudulent. The more complex your return, the more you need a veteran preparer. And if your preparer tells you about this great deduction that you can take and it sounds suspicious to you, listen to your intuition. It's the difference between paying a little bit now or paying a whole lot later.

2. Tax preparers are not business experts.

The only business experts in the world are those who are running successful businesses. Tax preparers are trained to understand taxes. They're trained to know the proper forms and deductions. They're trained to help you with tax planning. They are not trained to understand how business works.

Now, you may have a tax preparer who is also a successful business owner. Many CPA's, accountants, bookkeepers, and tax preparers do run their own businesses. They're in a much better position to help you with your taxes because they understand the day to day challenges of running a business.

Understand that having your taxes prepared by a big name franchise, although it does ensure that your return is accurate, does not mean that your return is prepared in a way that is best for your business. Only a preparer who understands business can prepare a return that works for your business.

3. Hiring a tax preparer doesn't mean you're excused from understanding taxes.

I've seen it so many times. I sit down with a client to talk about finances or taxes. As I talk, the head is nodding, the mouth is saying, "uh huh, uh huh", but what they're really focused on is the pen in their hand. They don't want to understand, they just want to sign off on the paperwork and be done with it. "That's what I hire you for", they say.

Big mistake. I could be sentencing them to time in a federal prison. Trusting someone else to the point where you abdicate all responsibility and have no knowledge of what you're signing or what is being done in your name is a recipe for a big fat slice of disaster. That's how embezzlement happens-I trust Mary completely. Bob always takes care of that. And it's also how business owners end up in trouble-What do you mean he took a deduction for my Chihuahua as a guard dog? Hey, why didn't I get a deduction for my new computer?

You have to know enough about taxes to be able to read your return intelligently so you know what you're signing. You also need to know enough about taxes so you know what your tax preparer needs to know to prepare your return accurately and to your best advantage.

And don't get your education from your buddies. I heard a lot about these "special deductions" you can take. Usually the information is not based on facts or tax codes. It's a conglomeration of bad information that can get you into tax trouble.

4. Your tax preparer shouldn't be the one telling you how your business is doing.

It hits them hard. They couldn't be more shocked if you'd hit them upside the head with a dead fish. "I owe how much!", they gasp. "How can that be? I don't have any money!" Then the desperation sets in. The tax preparer is accused of not doing a good enough job. "You must have missed something." Or, they dig deep trying to think of anything, anything at all, that can lower their tax liability. "Did I mention that vacation, I mean, business trip I took to the Caribbean? That's deductible right?"

If the only time you know how your business is doing is on April 15th, you're doing yourself a huge disservice. If you're not tracking your tax liability and making plans to satisfy that liability, you're in for a very long, painful, tortuous lesson delivered at the hands of the Internal Revenue Service. You will pay. You will pay way more than if you'd planned ahead. And it will take you forever to get caught up.

5. Why getting your tax return prepared shouldn't be an errand you run on your lunch break.

I was in a client's office one day getting her books closed out for the year so she could have her tax return prepared. I overheard a woman in the next office telling someone, "I'm just going to run out and get my taxes done." I was horrified. Having your taxes prepared is not something you just "run out" and get done like an oil change. Good tax preparers are like good hair stylists. They have followings. People pre-book them.

If you just "run out" and have your taxes done, who do you think you'll get as a tax preparer? The best and the brightest? Hardly. You'll get the first year preparers who haven't built up a following. The ones who are fresh out of tax class and generally have no experience preparing tax returns or running a business. The ones who don't have the expertise to know the ins and outs of interpreting tax codes to your best advantage while still keeping you within the law. Sure everyone deserves a chance to gain experience but do you really want to be the first patient a surgeon operates on?

6. Procrastination is your worst enemy.

It's April 14th. You think you probably should get your tax stuff together pretty soon. So, you work late into the night, gathering receipts, pawing through stacks of paper, digging under the seat of your car until finally you've got everything you need. Off you go on your lunch break on April 15th to get your return prepared. Your tax preparer, who has been working at a feverish pitch for weeks, has deep circles under her eyes, her hands are shaking from lack of sleep and too much caffeine, and you notice a small stream of drool running down her chin. "Oh look," she exclaims laughing maniacally, "Another return!". And you think to yourself, "What's her problem?".

You, my procrastinating friend, are her problem. Now she's got to frantically race around trying to keep you out of trouble because you didn't have the courtesy or forethought to be prepared well ahead of the deadline. And then she'll have to listen to you whine because now all of a sudden you have to come up with thousands of dollars that you didn't know you owed.

Do yourself a favor, get your return done early. If you owe money, you don't have to send it until April 15th. At least you'll know that your return was prepared by a tax preparer who wasn't fatigued, you'll know ahead of time what you owe, and you'll have it off your mind so you can focus on other important things. Like getting your oil changed on your lunch break.

Called the Wizard of Cash Flow, Caroline Grimm performs cash flow makeovers and financial rescue missions for cash-strapped business owners. She is the author of two books for small business owners: Stop the Cash Flow Roller Coaster and Strength in Numbers. Her home study course, From Chaos to Control, helps entrepreneurs take control of their finances and move beyond the "always broke" syndrome that plagues so many entrepreneurs.

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