If you are on a budget (and who isn’t?), there are actions you can take to make working with a CPA more affordable:

• Build a Relationship: If you are comfortable with your CPA, stick with them.   By working with the same CPA each year, they become familiar with your situation and can quickly spot discrepancies or big changes. One year, a volunteer preparer didn’t ask my aunt for her real estate property taxes because he didn’t see a mortgage statement.  A year-round CPA would have known to ask.

• Be Organized: Generally CPAs charge by the hour.  If you have a lot of contributions to deduct, consider providing a simple spreadsheet with the donations listed along with documentation.  This could lower your bill considerably.  A client once provided a co-worker with a large box of bank statements with a belt tied around it – this is an expensive way to claim your donations!

• Don’t Make Assumptions: A client knew he could gift each of his kids and grandchildren $13,000 without triggering any gift tax in 2010.  For 2011, he incorrectly assumed inflation had increased the gift tax exclusion to $13,500 and wasn’t expecting to pay for gift tax return preparation.

• Consult your CPA in Making Decisions: In 2009, a client decided to buy two cars in one year.  He wanted the hybrid tax credit so he purchased a Toyota hybrid and a Smart Car.  What he didn’t know was that Toyota hybrid no longer qualified for the tax credit.  Had he consulted me, I could have advised him before the purchase and provided a list of cars that still qualified.  It was heartbreaking to let him know he wasn’t going to get the tax credit.

• Don’t Lie to Your CPA: It’s like lying to your doctor, it only hurts you.  Sometimes clients can be embarrassed to share information like gambling earnings or certain medical expenses.  Your information is private and helps your CPA determine the best way to claim that expense or report those earnings.

So if you want to ease your stress, save money and work with someone who understands and keeps up with tax law, consider a CPA. If you are asking yourself if you should hire a CPA, I happen to think a CPA is a wise investment.

-Melanie Lauridsen, Technical Manager – Taxation, American Institute of CPAs 

After a regional office of the National Labor Relations Board (NLRB) ruled earlier this year that college football players at Northwestern should be treated as employees (13-RC-121359, 3/26/14), there was much speculation concerning the potential tax implications. For instance, based on the ruling, college athletic scholarships might be subject to federal income tax. But the IRS quickly nipped this notion in the bud.

In response to a Congressional inquiry, the IRS issued a new information letter stating that the existing provisions of the tax code will continue to apply to scholarships, irrespective of the NLRB ruling (IRS IL Number: 2014-0016, 6/27/14). Case closed.

Yet the tax rules remain somewhat murky to many parents of athletes and other scholarship recipients. Despite a common misconception, not all scholarships are tax-free, while others may be only partially tax-free. Here’s a brief review.

The main tax law provision in question is Section 117. Under this section, a scholarship or fellowship is exempt from tax only if you are a candidate for a degree at a qualified educational institution and only to the extent of your expenses. The scholarship can’t be earmarked specifically for room and board nor may it represent payment for teaching, research, or other services required as a condition for receiving the scholarship (other than exceptions for the national health services and the armed forces).

When is a student considered to be a candidate for a degree? He or she must meet one of the following conditions:

1. Attend a primary or secondary school or is pursuing a degree at a college or university.
2. Attend an accredited educational institution that provides a program acceptable for full credit toward a bachelor’s or higher degree, or offers a program of training preparing students for gainful employment in a recognized occupation.

If this requirement isn’t met, the scholarship is fully taxable.

What types of education expenses qualify for tax-free treatment? The IRS says the exclusion applies to:

• Tuition and fees required to enroll at or attend an eligible educational institution.
• Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in the course of instruction.

Conversely, qualified education expenses do not include the cost of:

• Room and board.
• Travel.
• Research.
• Clerical help.
• Equipment and other expenses not required for enrollment in or attendance at an eligible educational institution.

This leads back to the perception that scholarships—in particular those handed out to college athletes—are completely exempt from tax. Frequently, they are only partially tax-free.

Example: Suppose a football player gets a free ride at State University. The annual tuition and fees are $10,000 while room and board is $2,500. In this case, the student owes tax on $2,500 a year.

Taxable scholarship income is reported on the student’s 1040 (or 1040A or 1040EZ). Keep your clients informed so they aren’t blindsided come tax return time. More information is available in Publication 970, Tax Benefits for Education.

http://www.accountingweb.com/article/whats-tax-deal-college-scholarships/223696

If you rent a home to others, you usually must report the rental income on your tax return. But you may not have to report the income if the rental period is short and you also use the property as your home. In most cases, you can deduct the costs of renting your property. However, your deduction may be limited if you also use the property as your home. Here is some basic tax information that you should know if you rent out a vacation home:

• Vacation Home.  A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.
• Schedule E.  You usually report rental income and rental expenses on Schedule E, Supplemental Income and Loss. Your rental income may also be subject to Net Investment Income Tax.
• Used as a Home.  If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
• Divide Expenses.  If you personally use your property and also rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. To figure how to divide your costs, you must compare the number of days for each type of use with the total days of use.
• Personal Use.  Personal use may include use by your family. It may also include use by any other property owners or their family. Use by anyone who pays less than a fair rental price is also personal use.
• Schedule A.  Report deductible expenses for personal use onSchedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
• Rented Less than 15 Days.  If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income.

After starting three small businesses, I’ve learned firsthand the headaches that accounting causes for most small business owners. It’s one of those back-office tasks that never cross your mind when you decide to run your own business, and yet it sucks up your day and makes running a successful business that much harder. But there’s hope, and it starts with getting organized. Here are 5 tips I’ve learned by helping business owners trying to tackle their accounting:

1. Keep it separate. That new backpack for your kids isn’t a business expense, but your business credit card was handy so you used it. Sure, you can pay back your business for a personal expenditure, or the other way around, but if you’re going to do it right you actually have to record an accounting transaction. Things get complicated fast, and you don’t need that headache. By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place. Some applications can automatically handle the behind-the-scenes accounting for crossover expenses, but even so, we recommend handling business and personal finances as independently as possible.
2. Call in a pro. Since the days of the abacus, accountants have been trusted and respected allies to small business owners everywhere. Their intimate knowledge of the profession as well as tax laws in their jurisdiction will save you money almost every time. I know how tempting it can be to save a buck and do it yourself, but it’s almost never more cost-efficient in the end. An accountant will almost always find more deductions and keep you penalty-free. On that note, the cleaner your records, the fewer billable hours you’ll have to pay, so make sure you’re organized year-round. But when things get technical or taxes are due, save yourself the money, time and headaches and call in a trusted professional.
3. Pencil it in. Actually, use a pen. A permanent marker even. Set aside about 15 minutes every week — that’s the equivalent of just one Facebook visit every seven days — to organize your finances, and don’t let other things take priority during this time.  You’ll have more insights into your business, be able to make more informed financial decisions and have everything organized when tax time approaches. Something always feels more pressing than your finances. But when you find the time every week, you’ll feel your stress levels — now and at year-end — fall fast.
4. Consider your people. When you’re looking for insights into your businesses spending, don’t forget to properly track what is likely one of your biggest expenses: labor. Whether you’re paying a full staff or you’re the only one on the payroll, make sure you’re tracking the costs of wages, benefits, overtime and any other costs associated with labor. By tracking your spending on labor, perks and benefits, you may find you have more money to incentivize your employees — or that you’re outspending your budget. Either way, doing the math now can help you make better decisions later.
5. Finally, don’t forget to get paid. This one seems pretty obvious, but you would be shocked at how many small business owners don’t properly track invoices and customer payments. If you’re not keeping proper records that you can make sense of at a glance, it could be months before you realize you have outstanding invoices. You could be collecting payments late, or missing some altogether. Make sure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments from in the past.

   -Kirk Simpson

If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.

1. Business Structure.  As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.

2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.

3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.

4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.

5. Employee Health Care.  The Small Business Health Care Tax Credithelps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.

Do you know that if you sell your home and make a profit, the gain may not be taxable? That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.

2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details seePublication 523, Selling Your Home.

3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review theQuestions and Answers on the Net Investment Income Tax on IRS.gov.

6. Generally, you can exclude the gain from the sale of your main home only once every two years.

7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.

9. If you sell your main home at a loss, you can’t deduct it.

10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.

We have a new fax number (864) 752-0873.

Woodruff Accounting has moved to a new office!! Don’t worry we haven’t moved far! We have just relocated upstairs!!

New York, NY – March 13, 2014 – Yodle, a leader in local marketing automation, today announced two new products – reviews management and photo syndication. The products help small businesses gain additional credibility online, improve organic ranking, and find and keep more customers. Yodle’s reviews management solution makes it simple for small businesses to generate, promote, and respond to online reviews from their customers, while its photo syndication offering enables clients to easily upload pictures of their business that Yodle then rapidly distributes across multiple online channels.

“We secured more than 20 customer reviews in just our first month of working with Yodle and it was easy to make it happen. These reviews give our business a lot more credibility,” said Corey Phillips, owner of P & M Services, a tree care company in Englewood, Florida, and a Yodle client since January 2014. “Being able to share photos has also made a huge difference because it increases awareness of the type of work that we do and enables us to better showcase our business.”

Court Cunningham, CEO at Yodle, stated: “Research shows that having reviews and sharing new photos significantly impacts a small business’ ability to acquire and retain customers. We are offering powerful online tools to small businesses that provide them with an effective and efficient way to market themselves.”

Despite the difference that reviews make, Yodle found in its recent “Small Business and Online Reviews Survey” that 55% of small businesses don’t get any reviews, just 13% ask their customers for reviews, and less than half that receive reviews and have a website are posting those reviews to their website. Through its reviews management offering, Yodle makes it easy for small businesses to collect reviews from their customers through review forms, hosts all customers’ reviews at RateABiz.com for free, and automatically posts positive reviews to customers’ websites as well as their Facebook pages. Yodle also provides specific tools to small businesses for responding to negative reviews.

Yodle’s photo syndication feature provides similar ease-of-use. Yodle clients simply need to upload photos of their business from either their desktop or mobile device. Yodle then uses automated technology to distribute and syndicate the photos within 24 hours across the small business’ website, social media pages and 45 directories.

“Early results and adoption rates for these new offerings are very positive,” added Mr. Cunningham. “These new products are just another sign of our ongoing commitment to providing a full platform of marketing essentials to our small business clients.”

For more information, see this video testimonial from P & M Services about their experience using Yodle’s reviews management and photos syndication offerings:http://www.yodle.com/success-stories/video-testimonials/video-testimonial-pm-services/.

About Yodle
Yodle empowers local businesses to find and keep their customers simply and profitably. Yodle offers all the online marketing essentials that local businesses need through one easy-to-use, affordable and automated platform, fully supported by a live customer service team. Today, Yodle simplifies success for 40,000+ local businesses with a comprehensive desktop and mobile web presence, social media automation, reviews management, Search Engine Optimization (SEO), listings distribution to 50+ directories, photos syndication, plus proprietary and optimized paid search technology – transparently reporting results in a performance dashboard. Also offered by Yodle is Lighthouse 360™, an award winning automated patient communications system that improves medical office efficiencies and reduces missed appointments. Additionally, Yodle for Brand Networks™ (YBN™), a division of Yodle, delivers Centermark™, a distributed marketing automation platform that helps network businesses unify, scale, and optimize their local and national marketing strategies. YBN’s 130+ current clients include Merry Maids, Miracle-Ear, and TWO MEN AND A TRUCK®.

Yodle is ranked #9 on the 2014 Forbes list of America’s most promising companies and has won multiple awards for its business growth, job creation, technology innovation, and workplace and culture. For more information, visit www.yodle.com, www.lh360.com,www.yodlebrandnetworks.com or www.yodlecareers.com.

The Internal Revenue Service has released the spring 2014 edition of its quarterly Statistics of Income Bulletin, with statistics up through 2011 indicating there are still people who earn over $200,000 a year who pay no federal income taxes, although the number of them has been decreasing.

“For 2011, there were 4.8 million individual income tax returns with an expanded income of $200,000 or more, accounting for 3.3 percent of all returns for the year. Of these, 15,000 returns had no worldwide income tax liability,” according to one report in the bulletin by Justin Bryan. “This was a 6.7-percent decline in the number of returns with no worldwide income tax liability from 2010, and the second decrease in a row since reaching an all-time high of 19,551 returns in 2009.”

However, the advocacy group Citizens for Tax Justice pointed out that the numbers are still high when looked at over a longer period.

“From the report’s first publication in 1977 through 2000, the number of high-income Americans paying no tax never exceeded 3,000,” said CTJ. “But the past four years have seen an explosion of high-end tax avoidance: in each of these years, the number of zero-tax Americans found in this report has exceeded 30,000. In 2011 (the latest year for which data are available), almost 33,000 people with incomes over $200,000 paid no federal income tax. For this group—less than one percent of all Americans with incomes over $200,000 in 2011—tax-exempt bond interest and itemized deductions are among the main tax breaks that make this tax-avoiding feat possible.”

In addition to the report on high-income tax returns through 2011, the spring 2014 Statistics of Income Bulletin also contains articles on individual income tax rates and shares, individual noncash contributions andindividual foreign-earned income and foreign tax credits for 2011.

The IRS noted that of the 145 million individual tax returns filed in tax year 2011, 91.7 million were classified as taxable returns or returns with a total income tax greater than $0. Adjusted gross income (AGI) for taxable returns was nearly $7.7 trillion, up 6 percent from the prior year. Total income tax was more than $1 trillion. To be included in the top 1 percent of returns for 2011 required an AGI of $388,905.

For tax year 2011, there were more than 22 million individual taxpayers who reported a total of $43.6 billion in deductions for noncash charitable contributions. About a third (7.5 million) of these taxpayers reported nearly $39 billion in deductions for charitable contributions of $500 or more.

Nearly 450,000 U.S. taxpayers reported $54 billion of foreign-earned income for tax year 2011, representing growth in real terms of over 32 percent since the last study in 2006.

BY MICHAEL COHN, EDITOR-IN-CHIEF, ACCOUNTINGTODAY.COM