Bartering is the trading of one product or service for another. Often there is no exchange of cash. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services.

If you barter, you should know that the value of products or services from bartering is taxable income.

Here are four facts about bartering:

1. Barter exchanges.  A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.

2. Bartering income.  Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get.

3. Tax implications.  Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

4. Reporting rules.  How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040,Schedule C, Profit or Loss from Business.

The health care law has provisions that may affect your personal income taxes. How the law may affect you may depend on your employment status, whether you participate in a tax favored health plan and your age.

Here are three tips about how the law may affect you:

1. Employment Status

• If you are employed your employer may report the value of the health insurance provided to you on your W-2 in Box 12 with Code DD.  However, it is not taxable.
• If you are self-employed, you can deduct the cost of health insurance premiums, within limits, on your income tax return.

2. Tax Favored Health Plans

• If you have a health flexible spending arrangement (FSA) at work, money you put into it normally reduces your taxable income.
• If you have a health savings account (HSA) at work, money your employer puts into it for you, within limits, is not taxable.
• Money you put into an HSA usually counts as a deduction and can lower your taxes.
• Money you take from an HSA to use for qualified medical expenses is not taxable income; however, withdrawals for other purposes are taxable and can even be subject to an additional tax.
• If you have a health reimbursement arrangement (HRA) at work, money you receive from it is generally not taxable.

3. Age

If you are age 65 or older, the threshold for itemized medical deductions remains at 7.5 percent of your Adjusted Gross Income (AGI) until 2017; for others the threshold increased to 10 percent of AGI in 2013. Your AGI is shown on your Form 1040 tax form.

Some people must pay taxes on part of their Social Security benefits. Others find that their benefits aren’t taxable. If you get Social Security, the IRS can help you determine if some of your benefits are taxable.

Here are seven tips about how Social Security affects your taxes:

1. If you received these benefits in 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, showing the amount.

2. If Social Security was your only source of income in 2013, your benefits may not be taxable. You also may not need to file a federal income tax return.

3. If you get income from other sources, then you may have to pay taxes on some of your benefits.

4. Your income and filing status affect whether you must pay taxes on your Social Security.

5. The best, and free, way to find out if your benefits are taxable is to use IRS Free File to prepare and e-file your tax return. If you made $58,000 or less, you can use Free File tax software. The software will figure the taxable benefits for you. If your income was more than $58,000 and you feel comfortable doing your own taxes, use Free File Fillable Forms. Free File is available only at IRS.gov/freefile.

6. If you file a paper return, visit IRS.gov and use the Interactive Tax Assistant tool to see if any of your benefits are taxable.

7. A quick way to find out if any of your benefits may be taxable is to add one-half of your Social Security benefits to all your other income, including any tax-exempt interest. Next, compare this total to the base amounts below. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. The three base amounts are:

• $25,000 – for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year
• $32,000 -for married couples filing jointly
• $0 – for married persons filing separately who lived together at any time during the year

When most people think of financial planning, they think in terms of dollars and cents. They think of their weekly or monthly paycheck, and work with a financial advisor or tax professional to set long-term goals for retirement or education planning, creating a yellow-pad list of financial “to-dos.”

I believe that’s a limited definition that does not translate the full power one can derive from a comprehensive financial plan. It lacks an outline for implementation and often results in a perpetual state of procrastination — “I’ll get a handle on my finances once I get past this tough patch.”

To me, personal financial planning is the process of preparing for the inevitable tragedies of life that will affect each of us both financially and emotionally. It is a philosophy for intentional living, a framework for creating happiness, and offers joy in the face of life’s natural tendencies toward chaos and entropy.

A fully implemented, complete financial plan frees people to focus all of their mental, physical and spiritual energy toward their highest goals and survive life’s toughest obstacles.

Financial Planning is a Philosophy for Living

There are many axioms and premises inherent in the statement, “Financial planning is a philosophy for living.” Here are a few:

Making Promises to the Ones We Love

The essence of happiness is captured by the positive feelings of joy, significance, meaning, dignity, certainty, security and confidence. Happiness is a desirable, sustainable and favorable state of being.

For many, financial planning is a path to happiness because it allows us to make and honor life’s important promises and obligations. These promises are the duty of being a husband or wife, a father or mother, a brother or sister, and even an employee.

Think of the important promise a husband makes to his wife that she will retire with dignity whether or not he is there to provide for her. Another is a promise to our children or grandchildren that they will have financial assistance with obtaining a college education, whether or not the parents or grandparents are living and present in their lives at that time.

Life’s Tragedies Befall Us All

Two kinds of tragedies cause emotional and financial trauma: “That’s life” tragedies and “failure to prepare” tragedies. The French often use the phrase “c’est la vie” to refer to instances that can only be described as “that’s life.” “That’s life” tragedies are those forgivable events such as a sudden major illness, the loss of a job, the death of a spouse, a divorce or the stress of remarriage. Even retirement can be viewed as a forgivable tragedy because it occurs due to the fault of no one. That’s just life.

Much worse are type-two tragedies, which are the result of being unprepared for those “that’s life” events. This is an unforgivable tragedy because it means you were unprepared for life’s inevitability. We all grow older. We are all susceptible to losing our jobs.

It is sad that many of us carry the audacity and arrogance that serves as a false cloak of invincibility to “that’s life” tragedies. It is utter foolishness to believe that a major illness, the loss of a job or the death of a spouse would not cause severe emotional and financial trauma. Too much of this foolishness resides in America today. Nearly 1.3 million Americans die from heart disease, cancer or stroke each year. If it doesn’t happen to you, it can certainly happen to someone you know or care deeply about.

The only way to inoculate your life from the foolishness of being unprepared is to develop and implement a financial plan that accounts for these tragedies.

Battling Life’s Chaos

Love is the energy we use to battle back this chaos. When you observe a prosperous and happy nation, a growing business, a functioning family, or a life of joy, significance and meaning, you can be assured that love has been exerted very forcefully against the laws of chaos and entropy.

Unfortunately, the idea of “love” has been watered down by Western culture and the pursuit of materialistic happiness. Love is much more than a desire that can be captured on a Hallmark card or illustrated with grand gestures such as expensive gifts or tropical getaways. Love is an action verb; a conscious vow to whom or what one’s energy will be intentionally directed; a conscious devotion to improve one’s self for the betterment of another without regard to personal cost.

In a chaotic world, love generates the spiritual energy to create and commit to a financial plan when tragedies occur. When chaos disrupts, financial planning provides the antidote that allows us to honor the important promises we make to ourselves and others.

Who Carries the Torch?

Last month I challenged you to rediscover the “why” of your business. Now that you know “why,” it’s time to take action. The financial planning profession can be the great torchbearer that guides us toward a culture of personal responsibility. To achieve this, financial planners and wealth managers must believe in the monumental value they deliver to clients. They must eliminate any personal hypocrisy, stop their own tendencies toward procrastination, take this craft seriously for themselves and implement every aspect of their own personal financial plan in order to unify their walk and talk of life as quickly as possible.

My hope is that financial planners boldly engage themselves to make people’s lives better, happier and more liberated. I am ready to carry the torch. Are you?

http://www.cpawealthenterprise.com/guide-the-future/

Important Reminders about Tip Income

If you get tips on the job from customers, the IRS has a few important reminders:

• Tips are taxable.  You must pay federal income tax on any tips you receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
• Include all tips on your return.  You must include the total of all tips you received during the year on your income tax return. This includes tips directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
• Report tips to your employer.  If you receive $20 or more in tips in any one month, from any one job, you must report your tips for that month to your employer. The report should only include cash, check, debit and credit card tips you receive. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips. Do not report the value of any noncash tips to your employer.
• Keep a daily log of tips.  Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

For more information, see Publication 1244 or Publication 531, Reporting Tip Income. You can get them on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Beware of Fake IRS Emails and Phone Calls

Tax scams that use email and phone calls that appear to come from the IRS are common these days. These scams often use the IRS name and logo or fake websites that look real.

Scammers often send an email or call to lure victims to give up their personal and financial information. The crooks then use this information to commit identity theft or steal your money. Some call their victims to demand payment on a pre-paid debit card or by wire transfer. But the IRS will not initiate contact with you to ask for this information by phone or email.

If you get this type of ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.

If you get an unexpected phone call from someone claiming to be from the IRS:

• Ask for a call back number and an employee badge number.
• If you think you may owe taxes, call the IRS at 800-829-1040. IRS employees can help you.
• If you don’t owe taxes or have no reason to think that you do, call the Treasury Inspector General for Tax Administration at 800-366-4484 to report the incident.
• You should also report it to the Federal Trade Commission by using their “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Be alert to scams that use the IRS as a lure. The IRS will not initiate contact with you through social media or text to ask for your personal or financial information.

More information on how to report phishing or phone scams is available on IRS.gov.

If you have a child under age 17, the Child Tax Credit may save you money at tax time. Here are some key facts the IRS wants you to know about the credit.

• Amount.  The non-refundable Child Tax Credit may help cut your federal income tax by up to $1,000 for each qualifying child you claim on your tax return.

• Qualifications.  A child must pass seven tests to qualify for this credit:

1. Age test. The child was under age 17 at the end of 2013.

2. Relationship test. The child is your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child can also be a descendant of any of these persons. For example, your grandchild, niece or nephew will meet this test. Adopted children also qualify. An adopted child includes a child lawfully placed with you for legal adoption.

3. Support test. The child did not provide more than half of his or her own support for 2013.

4. Dependent test. You claim the child as a dependent on your 2013 federal income tax return.

5. Joint return test. A married child can’t file a joint return with their spouse they are filing jointly only to claim a tax refund.

6. Citizenship test. The child must be a U.S. citizen, U.S. national or U.S. resident alien. For more see Publication 519, U.S. Tax Guide for Aliens.

7. Residence test. In most cases, the child must have lived with you for more than half of 2013.

• Limitations. Your filing status and income may reduce or eliminate the credit.

• Additional Child Tax Credit.  If you get less than the full Child Tax Credit, you may qualify for the refundable Additional Child Tax Credit. This means you could get a refund even if you owe no tax.

• Schedule 8812.  If you qualify to claim the Child Tax Credit, make sure to check whether you must file Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.

• Interactive Tax Assistant Tool.  You can use the ITA tool at IRS.gov to see if you can claim the credit. The tool can answer many of your tax questions.

If you worked as an employee last year, your employer must give you a Form W-2, Wage and Tax Statement. This form shows the amount of wages you received for the year and the taxes withheld from those wages. It’s important that you use this form to help make sure you file a complete and accurate tax return.

Most employers give Forms W-2 to their workers by Jan. 31. If you haven’t received yours by mid-February, here’s what you should do:

1. Contact your employer.  You should first ask your employer to give you a copy of your W-2. You’ll also need this form from any former employer you worked for during the year. If employers send the form to you, be sure they have your correct address.

2. Contact the IRS.  If you exhaust your options with your employer and you have not received your W-2, call the IRS at 800-829-1040. You’ll need the following when you call:

• Your name, address, Social Security number and phone number;
• Your employer’s name, address and phone number;
• The dates you worked for the employer; and
• An estimate of the amount of wages you were paid and federal income tax withheld in 2013. If possible, you can use your final pay stub to figure these amounts.

3. File on time.  Your tax return is due by April 15, 2014. If you don’t get your W-2 in time to file, use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Estimate your wages and withheld taxes as accurately as you can. The IRS may delay processing your return while it verifies your information.

If you need more time, you can apply for a six-month extension to file your federal tax return. The easiest way to apply is to visit IRS.gov and use IRS Free File to e-file the extension. You can also mail Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Make sure you file your request by midnight on April 15.

You may need to correct your tax return if you get your missing W-2 after you file. If the tax information on the W-2 is different from what you originally reported, you may need to file an amended tax return. Use Form 1040X, Amended U.S. Individual Income Tax Return to make the change.

Would you choose direct deposit this year if you knew it’s the most popular way to get a federal tax refund? What if you learned it’s safe and easy, and combined with e-file, the fastest way to get a tax refund? The fact is almost 84 million taxpayers chose direct deposit in 2013.

Still not sure it’s for you? Here are four good reasons to choose direct deposit:

1. Convenience.  With direct deposit, your refund goes directly into your bank account. There’s no need to make a trip to the bank to deposit a check.

2. Security.  Since your refund goes directly into your account, there’s no risk of your refund check being stolen or lost in the mail.

3. Ease.  Choosing direct deposit is easy. When you do your taxes, just follow the instructions in the tax software or with your tax forms. Be sure to enter the correct bank account and routing number.

4. Options.  You can split your refund among up to three financial accounts. Checking, savings and certain retirement, health and education accounts may qualify. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to split your refund. Don’t use Form 8888 to designate part of your refund to pay your tax preparer.

You should deposit your refund directly into accounts that are in your own name, your spouse’s name or both. Don’t deposit it in accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.

Using the correct filing status is very important when you file your tax return. You need to use the right status because it affects how much you pay in taxes. It may even affect whether you must file a tax return.

When choosing a filing status, keep in mind that your marital status on Dec. 31 is your status for the whole year. If more than one filing status applies to you, choose the one that will result in the lowest tax.

Here is a list of the five filing statuses to help you choose:

1. Single.  This status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2011 or 2012 and you have a dependent child, this status may apply. Certain other conditions also apply.

You can also find the rules on this topic in Publication 501, Exemptions, Standard Deduction, and Filing Information. It’s available on IRS.gov or by calling 1-800-TAX-FORM (800-829-3676).