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Renting Your Vacation Home

Learn about when and how to report rental income from a vacation home such as a house, condominium, mobile home or boat.

 

IRS Launches 2017 Summertime Tax Tip Program

WASHINGTON — More than 719,000 taxpayers received plain-language Tax Tips directly to their email inbox during this past tax filing season and got the information they needed to help them file their taxes.
Because taxes are year-round for many taxpayers, and many taxable situations arise during the summer months, the Internal Revenue Service offers a Summertime Tax Tip program that begins July 3. The IRS is encouraging taxpayers to sign up now for this email service to help them get a jump-start on their taxes and learn about the tax implications of events that often occur during the summer months.
The Summertime Tax Tip series, which offers helpful consumer tips written in plain language, covers a wide range of important subjects.
Some of the 2017 Summertime Tax Tip topics include:
• Tax scams don’t take vacation; what’s out there now
• Teens and summer jobs
• Vacation home rentals – tax implications
• Getting married? Tax implications you need to know
• IRS notices – What you could receive in the mail from the IRS
The IRS Tax Tips email service is available in English and Spanish. It provides new IRS Tax Tips via e-mail three times a week during the months of July and August. Subscribers will also receive a Tax Tip each day of the week during the tax filing season and Special Edition Tax Tips that are issued for “hot topics” that arise throughout the year.

IRS: Home Office Deduction Often Overlooked by Small Business Owners

WASHINGTON — The Internal Revenue Service today reminded small business owners who work from a home office that there are two options for claiming the Home Office Deduction. The Home Office Deduction is often overlooked by small business owners.
As part of National Small Business Week (April 30-May 6), the IRS is highlighting a series of tips and resources available for small business owners.
Regular Method
The first option for calculating the Home Office Deduction is the Regular Method. This method requires computing the business use of the home by dividing the expenses of operating the home between personal and business use. Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses. Self-employed taxpayers file Form 1040, Schedule C , Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.
Simplified Method
The second option, the Simplified Method, reduces the paperwork and record keeping burden for small businesses. The simplified method has a prescribed rate of $5 a square foot for business use of the home. There is a maximum allowable deduction available based on up to 300 square feet. Choosing this option requires taxpayers to complete a short worksheet in the tax instructions and entering the result on the tax return. There is a special calculation for daycare providers. Self-employed individuals claim the home office deduction on Form 1040, Schedule C , Line 30; farmers claim it on Schedule F, Line 32 and eligible employees claim it on Schedule A, Line 21.
Regardless of the method used to compute the deduction, business expenses in excess of the gross income limitation are not deductible. Deductible expenses for business use of a home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. In general, expenses for the parts of the home not used for business are not deductible.
Deductions for business storage are deductible when the dwelling unit is the sole fixed location of the business or for regular use of a residence for the provision of daycare services; exclusive use isn’t required in these cases.
Further details on the home office deduction and the simplified method can be found in Publication 587 on IRS.gov.

Hobby or Business? IRS Offers Tips to Decide

Millions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing — no matter what a person’s passion, the Internal Revenue Service offers some tips on hobbies.
Taxpayers must report on their tax return the income earned from hobbies. The rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five tax tips to consider:
1. Is it a Business or a Hobby? A key feature of a business is that people do it to make a profit. People engage in a hobby for sport or recreation, not to make a profit. Consider nine factors when determining whether an activity is a hobby. Make sure to base the determination on all the facts and circumstances. For more about ‘not-for-profit’ rules, see Publication 535, Business Expenses.
2. Allowable Hobby Deductions. Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.
3. Limits on Hobby Expenses. Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.
4. How to Deduct Hobby Expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.

What to Do When an IRS Letter Arrives in the Mail

Accounting Services of York Specializes in IRS letters and notices. If you receive one call us immediately. If the letter states that you owe money don’t pay it until you let us revive the notice.

The IRS mails millions of pieces of correspondence every year to taxpayers for a variety of reasons.
Below are some suggestions on how to best handle a letter or notice from the IRS:
1. Do not panic. Simply responding will take care of most IRS letters and notices.
2. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and provides specific instructions on what to do. Careful reading is essential.
3. A notice may likely be about changes to a taxpayers’ account, taxes owed or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return.
4. If a notice indicates a changed or corrected tax return, review the information and compare it with your original return.
5. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
6. Taxpayers must respond to a notice they do not agree with. Mail a letter explaining why there is a disagreement with the IRS. The address to mail the letter is on the contact stub at the bottom of the notice. Include information and documents for the IRS to consider and allow at least 30 days for a response.
7. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the tax return and notice when calling.
8. Always keep copies of any notices received with tax records.
9. Be alert for tax scams. The IRS sends letters and notices by mail. IRS does not contact people by email or social media to ask for personal or financial information. The IRS will not demand payment a certain way, such as prepaid debit or credit card. Taxpayers have several payment options for taxes owed.
For more on this topic, visit IRS.gov. Click on the link ‘Respond to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process. Get IRS.gov/forms at any time.

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NATP

National Association of Tax Professionals