Getting Your Records Together
The key to being compliant and correctly taking all of the deductions that you are entitled to is to have your information organized and available for consideration for input onto your tax return. Following are some recommendations for getting your records pulled together.
IRS Hot Button Issues
IRS statistic: 61% of sole proprietors underreport net business income.
Revenue Ruling 56-407: You must report all of your expenses.
Per the National Association of Enrolled Agents, the following are key audit categories: gross receipts, costs of goods sold, auto expenses, supplies, meals & entertainment, rent, telephone and depreciation.
Payroll Tax Changes - 2012/2013
Payroll taxes generally fall into two categories: deductions from an employee's wages and taxes paid by the employer.
For 2012, Congress approved a payroll tax holiday in an effort to stimulate the economy. The holiday reduced the amount paid by employees. The amount withheld in paychecks for Social Security and Medicare was reduced from 6.2% to 4.2%. The effect increased the amount of take home pay.
The payroll tax holiday expired at the end of 2012. At this time, Congress has not taken any action to extend it.
Starting 2013, high wage employees will also pay an additional 0.9% in Medicare tax. The increased tax applies to wages in excess of $200,000.
Also new for 2013 is a 3.8% Medicare tax that will be assessed on the unearned income for individuals with income above $200,000. The final regulations have yet to be issued, but the tax will be applied to earnings from passive investments, annuities, rental properties, etc.
Mileage Rates - 2012/2013
Here are the standard mileage rates for business use of your car.
2012 = 55.5 cents per mile
2013 = 56.5 cents per mile