5 TIPS ON GAMBLING INCOME AND LOSSES

Do you bet on the ponies, play cards or enjoy slot machines, then you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.

Here are 5 important tips about gambling and taxes:

1. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

2. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:

• $1,200 or more in gambling winnings from bingo or slot machines;
• $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
• $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
• Any other gambling winnings subject to federal income tax withholding.

3. Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.

4. You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.' You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.

5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings.

THIS TYPE OF CHARITABLE CONTRIBUTION DOES NOT WORK

I don’t know how many times I have been asked if this charitable strategy will work. Give money to a charitable organization and then have them give a scholarship to a related party. Someone apparently tried this and the IRS weighed in.

In a recent case, the IRS ruled that making a donation for one person’s benefit kills the tax deduction. In this situation, a donor who contributed to her church’s scholarship fund wanted the church to use the money she gave for the college tuition costs of the minister’s daughter. The contribution is recast as a gift from the donor to the minister’s daughter, and no deduction is permitted.

IS FISCAL CLIFF ALREADY WREAKING HAVOC?

(CNBC) -- CNBC.com reports that CNBC's Larry Kudlow "thinks the looming 'fiscal cliff' has already started to do serious damage to the economy, and worries the damage could get much worse, with Congress ultimately driving Corporate America right to the edge."  According to the story, the threat of the fiscal cliff, "or confluence of tax hikes and spending cuts that could go into effect as soon as January 2013," has hurt new orders for durable goods or long-lasting manufactured goods, which has dropped to its lowest level in 3-1/2 years.

To read more of this article: CLICK HERE

EMAIL SCAM NOT FROM IRS

We have been notified by several of our clients, that they have received an email that looks like this one below:

 Subject: Your IRS tax transfer is declined.

Your Income Tax remittance (ID: xxxxxxxxxxx), recently ordered for processing from your bank account was turned down by your Bank.

Rejected Tax transfer
Tax Transaction ID:	Row of numbers here
Reason of rejection	See details in the report below
Income Tax Transaction Report	tax_report_.doc (Microsoft Word Document)

Internal Revenue Service St. Davis 00343 NY

 

This is a SCAM. The IRS does not email you any type of notice in this manner. Please do not open the attachment. If you receive an email similar to this one, but are unsure of its reliability please contact the IRS or your accountant.

TAX COURT HOLDS MEDICAL MARIJUANA RETAILER UNDERREPORTED INCOME

The owner of a California medical marijuana dispensary was found to have underreported income. Moreover, he was precluded from deducting most of the expenses he claimed because the business consisted of trafficking in controlled substances.

TIMOTHY GEITHNER, DAVE CAMP HUDDLE ON 'FISCAL CLIFF'

House Ways and Means Committee Chairman Dave Camp quietly huddled with Treasury Secretary Timothy Geithner Wednesday morning about the so-called fiscal cliff.

The meeting marks an uptick in discussions between the Obama administration and congressional Republicans in gaming out the year-end expiration of all income tax rates, the hiking of the nation’s borrowing cap and massive cuts to domestic and Pentagon spending set to kick in at the beginning of 2013.

Read more: CLICK HERE
 

JOB SEARCHING AND INTERVIEWING

One of my distance friends and great clients is Salvatore Balistreri and his wife Bonnie.  They are what I refer to as “head hunters and image consultants.”  They are contracted by employers looking for workers and also people looking for new positions.  Salvatore just sent me the following note along with the link to his interview.  If you know of anyone that has been laid off or that is looking for a new position his advice is well worth listening to. 

Hello Friends and Clients, 

Recently, Melissa Gale, a very successful morning, Austin TV anchor on the #1 rated TV morning show, decided to pursue a different career path after 14 years at KVUE. 

Melissa, as part of her reinvention process, recently asked me about insights related to the job search and interviewing for it. 

Please peruse this short video as you may want to use it for your employees or friends who may be laid off or in transition and need to "crack the code" on successful interviewing and running an effective job search.

http://www.youtube.com/watch?v=E2-ei6DR5C8 

I hope this adds value for you and whomever you share it with. 

In the meantime, please keep me in mind for your company's next executive search that I can manage for you. 

Thank you!  

Salvatore Balistreri Consulting

"BRIDGING CLIENT & CANDIDATE"

512-431-3020

www.BalistreriConsulting.com

SECTION 179 FOR 2013

As we are doing year end tax planning, the question has come up several times on how to plan for the fast write off of equipment called section 179. It is confusing. The current law is a limit of $25,000 for 2013, but will Congress change this low number. Who knows?

Both the President and Congress have discussed increasing the deduction up to $500,000 with a phase-out starting at $2 million. It appears at the moment that the Democrats are pushing this more than the Republicans, but they have other incentives that may provide small business tax relief similar to the Section 179 deduction.

There is even a chance that it may go to $500,000 from the current $139,000 in 2012. Unfortunatey we will not know until the election is over.

DID YOU GET A CHECK BACK FROM YOUR INSURANCE COMPANY

Some employers are receiving health insurance rebates.  If you are one of those lucky employers you are required to act quickly. 

Generally you have three months to pass the employees’ share back to the employee.

If you are wondering why you received the rebate, it is because the health reform law requires insurers that don’t spend enough of the premiums on medical care and quality improvement to rebate part of the premiums.

The rebates started going out in July.   We are seeing some employers generating goodwill by giving the full amount to employees through premium reductions or cash payouts, even though businesses can generally keep the portion of rebates attributable to employer contributions. 

A word of caution, there are complicted rules on the potential taxability of the rebates.

YOU CAN'T ROUND ON YOUR PAYROLL REPORTS

This was hard to believe. The IRS put out a memo and said that rounding to the nearest dollar on Form 941 is not allowable.

Neither the form nor instructions permit rounding. And the law gives filers the option to report in cents on all tax forms, so IRS can’t remove the cents column. Employers will have to keep reporting their payroll tax liability to the penny.

Make your 'cents' count...

IRS ANNOUNCES 2013 IRA AND GIFT TAX NUMBERS

Two tax breaks will be larger next year, thanks to an increase in inflation.

The ceiling on IRA contributions will jump to $5,500, a $500 increase.

• As a result, taxpayers age 50 or older in 2013 will be able to put in up to $6,500.

It is also calculated that the annual gift tax exclusion will rise to $14,000, up $1,000 from 2012.

• This is not official yet.  The Revenue Service will officially announce these figures next month.

ACCOUNTANTS NOT OPTIMISTIC ABOUT THE ECONOMIC FUTURE

I don't think any profession is in a better position to judge the economy than CPAs. We are on the front line dealing with clients in all aspects of their business.

Now a new survey from our governing organization, the American Institute of Certified Public Accountants (AICPA) shows that CPA's economic outlook has diminished.

CPA executives’ optimism over the U.S. economy has faded substantially over the past two quarters, the AICPA’s Business & Industry Economic Outlook Survey for the third quarter shows. After a significant rise in confidence that ended in the first quarter of 2012, CPAs report dimming expectations in virtually every major economic indicator.

The CPA Outlook Index--a comprehensive gauge of executive sentiment within the survey--fell four points to 63 for the quarter. The index had matched a post-recession high of 69 at the start of this year, but has declined each of the past two quarters.

BACK-TO-SCHOOL TIPS FOR STUDENTS AND PARENTS PAYING COLLEGE EXPENSES

The IRS just released a nice summary of education credits and deductions. If you have any questions let us know.

Back-to-School Tips for Students and Parents Paying College Expenses

Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.

The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

· American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don't owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.

· Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.

You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.

· Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income. For more information, visit the Tax Benefits for Education Information Center at IRS.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

· American Opportunity Tax Credit

· Tax Benefits for Education: Information Center
· Publication 970, Tax Benefits for Education
· The American Recovery and Reinvestment Act of 2009: Information Center
· Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

COPY OF OLD TAX RETURN

Q: I need a copy of my old tax return in order to get a loan. I can't find my return. Any suggestions?

A: If you used a tax a tax preparer, you should first check with them. They should have a copy. If not, the IRS can help.

Transcripts are free and are available for the currentand past three tax years. You can quickly receive a transcript. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed.

You can also receive a tax account transcript that shows any later adjustments either you or the IRS made after you filed your tax return. This transcript shows basic data including marital status, type of return filed, adjusted gross income and taxable income.

To request either type of transcript online, go to IRS.gov and use the online tool called Order A Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message.

To request a 1040, 1040A or 1040EZ tax return transcript through the mail, complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use Form 4506-T, Request for Transcript of Tax Return.

If you order online or by phone, you should receive your tax return transcript within five to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail.

If you need an actual copy of a previously filed and processed tax return, it will cost $57 for each tax year you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. Please allow 60 days for delivery.

Good luck on the loan.

ON A PERSONAL NOTE

I hope everyone had a great Labor Day weekend. I spent the weekend camping out and canoeing with my 15 year old son, Ryan and his Boy Scout Troop. We spent a day on the water going down the Niobrara river. This beautiful river has been named one of the top 25 canoeing rivers in the United States. The scenery and the wild life are amazing. Even though the bugs were really bad and it was really hot, it was a great time. (I should add that the ground was a little hard.) As my family has heard me say several times, “life is short, make memories.”

I hope that you made as many memories this Labor Day as I did.

FOOD STAMP USE HITS RECORD HIGH

Food stamp use reached a record high in June, the U.S. Department of Agriculture said this week, with 46.7 million people enrolled in the program for low-income families. The latest figures mean that food stamps will once again be a flash point in the presidential campaign. The number of people on food stamps rose 0.4 percent from May and was 3.3 percent higher than a year earlier.

“Too many middle-class families who have fallen on hard times are still struggling,” said Agriculture Secretary Tom Vilsack. The program is “one more example of government incompetence,” said Sen. Jeff Sessions (R-Ala.), who wants cuts in the program. It now costs $71.8 billion a year.