TAX TIPS FOR JOB SEEKERS

With unemployment so high right now, many people are looking for jobs.There may be some tax advantages by deducting costs related to job search. The amount is limited because you can only claim job search expenses as an itemized deduction (long form) and only the amount that is more than 2 percent of your adjusted gross income.You figure your deduction on Schedule A.

1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.
2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.
3. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers as long as you are looking for a new job in your present occupation.
4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
6. You cannot deduct job search expenses if you are looking for a job for the first time.

OBAMACARE - WHAT DOES IT MEAN TO YOU

Unless you live in a cave, by now you've heard that the U.S. Supreme Court has upheld the key provisions of the Affordable Care Act, or "Obamacare." In an unexpected twist, the Court ruled that the controversial individual mandate is constitutional, but under the government's power to tax, rather than to regulate commerce.

We don't need to go into the details of the ruling itself -- just turn on your television, and somewhere, somebody is opining on it right now! But we do want to remind you the Court's decision means several new taxes will go into effect as scheduled:

·         On January 1, 2013, the Medicare Tax will go up by 0.9% for individuals earning over $200,000 ($250,000 for joint filers, $125,000 for married individuals filing separately). 

·         Also on January 1, there will be a new "Unearned Income Medicare Contribution" of 3.8% on investment income, for those earning more than $200,000 ($250,000 for joint filers).

·         Beginning on January 1, 2014, there will be a new $2,500 limit on tax-free contributions to flexible spending account. 

·         Also beginning January 1, 2014 employers with more than 50 employees will face a penalty of $2,000 per employee for not offering health insurance to full-time employees.  

·         Finally, the threshold for deducting medical and dental expenses rises from 7.5% of adjusted gross income to 10%. This will make these expenses even harder to deduct without help from advanced strategies like Health Savings Accounts or Medical Expense Reimbursement Plans.

That’s not all.  On January 1, 2013 the so called “Bush Rates” are repealed and we go back to the “Clinton Tax Rates.”  This change impacts every taxpayer.  So, while the constitutional issues of Obamacare may be settled, several planning challenges certainly remain. We'll be following developments carefully in order to help you navigate these new challenges. If you have any questions, don't hesitate to call us at 402.362.6636.  In addition, now that the Supreme Court has ruled we will be planning a local seminar and/or webinar to keep you informed.

FAMILY MEDICAL LEAVE ACT (FMLA)

Q: I have 10 employees.Some are part time.I have two of my employees pregnant. I can't afford to give them a lot of time off. What do I have to do?

A: First, hopefully I read you wrong.You say that "I have two of my employees pregnant." I hope that doesn't mean that you are the responsible one.If so, you may have more problems than time off.

Anyway, this is a complicated subject so when in doubt check with an attorney that practices in the HR area.Here are the basics.

The federal law does not apply to businesses with fewer than 50 employees. However, many states have additional laws with different rights that apply to employers with fewer employees. And many states also grant employees leave for reasons and periods beyond those granted under the FMLA.

If you are subject, covered employers must grant an eligible employee up to a total of 12 work weeks of unpaid leave during a 12-month period for one or more of the following reasons:

• For the birth and care of the newborn child of the employee.
• For placement with the employee of a son or daughter for adoption or foster care.
• To care for an immediate family member (spouse, child, or parent) with a serious health condition.
• To take medical leave when the employee is unable to work because of a serious health condition.

That's the basics but each situation and state is different.

HOW LONG SHOULD I KEEP PAYROLL RECORDS

Q:  How long should my business keep payroll tax records?

A:  Per the IRS, at least four years after the due date for employees to file their income tax returns for the particular year. Records to be retained include wages and payment dates and employee data such as names, Social Security numbers and addresses. Also copies of W-4 forms, payroll tax returns and valuation records for fringe benefits provided to employees.

WAR ON EMPLOYERS? CRACK DOWN ON BIAS AGAINST HIRING THOSE WITH CRIMINAL RECORDS

(The New York Times) -- NYTimes.com reports, "In April, the Equal Employment Opportunity Commission signaled that it would begin to crack down on employers who use the criminal histories of job applicants to discriminate against them illegally." But the story notes that many "many small businesses had no idea there was anything wrong with practices like a blanket ban on hiring anybody with a criminal record." The E.E.O.C. "warns employers not to use arrest records at all in hiring decisions. Because 'arrests are not proof of criminal conduct' ... basing a hiring decision on an arrest record is presumptively discriminatory." The story notes, however, that an employer can investigate the conduct that led to an arrest and "make an employment decision based on the conduct underlying the arrest if the conduct makes the individual unfit for the position in question." A Chicago labor law expert "warned that the E.E.O.C. seemed to be preparing for battle on this issue" and the commission is "already investigating hundreds of charges related to the use of criminal history in employment."


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I WON A CAR, HOW DOES THAT IMPACT MY TAXES?

Q:  I recently won a car. How does this impact my taxes?

A:  Congratulations on the win of the car. The fair market value of the vehicle will be ordinary income to you. There really isn’t too much you can do to reduce the tax consequences.

The following are some of the items involved:

• You will want to watch the fair market value of the vehicle that is reported on the 1099. Sometimes the value reported on the 1099 is considerably higher than the actual fair market value. This is especially true in the case of a vehicle where the sticker price is considerably higher than the real value. I would consider comparing the 1099 value to the Bluebook value. If there is a big difference, we might want to re-discuss this.
• You do not need to worry about any penalty for underpayment of estimates as long as the amount that you have withheld from your paychecks is greater than last year’s tax liability. If this is the case, you should not have to worry about underpayment penalties.
• If you are not in alternative minimum tax (AMT) and itemize deductions, you might want to consider paying your state income tax prior to the end of the year. This will allow you to have that itemized deduction in the 2012 year as opposed to 2013. In addition to this, there is some discussion of changing the tax code and eliminating the state income tax deduction. If this should happen, it would be best if you could pay that this year. It’s hard for me to give advice without seeing your actual tax situation regarding the AMT.
• This is considered gambling winnings so, therefore; should you have any gambling losses you should keep track, in that, they would be deductible. Keep documentation of your losses. There is a court case where tickets were disallowed because there were foot prints on the tickets. You will need to show that you actually had cash withdrawals to support the deduction.

Again, congratulations! Drive the new car proudly.

STUDENTS AND SUMMER JOBS

School’s out and many students will be starting summer jobs. I want to remind you that employers may be withholding taxes, so you may not get all of the money that you earn and if you don't take action you may have to file a tax return to get your refund.

Here is a tip that might help:

When you first start a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paycheck.

If you have multiple summer jobs, make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct, use the Withholding Calculator on www.irs.gov.

If you do not anticipate owing any tax and did not owe tax last year, you can simply indicate on your W-4 and your employer should not withhold.