Who needs an "Employer Identification Number"?

If you do any of the following, you will need an Employer Identification Number (EIN) from the IRS:

If you operate your business as a corporation or partnership.

If you file reports for employment taxes, excise tax, or alcohol, tobacco and firearms.

If you have even one employee.

If you have a self-employed retirement plan.

If you operate as any of several other organizations.

Acquiring an EIN is very quick and simple. You do not need to complete the Form SS-4 unless you prefer to. Go to www.irs.gov. Once there, use the search box and type in EIN online. You will be taken to the page that allows you to answer questions online and you will get your EIN upon validation of your answers. You will be able to download and print your confirmation notice.

If you need assistance, please contact our office. We are here to help you.

Rule for deducting medical expenses has changed

You may be familiar with the old tax rule that let you take an itemized deduction for unreimbursed medical expenses that exceeded 7½% of your adjusted gross income. For 2013 and future years, the income threshold increases to 10% for taxpayers under age 65. Those 65 and older may continue to use the 7½% threshold through the year 2016.

Take a different route to a Roth IRA

If your income exceeds certain levels, you cannot make contributions to a Roth IRA. However, you can convert a traditional IRA to a Roth IRA no matter how high your income. Roth IRAs are popular because qualifying distributions are tax-free and annual distributions are not required at age 70½. A conversion to a Roth is a taxable event, so factor that into your analysis. For more information, call us.

Take your choice for deducting home office expenses

You now have a choice in how you deduct the expense of a home office. Starting with your 2013 tax return, you can either deduct the actual expenses connected with your home office, or you can use the simplified method of deducting $5 per square foot of the part of your home used for business, up to a maximum deduction of $1,500.

Remember, the deduction isn't available just because you do work at home; you must use part of your home regularly and exclusively as your principal place of business or where you meet customers, clients, or patients in the normal course of business.

Equipment write-off decreases for 2014

In recent years, businesses could expense up to $500,000 of equipment purchases in the year of purchase, with a $2,000,000 annual purchase limit. In addition, bonus depreciation was allowed for new equipment purchases.

Because Congress did not extend these provisions for 2014, businesses can now only expense $25,000 of new or used equipment purchases. The deduction is reduced dollar-for-dollar when total asset purchases for 2014 exceed $200,000. Also, the 50% bonus depreciation that applied in 2013 is no longer available.

Congress may extend these provisions, or they may not. Check with us for the latest when you're making equipment purchasing decisions this year.

Capitalization vs. expensing

The new IRS regulations on capitalization vs expensing are complex. But the part of the regulations that concerns most small businesses makes it easier for them to comply.

Here's an overview of the safe harbor rules for small businesses. If your average annual gross sales are $10 million or less, you may choose to write off the cost of improvements made to an "eligible building." An "eligible building" is one that is owned or leased by the qualifying taxpayer and the unadjusted basis of the building is $1,000,000 or less. Also, to be able to deduct the expenditures on your current-year's tax return, the yearly total paid for repairs, maintenance, and improvements cannot exceed the lesser of $10,000 or 2% of the building's unadjusted basis.

As with any part of the tax law, there are many details to be followed for the best tax treatment. Please contact us if you would like more information on these new tax regulations.

IRS alerts taxpayers to latest tax scam

The IRS has issued a warning about the latest phone scam. The caller claims to be from the IRS and tells the intended victims they owe taxes which must be paid immediately with a pre-paid debit card or wire transfer. Individuals who don't pay up are threatened with arrest or loss of their business or driver's license.

Watch for these signs that the call is a scam:

Use of fake IRS badge numbers.

Caller knows the last four digits of your social security number.

Caller ID appears as if IRS is calling.

Bogus IRS e-mail is sent as follow-up.

Second call claims to be from police or DMV, again supported by fraudulent caller ID.

Don't respond in any way to these scams; instead forward the scam e-mail to phishing@irs.gov, or file a complaint at FTC.gov.