Welcome to JIL Enterprises Below are a number of articles that have appeared in our newsletter.  Please contact us if you have any questions.  If you are not on our mailing list and would like to be, please sign up below.

What is the home-office deduction and can I take it? Posted Monday, March 05, 2012 If you use part of your personal residence for business you may be able to take a deduction. You may take a deduction whether you are self-employed or an employee. But just because you can take a deduction doesn’t mean you should. The home-office deduction has traditionally been a high audit area so if you use it you should be certain you use it correctly. To take the deduction part of your home must be used exclusively and regularly for business. Exclusively means that the part of your home used for business may not be used personally. Space that is used jointly would not qualify for the deduction. This is typically interpreted very narrowly and the deduction has been disallowed for non-business use as little as a place where the kids sometimes watch television. If providing a daycare facility in your home or using your home to store inventory that you resell, the exclusive use requirement is loosened. Several issues go into determining if the use is regular. First you have to consider the relative importance of activities performed in your home as compared to other places. You should also consider where you conduct the administrative functions of your business. Meeting clients or using the office as the primary location where you perform administrative functions certainly qualifies for the deduction. Inconsistent or occasional use of the home office would not meet this criterion. If you are an employee the home office must additionally be for the convenience of the employer. If you meet the exclusive and regular use tests and you decide to take the deduction the next step is to figure the amount. The expenses that are deductible as a home-office include mortgage interest, real estate taxes, property insurance, utilities, general repairs, depreciation, and other expenses for keeping up and running your home. The amount of the deduction for these types of expenses is generally based on the relative size of the office compared to the whole structure. You can deduct 100% of direct expenses to the office such as repairs or painting. Expenses for self-employed persons are deducted before determining AGI while expenses for employees are deducted on Schedule A and subject to a 2% floor. The deduction is further limited by the income from the activity. If depreciation is deducted there are some potential negative issues with regard to the gain exclusion on the sale of a personal residence. If you have a separate structure for your office space or use your home as a daycare facility, there are other things to consider. These issues are too complex for this article but should be addressed if you are considering using this deduction. Hopefully this gives you an overview of how the home-office deduction works. For a more complete discussion see IRS publication 587 or contact us. If you would like to receive our newsletter please sign up above.

Do I really need an experienced CPA o prepare my taxes? Posted Monday, March 05, 2012 It is interesting that people will go to a physician annually for a physical but they do not use a CPA for tax preparation.  What we do is much more than just preparing tax returns.  We seek to develop relationships.  We seek to help clients manage their withholdings.  We are available year round to help answer questions, questions that are more easily answered when we are already familiar with your tax situation.  Tax time should not be a time for surprises but a time for finishing up your plan for last year and formulating your plan for the current year.  This is an opportunity for an annual financial checkup.   A CPA offers experience that most people who choose to prepare their own returns don't have.  This experience comes from having prepared thousands of tax returns.  People who don't prepare as many returns are more likely to make mistakes.  When the IRS discovers a mistake they will contact the taxpayer.  Correcting the mistake can be time consuming and expensive since the IRS charges penalties and interest if money is owed to them.  On more than one occassion I've had new clients who came to me after having to pay penalties and interest to the IRS or State on honest mistakes they made.  These costs could have paid for professional preparation for five years or more. CPAs are required to stay current with tax law.  The tax law changes every year and sometimes will change one year and then change back a few years later.  Most CPAs will spend time each year at a conference on tax law changes and then countless hours throughout the year reading technical journals that discuss tax and accounting topics.  This allows us to stay more up to date and to assist during tax planning.  It also creates an atmosphere that promotes your receiving all deductions available to you and therefore minimizing your tax liability. People who prepare their own returns can never know for sure that they have done it correctly.  Even answering a series of questions can not guarantee it has been done correctly.  Answering a question that is vague could lead you down a path that never asks the question to which you really know the answer.  When using big box tax preparation services you do not know the experience of your individual preparer and you do not typically have access to that preparer after April 15th.  Using an experienced CPA you have more of a human element to make sure you have answered those questions correctly and you know they are available throughout the year.  So, yes, you really do need a CPA.  No matter how simple your information may appear you need someone with experience to guide you through the process.  Someone you feel comfortable with who can create peace and serenity in an otherwise chaotic process.  Someone who is there year round to answer your questions.  And someone who will help you, not only with last year, but also with this year and for many years to come.  If you are not on our mailing list and would like to be, please sign up below.