Business Tax Returns tips


Domestic Production Deduction

If your  business is engaged in a qualifying production activity you may be able  to take a tax deduction for your U.S. based business activities. The  deduction is limited to income arising from qualified production  activities in whole or in part based in the United States. 

Organizational and Start Up Costs

Have you just  started a new business? Did you know expenses incurred before a business  begins operations are not allowed as current deductions? Generally,  these startup costs must be amortized over a period of 180 months  beginning in the month in which the business begins. However, based on  the current tax provisions, you may elect to deduct up to $5,000 of  business start-up and $5,000 of organizational costs paid or incurred.  The $5,000 deduction is reduced by any start-up or organizational costs  which exceed $50,000. If you want to deduct a larger portion of your  startup cost in the first year, a new business will want to begin  operations as early as possible and hold off incurring some of those  expenses until after business begins

Deductible Home Offices

You may be able to  take a home office deduction if you use a portion of your home  exclusively and regularly for business purposes, regardless of whether  you are self-employed or not. 

Coverdell Savings Accounts

A Coverdell  Education Savings Account (ESA) is a savings account created as an  incentive to help parents and students save for education expenses.

The  total contributions for the beneficiary (who is under age 18, or is a  special needs beneficiary) of this account in any year cannot be more  than $2,000, no matter how many accounts have been established. The  beneficiary will not owe tax on the distributions if, for a year, the  distributions from an account are not more than a beneficiary's  qualified education expenses at an eligible education institution. This  benefit applies to higher education expenses as well as to elementary  and secondary education expenses.

Generally,  any individual (including the beneficiary) can contribute to a  Coverdell ESA if the individual's modified adjusted gross (MAGI) income  is less than an annual, constantly changing maximum. Usually, MAGI for  the purpose of determining your maximum contribution limit is the  adjusted gross income (AGI) shown on your tax return increased by the  following exclusion from your income: foreign earned income of U.S.  citizens or residents living abroad, housing costs of U.S. citizens or  residents living abroad, and income from sources within Puerto Rico or  American Samoa. Contributions to a Coverdell ESA may be made until the  due date of the contributor's return, without extensions.

ROTH IRA Contributions

 Can you contribute to a Roth IRA? The IRS suggests checking these simple rules:

To  contribute to a Roth IRA, you must have compensation (e.g., wages,  salary, tips, professional fees, bonuses). Your modified adjusted gross  income must be less than:

• $188,000 — Married Filing Jointly

• $10,000 — Married Filing Separately (and you lived with your spouse at any time during the year).

• $127,000 — Single, Head of Household, or Married Filing Separately (and you did not live with your spouse during the year).

Unlike traditional IRAs there is no age limitation for Roth IRA contributors.

Contribution Limits:

In  general, if your only IRA is a Roth IRA, the maximum current year  contribution limit is the lesser of your taxable compensation or $5,500  ($6,500 for those age 50 or over). The maximum contribution limit phases  out if your modified adjusted gross income is within these limits:

• $178,000-$188,000 — Married Filing Jointly or Qualifying widow(er)

• $0-$10,000 — Married Filing Separately (and you lived with your spouse at any time during the year)

• $112,000-$127,000 — Single, Head of Household, or Married Filing Separately (and you did not live with your spouse)

Contributions to Spousal Roth IRA:

 You can make contributions to a Roth IRA for your spouse provided you meet the income requirements.

* Note - threshold amounts listed above are for tax year 2013.