News & Articles

6 Last-Chance Tax Breaks: Do You Qualify?

Posted on Mon, Jan 29, 2018

The new Tax Cuts and Jobs Act (TCJA) significantly changes some parts of the tax code that relate to personal tax returns. In addition to lowering most of the tax rates and increasing the standard deduction, the TCJA repeals, suspends or modifies some valuable tax deductions. As a result, millions of Americans who have itemized deductions in the past are expected to claim the standard deduction for 2018 through 2025.

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Tags: Michigan State and Local Tax (SALT), Individual Taxes, Expenses, Taxpayers Claim a Theft Loss, Tax Cuts and Jobs Act (TCJA)

Don't Overlook Miscellaneous Itemized Deductions

Posted on Fri, Dec 08, 2017

Many people itemize deductions on Schedule A of their tax returns, rather than taking the standard deduction. Your tax preparer will generally advise you to do so if your allowable itemized deductions exceed the standard deduction.

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Tags: Expenses, Deductions, Tax Return

Meal Deductions: Tax Rest for the Weary

Posted on Fri, Aug 25, 2017

In one significant case, the U.S. Tax Court allowed a taxpayer to claim deductions for meals that stretch the limits of the traditional "sleep-or-rest" rule for business travelers. (Bissonnette, 127 TC No. 10)

Background: Generally, you can deduct 50% of your meals and all incidental expenses when you are away from home on business. The IRS considers you to be "away from home" if business duties require you to leave the general area of your tax home substantially longer than an ordinary work day and you need to sleep or rest in order to meet the demands of the job.

When Are Meal Deductions Allowed?

    • Meal expenses are generally deductible only if a business trip is overnight or long enough that the taxpayer needs to stop for sleep or rest to properly perform his or her duties.
  • The amount of the meal expenses must be substantiated, but instead of keeping records of the actual cost of meal expenses, a taxpayer can generally use a standard "per diem" meal allowance. The amount allowed varies, depending on the travel location and time of year.
  • Generally, the deduction for unreimbursed business meals is limited to 50% of the cost that would otherwise be deductible.

For these purposes, your tax home is your regular workplace, regardless of where you actually reside.

Therefore, if you're merely grabbing 40 winks in between shifts, you probably won't qualify for meal deductions. Conversely, if you need an extended nap before resuming work, you may be in line for tax breaks.

In the Tax Court case, meal deductions were claimed by a ferryboat captain who normally worked 15 to 17 hours a day for seven days, with the next seven days off. The captain was employed by a company based in Seattle, Washington, which carried travelers on turnaround voyages to destinations on Puget Sound. During the peak season one year, the taxpayer had a layover of one hour, increasing to five hours the next two years. In the off-season, the captain's mid-cruise layovers were six hours long.

At the end of a workday, the captain usually did not have time to return to his personal residence for dinner. On account of an early starting time and long commute to and from his residence, he slept on a cot stored aboard one of the company's vessels. The company did not require him to stay overnight, pay him during this time or provide an allowance for meals or incidental expenses.

The captain deducted the expenses on his tax return. The IRS denied the captain's meal and incidental expense write-offs because he was not "away from home" under the tax code definition "because his voyages did not require him to obtain sleep or rest."

However, the court found that it was reasonable for the captain to obtain sleep or rest so he could meet his job demands. He was responsible for his crew and the safety of up to 1,200 passengers on voyages. As a result, the court ruled that the six-hour layover resulted in the taxpayer being away from home in the off-season. Once sleep or rest is required, 50% of the cost of his meals could automatically be deducted, even if these expenses were of a purely personal nature (for example, there was no substantial business discussion with a customer or client).

In addition, the Tax Court determined that the workday was long enough to use the standard per diem rate without prorating the amounts.

Can other taxpayers take advantage of this case if they work long hours? There's no definitive time established for the "sleep-or-rest" rule. However, the courts are likely to rely on critical situational factors if it's a close call. In the case described above, the Tax Court stated: "The factors to consider in determining whether [the taxpayer] needed sleep or rest include his age, his physical condition, the length of his workday, and the importance of being alert so that he could carry out his job's responsibilities without fear of injury to others."

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Tags: Expenses, Deductions, Travel Expenses, Meals

Tax-Advantaged Ways to Help Educate the Grandchildren

Posted on Wed, Feb 22, 2017

If you want to help your grandchildren through college, there are several options to help pay their expenses and trim your family's tax bill at the same time. Here are three tax-wise ideas:

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Tags: Tuition, Expenses, College Expenses

No Current Deductions Before Business Commences

Posted on Wed, Aug 24, 2016
Starting up a business and wondering about how tax deductions will be handled? The most important thing to understand is that most expenses incurred before a business begins functioning cannot be deducted or amortized until the year when the business does become active.

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Tags: Internal Revenue Code, Expenses, Business, Section 162, Section 195

Rx for Itemizing Medical Expenses

Posted on Mon, Aug 22, 2016

Medical expenses can be costly — and they're not always covered by insurance. But there may be a silver lining: You may be able to claim an itemized deduction for the amounts you pay for medical, dental and vision care, if you incur enough costs to exceed the applicable threshold for the tax year. Here are the details about this deduction.

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Tags: Expenses, Deductions, Medical

Back-to-School Tips for Grownups

Posted on Wed, Aug 17, 2016
August is back-to-school time across the country. Whether the school buses are already disrupting your commute to work — or will be soon — the start of the school year brings opportunities for savvy business owners.

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Tags: Expenses, Small Business, Education

Maintain a Healthy Cash Flow

Posted on Mon, Mar 28, 2016

In today's economic environment, one major concern for businesses is maintaining a healthy cash flow.

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Tags: Expenses, Non-cash Incentives, Tax Deduction, Accounts Receivable, Accounts Payable

Rx for Itemizing Medical Expenses

Posted on Wed, Mar 09, 2016

Medical expenses can be costly — and they're not always covered by insurance. But there may be a silver lining: You may be able to claim an itemized deduction for the amounts you pay for medical, dental and vision care, if you incur enough costs to exceed the applicable threshold for the tax year. Here are the details about this deduction.

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Tags: Expenses, Deductions, Medical

A Gift from Uncle Sam: Congress Passes the Extenders Package

Posted on Mon, Dec 21, 2015

This holiday season, taxpayers are receiving a "gift" from Washington, D.C. It's the Protecting Americans from Tax Hikes Act of 2015 or, simply, the PATH Act. It does more than just extend expired tax provisions for another year. The bipartisan deal makes about one-third of these tax provisions permanent. Many others have been extended for periods ranging from two to five years.

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Tags: Tax, Expenses, Business, Tax Breaks, Section 179 deduction, PATH Act