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FAQ

What Kind of tax deduction, credits we can apply on year end tax if we renting car to Turo or Hyrecar after receiving 1099 from them?

If you are renting your personal vehicle through Turo or Hyrecar, report income on line 21 and expenses on line 36 of Form 1040.pdf, U.S. Individual Income Tax Return. This applies if you're not in the business of renting personal property, which is most likely if you are occasionally renting out your personal vehicle.If you are in the business of renting personal property, then the income and expense is reported on Schedule C.Examples of expenses that you may deduct from your total rental income include:Depreciation – Allowances for exhaustion, wear and tear (including obsolescence) of property. You begin to depreciate your rental property when you place it in service. You can recover some or all of your original acquisition cost and the cost of improvements by using Form 4562.pdf, Depreciation and Amortization, (to report depreciation) beginning in the year your rental property is first placed in service, and beginning in any year you make improvements or add furnishings.Repair Costs – Expenses to keep your property in good working condition but that don't add to the value of the property.Operating Expenses – Other expenses necessary for the operation of the rental property, such as the salaries of employees or fees charged by independent contractors (groundkeepers, bookkeepers, accountants, attorneys, etc.) for services provided.

What is income tax return?

Income tax is paying tax on what you are earning income from profession , trading and any business . this tax will applicable as per tax rules .in india every one who is earing more 2.5 lacks per year they need to pay the tax as per slabs applicable.The slabs in india0–2.5 lacks -Nill2.5 -5 lacks -10%(2.5 lacks)= 25k5–10 lacks -20%(5 lacks )= 1 lackMore than 10 lacks-30 % (on 10 lacks above)above are the slab taxes in india, we need to pay the above percentages as a tax on your income.after paying the tax you need to file the tax return .means you are confirming your income where did you earned (which sources) .this filing only called Tax retuns .Hear as a person you can show some tax savings investemnts to save tax and you can claim from what you have paid as tax to imcome tax department.Hear i am giving best investments as per my knowledge. start investing money into the stock markets and mutal funds.As fresher you you can open a trading and demat account with rajeev gandhi scheem . in india we have lot of brokers but i have account with Zerodha . they are given me best service .this is my advise not recommendation. in this scheem what ever you are investing it will show as tax saving investments and you show under tax exemptions.And one more best thing ,you can start investing in mutual funds who are not having idea in stockmarkets .just start investing in ELSS Mutal funds .this investments also you can show as a tax saving investments. even in Zerodha you can invest in mutual funds with out any commision.my best broker and service provider Zerodha and they are giving me as a zero brokerage .Start invest and save your money instead of paying tax.Every employee start investing in market for tax saving . today small investings only tomorrows wealth for you.Happy investing.Thanks.

Is the initial investment, when starting a company/LLC, considered tax deductible?

If you’re looking to involve yourself in business ownership for the first time, don’t be surprised when you have to dig deep into your pockets to cover the array of initial and ongoing business expenses you’ll incur. Fortunately, the IRS offers a silver lining when it comes to claiming tax-deductible business expenses when you file taxes each year.According to the federal tax code, the owner of a limited liability company (LLC) can deduct startup expenses incurred by the business, no matter how the LLC is designated in terms of its tax structure. To claim this business tax deduction, an LLC has to incur startup expenses before it formally becomes operational. Once the business is officially open, ongoing costs can be written off as well under the category of operating business expenses.What Are Startup Costs?As the name implies, startup costs are expenses incurred by an LLC owner in the very early stages of business development. If you already have or plan to start an LLC, startup costs you can write off include the money you pay to create an LLC—or the money you spend to either investigate or actually purchase an LLC. For example, you can deduct the costs you incur to survey a marketplace for your new business, money you spend on marketing to promote your “grand opening,” travel expenses you incur to get your business off the ground, and fees for training new hires in your office. In essence, startup costs are incurred before you make your first transaction with a customer.What Are Organizational Expenses?Organizational expenses are the required expenses involved in formally registering an LLC as a business entity. These costs include accounting fees, attorney expenses to help you draft and negotiate your LLC’s membership agreement, and other costs directly related to the paperwork that must be filed with state agencies. Certain organizational expenses that cannot be deducted include investor solicitations and attorney fees for assistance with drafting customer contracts.How Much Can You Deduct?LLC members can deduct startup and organizational expenses incurred during a company’s first year of operation. However, there is a limit—no more than $5,000 of these LLC expensescan be deducted. LLC members must reduce this deduction by an amount of total costs that are in excess of $50,000. The amount that exceeds this $50,000 cap is considered amortizable.Startup costs can be claimed as a write-off for the year in which they are paid. For example, startup business expenses paid in 2015 must be claimed on a 2015 LLC tax return when you file it with the IRS in 2016.How to Amortize Startup CostsKeep in mind that both startup and organizational costs are subject to amortization rules since they are classified as capital expenditures. As such, you must claim these deductions over the 180-month period that begins when an LLC becomes an active business. You can opt for an alternative amortization period, as long as it is not shorter than this 180-month period.In order to amortize your business expenses, use Form 4562 and attach it to your initial LLC tax return that describes your company’s activities. In addition, you must attach a statement to Form 4862 outlining your business and each specific startup cost for which you elect amortization. It should also include the date the LLC officially became operational and the amortization period you are requesting.

I only use my car for business, but I have not kept a mileage log. How much can I claim as a tax deduction without triggering an audit?

I would be willing to bet you don't only use your car for business.  Do you ever drive to the supermarket to buy groceries?  Ever drive to the mall to go shopping for yourself?  Ever drive to the theatre to watch a movie with friends?  If you answered "yes" to any of these questions, you've driven personal miles at some point.The reason why I'm bringing this up is because on your tax return (probably on your Schedule C or Form 4562) you will probably have to report total miles driven, commuting miles driven, and business miles driven.  If you try to claim that all your miles driven are business-related, that would definitely catch the attention of most auditors.  Also, if an IRS agent were reviewing your return, he would probably look at the type of work you do (by looking at your own description or the NAICS code you have listed on your Schedule C) and see if all that driving makes sense, given your profession.Insofar as how much can you report before it triggers an audit, there is no simple answer - everything depends on context.  For example, let's take two taxpayers.  One is a single person with no dependents who travels to people's homes to fix their air conditioners.  The second person is a single mother with 3 children between the ages of 7 and 12 who drives her own vehicle for her flower delivery service.  While it might seem reasonable for the first person to claim 80% of all miles are business-related, it be a lot more difficult claiming that for the second person.  Why?  Because a reasonable person would imagine that the single parent would have to drive their kids all over (personal non-deductible miles) and do a lot more personal errands than the first person would.  So here are the things you should watch out for:1. Too many driving miles given your profession and place of residence.  2.  Reported mileage numbers that are too round. 

Is this year's tax return going to fit on a postcard as promised?

The draft forms for 2018 have now been released by the IRS, and sure enough, Form 1040 now fits into a 5x8 inch rectangle (both sides)[1] . There’s been some actual simplification (for example, the exemptions section has been removed.) But the big change is that great sections of Form 1040 have been moved to other new schedules. Obviously this makes 1040 shorter, but it doesn’t do anything to reduce the total number of lines, and it certainly doesn’t simplify anything.Form 1040 was actually never really very complex in the first place. The real work was being done by the ream of supporting schedules, worksheets and documentation that accompanied it. This has not changed. And now there are additional forms, whose only purpose is to reduce the size of Form 1040 to a postcard.For example, suppose you had Capital Gains and Rental Income. Previously, you would enter capital gains on Form 1040, Line 13 and Rental Income on Form 1040, Line 17. Pretty simple, if you ignore that you would also include a Schedule D, Schedule E, Form 8949, and Form 4562, and calculate your taxes on the 2-page Schedule D Worksheet.Now, after the great form simplification, you enter capital gains on Schedule 1, Line 13, and Rental Income on Schedule 1, Line 17. You would total up Schedule 1, and copy the total on Form 1040, line 6. And as before, you would also include a Schedule D, Schedule E, Form 8949, and Form 4562, and tackle the formidable Schedule D Worksheet.In effect, all they’ve done is replaced 2 lines on 1040 with one line on 1040, and three lines on Schedule 1. In terms of complexity, that’s two extra lines. In terms of weight, that’s a net increase of one page. But hey, one of those pages now fits on a postcard.My opinion of the postcard return: it’s like a poorly done magic trick at a children’s party. Voila!, it’s tax simplification and a postcard-return! But even the kids can see how the trick is done. We know it’s not real, and now our intelligence has been insulted as well. My real indignation is not that it’s more complicated, or that it fails to be less complicated. I’m angry that the political magicians are so contemptuous as to think that we can be played with such little effort.That aside, let me just add that the reaction in the press is overblown. An article in Inc. Magazine suggests that the new format is more error-prone, more confusing, and more time-consuming. It is none of these things. If any CPAs out there start missing deductions because they can’t cope with multiple forms, then they should probably not be in the tax business. The new format should also not be a problem to most DIY-ers who never see the forms anyway until they are done entering information into their software’s user-friendly interface.In other words, the physical size of Page 1 of a tax form bears no relationship whatsoever to the complexity of the tax system.Footnotes[1] https://www.irs.gov/pub/irs-dft/...

How do I minimize my Airbnb hosting taxes on a property I own?

When renting out your home through Airbnb, it is important to know the general rules: Generally, if you are hosting your home to guests for 30 days or less, you are considered to be running a bed & breakfast.  As such, you file your gross income and corresponding expenses on a Schedule C, which is a tax form included in your annual personal income tax filing.  If you file on a Schedule C rather than "traditional" rentals on Schedule E, your Schedule C income is subject to Self-Employment taxes.  Therefore it is vitally important to keep accurate records and update them regularly.  In addition to the Airbnb hosting fees, you may also capture your allocated percentage of rents (or mortgage interest), real estate taxes, utilities, cell phone expenses, mileage and any other expense you incurred in the operation of your Airbnb business.  Did you buy extra supplies for your guests?  Food?  Did you purchase furniture for the rented space?  These are all items that can be utilized when calculating your total tax liability.If you rented out your home for longer than 30 days at a time, you file on Schedule E.  This net rental income is subject to ordinary income tax only.In either case, since you own your property, capturing the expenses you incur such as homeowners dues and insurance will help offset your total tax liability.  In addition, you are also allowed to depreciate your property based on the allocated percentage.  This depreciation amount is based on the basis in your property and your allocated percentage of business use (if filing on Schedule C).  Currently, the recovery period for a residential rental home is 27.5 years.If you have any other questions, we have great resources on our blog.  Please check it out here: http://www.sharedeconomycpa.com/...

How do I learn how to file my corporate tax returns?

1. Know your forms:- The first step is determining the correct tax form to use. In essence, every business needs to report its business earnings to the IRS and pay taxes, but the exact forms you'll use depend on your business structure.Partnerships report their income/losses/expenses on Form 1065. If you are a sole proprietor, then you report your business income and expenses on a Schedule C attached to your personal income tax return. Likewise, if your business is an LLC treated as a sole prop, you also use the Schedule C attachment. But if you have a corporation or have elected to treat your LLC as a corporation, then you will need to prepare a separate corporate tax return with Form 1120. Use Form 1120S is if you have elected S Corporation Status.The IRS provides helpful tables that break down the necessary tax forms for each business type.2. Home office deduction:- Many small business owners are intimidated from taking the home office deduction, because they've been told it's a red flag for an IRS audit. However, if you are legitimately entitled to the deduction, you should take it, as it can add up to thousands of dollars in deductions. In order to qualify for the deduction, you need to have a dedicated space in the home that you use solely for the business and nothing else (and proof of that fact).Starting with the 2013 return, you now have the option to use a simplified method for calculating the home office deduction. In the past, you needed to add up your actual costs (mortgage/rent, utilities, etc.) and multiply that figure by the percentage of your home that's dedicated to your office.While the simplified deduction will save you time and paperwork, it may give you a smaller deduction. Savvy tax filers should calculate the home office deduction using both methods and see which is more advantageous. Of course, if you haven't kept track of your home expenses and don't have documentation to back it up, then you should take the simplified deduction.3. Properly classify your office equipment:- First-time and experienced business filers often get tripped up when categorizing expenses as equipment versus supplies. Supplies include things that you used during the year, such as printer paper, pens and printer ink.Equipment (also called capital expenditures) are typically higher-value items that will last significantly longer than one year. Computers, software, office furniture, and servers are all examples of equipment. With the Section 179 deduction, you are able to write off the entire cost of new equipment in one year (up to $500,000), rather than taking depreciation over multiple years.Add up any computers, software, and other equipment you purchased in 2013 in order to get a greater deduction for 2013. And make sure to report these purchases on Form 4562.4. Deduct your insurance costs:- Any insurance premiums related to liability, malpractice, workers' comp, and property are typically deductible as business expenses. Commercial vehicle insurance and life insurance premiums may also be deductible, but rules vary by business type.Business owners of sole proprietorships, partnerships, and S Corporations may be able to deduct the premiums paid for medical and dental insurance for themselves, their spouse, and dependents. In addition, if you have a company with fewer than 25 full-time employees and pay at least half of your employees' health insurance premiums, you may qualify for a tax credit up to 35% of the cost under the Small Business Health Care Act.5. Keep tabs on travel and entertaining expenses:- Did you drive to meet with potential clients, fly out to an industry seminar or tradeshow, or take a client to dinner or a baseball game? If so, you may be able to deduct some of these expenses.For example:If you picked up the tab for entertaining a current or prospective client, you can deduct 50% of the cost as long as business was discussed at the event or the entertainment takes place immediately before or after a business discussion. Be sure to write notes on the receipt, such as whom you were meeting with and what business was discussed.You can deduct 100% of your travel costs if the primary purpose of your trip is for business. If you get some downtime and are able to stay a few extra days after the business is done, that's fine. But, don't try to expense your airfare for a seven-day trip to the Florida Keys for a two-hour meeting.6. Small deductions add up:- Small business owners should keep track of any miscellaneous expenses, as these can really add up over the course of a year. For example, did you buy any books or take an online course to hone your skills? Did you pay dues to an industry organization? These can all be write-offs. Likewise, any interest on credit used to finance business purchases is fully deductible. If you drive to meet with customers, you can take a standard mileage rate deduction (it's 56.5 cents per mile for 2013). And don't forget other business expenses such as web hosting, Internet bill, mobile phone plans, stamps, printer ink and so on.7. Need more time?If the deadline is approaching too quickly for your taste, you can file for an extension. It's better to get your return right than rush to meet the deadline. However, keep in mind that while you get extra time to file, you don't get extra time to pay. If you need to ask for an extension and anticipate you will owe money, you should estimate what you owe and send the payment when you request the extension. Otherwise, you'll be stuck with interest and penalties when you finally do send everything in.
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