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 start-up 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 costs paid or incurred. The $5,000 deduction is reduced by $1 for any dollar you spend over $50,000, which means that you would not be able to deduct any costs if you spent more than $55,000, instead you will need to amortize all of them.

It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make a profit. If you do not carry on your business or investment activity to make a profit, there is a limit on the deductions you can take. You must include on your return income from an activity from which you do not expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. You cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, come under this limit. So does an investment activity intended only to produce tax losses for the investors. In determining whether you are carrying on an activity for profit, all the facts are taken into account. No one factor alone is decisive. Among the factors to consider are whether:

1. You carry on the activity in a business-like manner,
2. The time and effort you put into the activity indicate you intend to make it profitable,
3. You depend on income from the activity for your livelihood,
4. Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
5. The activity makes a profit in some years, and
6. You can expect to make a future profit from the appreciation of the assets used in the activity.

If you're you are unable to file by the tax deadline, you can get a six month extension of time to file using Form 7004. And if you have trouble paying your tax bill, the IRS has several payment options available. The extension will give you extra time to file the tax return, but it does not extend the time you have to pay any tax due. You have to make an accurate estimate of any tax due when you request an extension. You can also send a payment for the expected balance due, but this is not required to get the extension. However, you will owe interest on any amounts not paid by the deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date. If you're you are unable to file by the tax deadline, you can contact us and we can help you file for an extension.

Are you in the middle of a disagreement with the IRS? One of the guaranteed rights for all taxpayers is the right to appeal. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case. IRS Publication 1, Your Rights as a Taxpayer, explains some of your most important taxpayer rights. During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights, including the right to appeal. The IRS appeals system is for people who do not agree with the results of an examination of their tax returns or other adjustments to their tax liability. In addition to examinations, you can appeal many other things, including:

• Collection actions such as liens, levies, seizures, installment agreement terminations and rejected offers-in-compromise
• Penalties and interest
• Employment tax adjustments and the trust fund recovery penalty

Appeals conferences are informal meetings. The local Appeals Office, which is independent of the IRS office that proposed the disputed action, can sometimes resolve an appeal by telephone or through correspondence. The IRS also offers an option called Fast Track Mediation, during which an appeals or settlement officer attempts to help you and the IRS reach a mutually satisfactory solution. Most cases not docketed in court qualify for Fast Track Mediation. You may request Fast Track Mediation at the conclusion of an audit or collection determination, but prior to your request for a normal appeals hearing. Fast Track Mediation is meant to promote the early resolution of a dispute. It doesn't eliminate or replace existing dispute resolution options, including your opportunity to request a conference with a manager or a hearing before Appeals. You may withdraw from the mediation process at any time. When attending an informal meeting or pursuing mediation, you may represent yourself or you can be represented by an attorney, certified public accountant or individual enrolled to practice before the IRS. If you and the IRS appeals officer cannot reach agreement, or if you prefer not to appeal within the IRS, in most cases you may take your disagreement to federal court. But taxpayers can settle most differences without expensive and time-consuming court trials. For more information on the appeals process, please contact us!

It's a moment any taxpayer dreads. An envelope arrives from the IRS — and it's not a refund check. But don't panic. Many IRS letters can be dealt with simply and painlessly. Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice provides specific instructions explaining what you should do if action is necessary to satisfy the inquiry. Most notices also give a phone number to call if you need further information. Most correspondence can be handled without calling or visiting an IRS office, if you follow the instructions in the letter or notice. However, if you have questions, call the telephone number in the upper right-hand corner of the notice, or call the IRS at 1-800-829-1040. Have a copy of your tax return and the correspondence available when you call so your account can be readily accessed. Before contacting the IRS, review the correspondence and compare it with the information on your return. If you agree with the correction to your account, no reply is necessary unless a payment is due. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write an explanation why you disagree, and include any documents and information you wish the IRS to consider. Mail your information along with the bottom tear-off portion of the notice to the address shown in the upper left-hand corner of the IRS correspondence. Allow at least 30 days for a response. Sometimes, the IRS sends a second letter or notice requesting additional information or providing additional information to you. Be sure to keep copies of any correspondence with your records.  If you've received a notice and are confused about what to do next, please contact us and we can help!

Here are some details about this deduction to help taxpayers determine if they can claim it:

• Employees and S-Corps are not eligible to claim the home office deduction.
• The home office deduction, calculated on Form 8829, is available to both homeowners and renters.
• There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
• Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
• The term "home" for purposes of this deduction:
  • Includes a house, apartment, condominium, mobile home, boat or similar property.
  • Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
  • Doesn't include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business.
• Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:
  • There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
  • The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
• Expenses that relate to a separate structure not attached to the home may qualify for a home office deduction. They will qualify only if the structure is used exclusively and regularly for business.
• Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
  • The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
  • When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.