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Wondering About Recovery Act Tax Benefits? Here is Some Information
WASHINGTON — As part of a larger effort to increase the awareness and use of tax benefits available through the American Recovery and Reinvestment Act (Recovery Act), the Internal Revenue Service announced the availability of a vast array of products that help explain several tax benefits currently available to American Families.
With time running out to qualify for some of the Recovery benefits, the IRS has unveiled new YouTube videos, radio public service announcements (PSAs) and multi-lingual informational flyers that provide basic information for taxpayers. The items are available on IRS.gov for partner groups, the media, web sites and other organizations whose audience could benefit from the new tax changes.
These products are in addition to earlier IRS efforts on YouTube (www.youtube.com/irsvideos) and iTunes to increase public awareness about the tax credits. The IRS.gov official web site also contains links and complete information about ARRA at www.irs.gov/recovery. The PSAs are in English and Spanish in either 30-second or 60-second formats. The flyers and posters are in English, Spanish, Chinese, Korean, Russian and Vietnamese.
Topics covered include:
The first-time homebuyer credit which provides a maximum $8,000 tax credit to people who meet eligibility requirements and complete the purchase of their homes before December 1;
The American Opportunity Credit expands education tax credits to $2,500 for tuition and a change in 529 plans allows for the purchase of computers for college use;
The energy credit expands to a maximum of $1,500 for certain energy-saving upgrades;
A new deduction for the sales or excises taxes paid on the purchase price of new vehicles;
The Making Work Pay tax credit, which many American workers received in April through reduced tax withholding in their paychecks. The Making Work Pay credit is $400 for single taxpayers and $800 for married taxpayers who meet certain income guidelines. However, some people, such as married spouses, workers with two jobs, pensioners, some Social Security recipients and dependents, should check their tax withholding to ensure they are not having too little withheld.
Keeping The Correct Records To Support Your Deductions
[Stacie says: keeping the right records to support your business income and deductions can save you some sleepless nights if you are selected for audit. The IRS offers some helpful tips in their Small Business News.]
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes. Your recordkeeping system should also include a summary of your business transactions. This summary is ordinarily made in your business books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business checkbook is the main source for entries in the business books.
Supporting Business Documents
Purchases, sales, payroll, and other transactions you have in your business will generate supporting documents such as invoices and receipts. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense. For more detailed information refer to Publication 583, Starting a Business and Keeping Records.
The following are some of the types of records you should keep:
Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:
Cash register tapes
Bank deposit slips
Receipt books
Invoices
Credit card charge slips
Forms 1099-MISC
Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases.
Documents for purchases include the following:
Canceled checks
Cash register tape receipts
Credit card sales slips
Invoices
Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following:
Canceled checks
Cash register tapes
Account statements
Credit card sales slips
Invoices
Petty cash slips for small cash payments
Travel, Transportation, Entertainment, and Gift Expenses
If you deduct travel, entertainment, gift or transportation expenses, you must be able to prove (substantiate) certain elements of expenses.
For additional information on how to prove certain business expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets. Documents for assets include the following:
When and how you acquired the assets.
Purchase price
Cost of any improvements.
Section 179 deduction taken.
Deductions taken for depreciation.
Deductions taken for casualty losses, such as losses resulting from fires or storms.
How you used the asset.When and how you disposed of the asset.
Selling price.
Expenses of sale.
The following documents may show this information.
Purchase and sales invoices.
Real estate closing statements.
Canceled checks.
Employment taxesThere are specific employment tax records you must keep. Keep all records of employment for at least four years. For additional information, refer to Recordkeeping for Employers and Publication 15, Circular E Employers Tax Guide.
Stacie's Tax Stuff 