5 TIPS ON GAMBLING INCOME AND LOSSES

Do you bet on the ponies, play cards or enjoy slot machines, then you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.

Here are 5 important tips about gambling and taxes:

1. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

2. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:

• $1,200 or more in gambling winnings from bingo or slot machines;
• $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
• $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
• Any other gambling winnings subject to federal income tax withholding.

3. Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.

4. You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.' You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.

5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings.

HIGHER FUTA TAXES FOR MANY STATES AND A CUT FOR A COUPLE

Firms in many states will pay higher FUTA taxes for 2012. The 5.4% credit against FUTA tax is reduced for companies in states that haven’t repaid loans from the federal jobless fund by November 10th.

Employers in Indiana. and South Carolina face a 0.9% cut in their FUTA credit. That translates to as much as $63 extra in tax per employee.

Staring at a 0.6% additional tax of credit of up to $42 more tax per employee are companies in the Virgin Islands and 19 states: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolihna, Ohio, Pennsylvania, Rhode Island, Virginia and Wisconsin.

In addition, businesses in Arizona, Colorado, Delaware, Kansas and Vermont face a 0.3% drop in the credit...an up to $21-per-employee increase. The final word will be announced in mid-November. 

One bit of good news: The 0.2% FUTA surtax that lapsed last year was not revived.

FISCAL CRISIS LOOMS FOR WINNER OF THE PRESIDENTIAL ELECTION

(Bloomberg Markets Magazine) After the election, either President Barack Obama or Mitt Romney will have to deal with a deficit that has topped $1 trillion every year for the past three years and is on an unsustainable trajectory. "We've made a lot of progress getting the private-sector balance sheet in order. Where we've got a lot of work to do is on the public side," says Mark Zandi, chief economist at Moody's Analytics.

To read more of this article: CLICK HERE

THIS TYPE OF CHARITABLE CONTRIBUTION DOES NOT WORK

I don’t know how many times I have been asked if this charitable strategy will work. Give money to a charitable organization and then have them give a scholarship to a related party. Someone apparently tried this and the IRS weighed in.

In a recent case, the IRS ruled that making a donation for one person’s benefit kills the tax deduction. In this situation, a donor who contributed to her church’s scholarship fund wanted the church to use the money she gave for the college tuition costs of the minister’s daughter. The contribution is recast as a gift from the donor to the minister’s daughter, and no deduction is permitted.

PAUL RYAN

Q: You seem like a pretty bright guy. What do you think about this? Some of my friends are critical of Paul Ryan because of his budget proposal that he put out a few years back. They say that he would take away a lot of benefits that the government gives us. I have heard others say it is better to do something.

Is his plan something I should vote for?

A:  Thanks for the compliment. My ex would not agree with you about me being such a bright guy.

Before I respond, I have a couple of comments about your question. First of all, when you vote for president there is really only so much they can do without the backing of Congress. Secondly, Paul Ryan is the vice presidential candidate. Romney will be the prime idea guy so voting for Romney/Ryan is not a vote for Paul Ryan's budget proposal.

I also have to make a comment about your friends statement that "he would take away a lot of benefits that the government gives us." You must realize that if the government gives us a benefit that cost money, they must either take money from others or print more money that puts us further in debt.

Now, finally to respond to your question - We have to go back to early 2011 when Paul Ryan was Chairman of the House Budget Committee. In the opinion of many economists, unlike the typical Congressional budget resolution, the Ryan plan was not only comprehensive in its scope, but it was presented in a refreshingly transparent manner.

Every proposal in this nearly 75-page document—from discretionary spending and Medicaid, to taxes and welfare spending—was explained and justified in a way that any taxpayer could understand.

The press and critics zeroed in on Ryan's bold proposals for reforming entitlements, such as Medicaid and Medicare. Unfortunately, serious attention was not given to the tax side of the plan. Making the tax system conducive to long-term economic growth is just as critical to solving the nation's fiscal crisis as is reining in uncontrolled spending.

I could go on and on about the plan, but let me say this - At least it was a starting point. In my opinion, at least he and his committee had the guts to start the process.

WHY DOESN'T THE PREACHER TALK POLITICS FROM THE PULPIT?

If nonprofits start talking politics, they could lose their tax exempt status.  Now the IRS is stepping up its scrutiny of nonprofits in this election year to ensure they are complying with the rules on intervening in political campaigns.

Charities are barred from participating in political campaigns. Social welfare groups may engage in some political activity, as long as that is not their primary activity.

The IRS has been sending questionnaires about political activities to some groups that are applying for a tax exemption, and leads are pouring in about organizations on both sides of the political spectrum that may be trying to get around the rules.

TIMOTHY GEITHNER, DAVE CAMP HUDDLE ON 'FISCAL CLIFF'

House Ways and Means Committee Chairman Dave Camp quietly huddled with Treasury Secretary Timothy Geithner Wednesday morning about the so-called 'Fiscal cliff'.

The meeting marks an uptick in discussions between the Obama administration and congressional Republicans in gaming out the year-end expiration of all income tax rates, the hiking of the nation’s borrowing cap and massive cuts to domestic and Pentagon spending set to kick in at the beginning of 2013.

Read more: CLICK HERE

EMAIL SCAM NOT FROM IRS

We have been notified by several of our clients, that they have received an email that looks like this one below:

 Subject: Your IRS tax transfer is declined.

Your Income Tax remittance (ID: xxxxxxxxxxx), recently ordered for processing from your bank account was turned down by your Bank.

Rejected Tax transfer
Tax Transaction ID:	Row of numbers here
Reason of rejection	See details in the report below
Income Tax Transaction Report	tax_report_.doc (Microsoft Word Document)

Internal Revenue Service St. Davis 00343 NY

This is a SCAM. The IRS does not email you any type of notice in this manner. Please do not open the attachment. If you receive an email similar to this one, but are unsure of its reliability please contact the IRS or your accountant.

DID YOU GET A CHECK BACK FROM YOUR INSURANCE COMPANY

Some employers are receiving health insurance rebates. If you are one of those lucky employers you are required to act quickly.

Generally you have three months to pass the employees’ share back to the employee.

If you are wondering why you received the rebate, it is because the health reform law requires insurers that don’t spend enough of the premiums on medical care and quality improvement to rebate part of the premiums.

The rebates started going out in July. We are seeing some employers generating goodwill by giving the full amount to employees through premium reductions or cash payouts, even though businesses can generally keep the portion of rebates attributable to employer contributions.

A word of caution, there are complicted rules on the potential taxability of the rebates.

YOU CAN'T ROUND ON YOUR PAYROLL REPORTS

This was hard to believe.  The IRS put out a memo and said that rounding to the nearest dollar on Form 941 is not allowable.

Neither the form nor instructions permit rounding. And the law gives filers the option to report in cents on all tax forms, so IRS can’t remove the cents column. Employers will have to keep reporting their payroll tax liability to the penny.

Keep track of your 'cents'...

IRS ANNOUNCES 2013 IRA AND GIFT TAX NUMBERS

Two tax breaks will be larger next year, thanks to an increase in inflation.

The ceiling on IRA contributions will jump to $5,500, a $500 increase.

• As a result, taxpayers age 50 or older in 2013 will be able to put in up to $6,500.

It is also calculated that the annual gift tax exclusion will rise to $14,000, up $1,000 from 2012.

• This is not official yet. The Revenue Service will officially announce these figures next month.

ACCOUNTANTS NOT OPTIMISTIC ABOUT THE ECONOMIC FUTURE

I don't think any profession is in a better position to judge the  economy than CPAs.  We are on the front line dealing with clients in all aspects of their business.   

Now a new survey from our governing organization, the American Institute of Certified Public Accountants (AICPA) shows that CPA's economic outlook has diminished.

CPA executives’ optimism over the U.S. economy has faded substantially over the past two quarters, the AICPA’s Business & Industry Economic Outlook Survey for the third quarter shows. After a significant rise in confidence that ended in the first quarter of 2012, CPAs report dimming expectations in virtually every major economic indicator.

The CPA Outlook Index--a comprehensive gauge of executive sentiment within the survey--fell four points to 63 for the quarter. The index had matched a post-recession high of 69 at the start of this year, but has declined each of the past two quarters.

BACK-TO-SCHOOL TIPS FOR STUDENTS AND PARENTS PAYING COLLEGE EXPENSES

The IRS just released a nice summary of education credits and deductions. If you have any questions let us know.

Back-to-School Tips for Students and Parents Paying College Expenses

Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.

The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

· American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don't owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.

· Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.

You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.

· Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income. For more information, visit the Tax Benefits for Education Information Center at IRS.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

· American Opportunity Tax Credit

· Tax Benefits for Education: Information Center
· Publication 970, Tax Benefits for Education
· The American Recovery and Reinvestment Act of 2009: Information Center
· Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

ON A PERSONAL NOTE

I hope everyone had a great Labor Day weekend. I spent the weekend camping out and canoeing with my 15 year old son, Ryan and his Boy Scout Troop. We spent a day on the water going down the Niobrara river. This beautiful river has been named one of the top 25 canoeing rivers in the United States. The scenery and the wild life are amazing. Even though the bugs were really bad and it was really hot, it was a great time. (I should add that the ground was a little hard.) As my family has heard me say several times, “life is short, make memories.”

I hope that you made as many memories this Labor Day as I did.

FOOD STAMP USE HITS RECORD HIGH

Food stamp use reached a record high in June, the U.S. Department of Agriculture said this week, with 46.7 million people enrolled in the program for low-income families. The latest figures mean that food stamps will once again be a flash point in the presidential campaign. The number of people on food stamps rose 0.4 percent from May and was 3.3 percent higher than a year earlier.

“Too many middle-class families who have fallen on hard times are still struggling,” said Agriculture Secretary Tom Vilsack. The program is “one more example of government incompetence,” said Sen. Jeff Sessions (R-Ala.), who wants cuts in the program. It now costs $71.8 billion a year.

A REMINDER FOR 12/31 CORPORATIONS

A reminder for calendar year corporations that filed for an extension.

Contributions to retirement plans must be made by September 17, 2012, the same day that their income tax returns are due. Normally, the deadline for filing and making payins is September15, but that day falls on a Saturday this year. For firms on fiscal years (non December 31st) with extensions, the due date is 8½ months after the fiscal year ends.