Breaking news from our Manhattan income tax CPAs: Starting July 1, 2010, many mall businesses offering tanning services in New York must collect a 10 percent excise tax on the tanning services they provide. This excise tax requirement is part of the Affordable Care Act that was enacted in March 2010.

Here are nine tips on the tanning excise tax that providers must collect.

1.       Businesses providing ultraviolet tanning services must collect the 10 percent excise tax at the time the customer pays for the tanning services.
2.       If the customer fails to pay the excise tax, the tanning service provider is liable for the tax.
3.       The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises.
4.       The tax does not apply to spray-on tanning services.
5.       If a payment covers charges for tanning services along with other goods and services, the other goods and services may be excluded from the tax if they are separately stated and the charges do not exceed the fair market value for those other goods and services.
6.       If the customer purchases bundled services and the charges are not separately stated, the tax applies to the portion of the payment that can be reasonably attributed to the indoor tanning services.
7.       The tax does not have to be paid on membership fees for certain qualified physical fitness facilities that offer indoor tanning services as an incidental service to members without a separately identifiable fee.
8.       Tanning service providers must report and pay the excise tax on a quarterly basis.
9.       To pay the tax, businesses must file IRS Form 720, Quarterly Federal Excise Tax Return using an Employer Identification Number assigned by the IRS. Businesses that don’t already have one can apply for an EIN online at IRS.gov.

If you have any questions about this issue, or how it may affect your small business tax preparation in New York City, call one of our Manhattan income tax CPAs today.

About us: MEDOWS CPA, PLLC is a boutique New York CPA NY Firm serving the needs of Individuals & Small Businesses in New York City and throughout the nation.  We work with the self-employed, freelancers, LLC, C-Corporations and S-Corporations to help them with their accounting and tax needs.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

If you have young children, you should consider the cost of higher education well in advance, and how it will effect your NYC income taxes. Two educational savings vehicles allow individuals to save for education on a tax-favored basis in New York: a qualified tuition program and a Coverdell education savings account. Also, you may be able to exclude from your  Manhattan income taxes a limited amount of bond interest received from qualified U.S. savings bonds in the year you pay higher education expenses. Parents may also use funds from an individual retirement account or a traditional form of savings to pay tuition costs. Generally, the payment of higher education costs is supplemented with scholarships, loans and grants. However, having a viable plan as early as possible in a child’s life will make maximum use of a family’s financial resources and may provide some New York City income tax benefit.

Section 529 plans. The Tax Code allows New York State and some educational institutions to offer so-called “529″ plans (known for the section of the Tax Code that governs them). They are also sometimes called qualified tuition programs (QTPs). They allow you to either prepay or contribute to an account for paying a student’s post-secondary education expenses. An eligible educational institution generally includes colleges, universities, vocational schools or other post-secondary educational institutions. In addition, distributions from state programs, even to the extent of earnings, are now entirely tax-free to the extent used for qualified higher education expenses. This tax-free treatment also has been available for distributions from private college and university programs.

Coverdell education savings accounts. Coverdell education savings accounts (also sometimes called education IRAs) are similar to IRAs. You can save today for future educational expenses, not just higher educational expenses. Funds in a Coverdell ESA can also be used for K-12 and related expenses. The maximum annual Coverdell ESA contribution is $2,000 per beneficiary. Contributions are not deductible by the donor and distributions are not included in the beneficiary’s income as long as they are used to pay for qualified education expenses. Earnings accumulate tax-free. Contributions generally must stop when the beneficiary turns age 18, except for individuals with special needs. Parents can maximize benefits, however, by transferring older siblings’ accounts for use by a younger brother, sister or first cousin, thereby maximizing the tax-free growth period. Excess contributions are subject to an excise tax on NYC income tax returns.

Although the amounts of adjusted gross income allowed for a contributor to a Coverdell ESA are subject to phase-out, the limits are generous. The annual contribution starts to phase out for married couples filing jointly with modified AGI at or above $190,000 and less than $220,000 and at or above $95,000 and less than $110,000 for single individuals.

Undoubtedly, some of these provisions will be more important to you than others, depending upon your personal circumstances. If you would like to explore how these opportunities can work for you and how they may effect your future income tax returns in New York, please do not hesitate to call.

About us: MEDOWS CPA, PLLC is a boutique New York CPA NY Firm serving the needs of Individuals & Small Businesses in New York City and throughout the nation.  We work with the self-employed, freelancers, LLC, C-Corporations and S-Corporations to help them with their accounting and tax needs.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Many medications are increasingly becoming available over-the-counter without a prescription. In recent years, individuals could use funds in their health Flexible Spending Arrangements (health FSAs) to pay for over-the-counter drugs, as well as prescription meds and other healthcare costs. However, the new health care reform package makes some important changes to health FSAs, including prohibiting health FSA dollars to be used for over-the-counter medications. Keep reading to discover how these changes will affect your small business and your NYC income taxes.

Health care costs. In New York City, health FSAs allow employees to be reimbursed for health care, dependent care or other expenses that are excludable from gross income if paid by an employer. Medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease. Medicines and drugs are expenditures for medical care. In 2010, health FSAs may also reimburse employees for out-of-pocket expenses for over-the-counter drugs as well.

The health care reform package (the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010) modifies the definition of medical expenses for health FSAs to conform them to the definition used for the medical expense itemized deduction. This means that over-the-counter drugs are excluded unless prescribed by a health care professional. The new law makes an exception for insulin. This new treatment is effective for tax years beginning after December 31, 2010.

You should receive information from your employer or heath FSA administrator about this important change. If you are a Manhattan Small Business owner and are curious as to how this will effect your income taxes in New York, please contact our office.

“Use it or lose it rule.” FSAs have some important limitations. Amounts withdrawn from an FSA must be used to reimburse medical care expenses. Any excess cash in the account at the end of the year will be forfeited. This is known as the “use it or lose it” rule. However, the IRS has given small business owners and other employers permission to modify FSAs to extend the deadline for up to 2 1/2 months after the end of the plan year.

FSA funding. The FSA may be funded by employer contributions or by a salary reduction agreement with each employee as that employee so elects at the start of each year. The employer must take the initiative to establish the FSAs; the employee cannot start one on his or her own. The employer as the plan sponsor also shoulders the incidental administrative costs of running the FSAs.

The health care reform package places an important new limit on contributions to health FSAs. After 2012, contributions will be capped at $2,500 per year. The $2,500 amount is indexed for inflation after 2013.
Dependent care FSAs. Independent of a health FSA, small business owners may set up dependent care FSAs to cover costs of day care, summer day camp, and for the care of a physically or mentally incapacitated dependent of any age. If the employer offers a dependent care program or an FSA, the taxpayer may choose to (1) receive up to $5,000 in tax-free dependent care from the employer plan or convert a portion of his or her salary (up to $5,000) to a tax-free spending account, (2) take the child care credit at the end of the year or (3) use a combination of the two alternatives.

If you have any questions about health FSAs or dependent care FSAs as applied to your NYC small business income taxes, please contact our office.

About us: MEDOWS CPA, PLLC is a boutique New York CPA NY Firm serving the needs of Individuals & Small Businesses in New York City and throughout the nation.  We work with the self-employed, freelancers, LLC, C-Corporations and S-Corporations to help them with their accounting and tax needs.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

If you live in Manhattan, it is only logical that you would want to file your income taxes with a tax professional who is nearby. However, you may not be aware that filing your Manhattan income taxes with anyone other than a Manhattan CPA could actually hurt your wallet.

There are some income tax issues that are unique to Manhattan that only a CPA based in the borough would know thoroughly, and if you went to a CPA or other tax professional outside of Manhattan, they may overlook these issues and you could end up paying more on your income taxes or possibly even missing out on an extension or refund opportunity. And of course you don’t want that to happen.

Nobody likes losing money, so it makes sense to trust your Manhattan income taxes to a veteran Manhattan Certified Public Accountant. At MEDOWS CPA, PLLC our Manhattan based CPAs will be able to take care of your income taxes and also offer you any additional advice or assistance you may need.

About us: MEDOWS CPA, PLLC is a boutique New York CPA NY Firm serving the needs of Individuals & Small Businesses in New York City and throughout the nation.  We work with the self-employed, freelancers, LLC, C-Corporations and S-Corporations to help them with their accounting and tax needs.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

If you are liable for the Alternative Minimum Tax (AMT) bracket this year you may not understand how you got there to begin with. Taxes can be confusing so the more you understand it the better the outcome.

If you are living in the New York and looking for ways to decrease your chances of landing in the Alternative Minimum Tax class then you need to decrease your income. You can also pay more into any retirement plan you have. Paying more into a 401K plan will automatically reduce your income and solve the problem.

The Alternative Minimum Tax is a calculation that is always figured with the regular income tax figures. The original purpose of the alternative minimum tax was to prevent tax payers from finding ways to take advantage of tax deductions that includes buying and selling stocks to keep from paying too much in taxes. But today taxpayers do not need a lot of personal deduction in order to be classified in the alternative minimum tax bracket.

The ATM reduces your itemized taxes. Some NYC CPAs would say simply not to claim as many itemized taxes and this would reduce your AMT. However, blindly reducing itemized taxes may increase your overall tax liability. There is a careful balance to determining what to include in itemized deductions and what not to include insuring that your overall tax liability is as low as possible.

Speak to your Certified Public Accountant in New York or NY tax consultant to decide which ways are better for you to reduce your chances of being considered in the Alternative Minimum Tax bracket. Your accountant can give you suggestions on how to get out of it or reduce your chances of getting back in it.

If you have substantial state and local taxes, property taxes, mortgage interest, real estate taxes and non reimbursed business expenses and earn a decent salary you are at a risk for AMT. You may benefit from filing separately on your income tax NY. Not everyone does, but if your New York accountant thinks that it may save you money then you should do it as this will be used in your savings on your federal liability. The AMT does not factor in when determining New York tax liability.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners, freelancers and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses