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Acquisition Cost Analysis For NYC Small Businesses

23.07.2010

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tags: accountant new york city, Amended Tax Returns New York, Certified Public Accountant New York City, income tax manhattan, income tax new york city, income tax nyc, llc cpa manhattan, llc cpa nyc, Manhattan CPA, Manhattan Tax Preparation, new york certified public accountant, NYC LLC Manhattan LLC CPA, nyc small business cpa, Small business CPA Manhattan, small business cpa new york city, small business nyc, small business tax advice nyc, TAX PREPARATION NYC

Congratulations on your recent acquisition of your new small business in New York. Acquiring a small business is often an emotionally exhausting, confusing and exhilarating experience. Further, acquiring a business can put a strain on the new company’s cash flow. As Manhattan CPAs experienced in working with S-corps, C-corps and LLCs in NYC, we can advise you on ways to improve your cash flow.
One way to improve cash flow is to reduce the amount of New York income taxes your small business is currently paying. One possible way to reduce NYC income taxes is to accelerate the deduction of costs currently capitalized as acquisition related costs. Generally, professional fees and other costs associated with the purchase of a business are “capitalized” in the stock or assets that are purchased. For income tax purposes, deduction of these costs may be over 15 years, on sale of the business, or the costs may never be deducted. Because invoices often do not clearly allocate fees among all the services performed by professionals, or costs associated with travel and other miscellaneous expenses, costs that are not associated with the purchase can be capitalized as acquisition costs.

If costs unrelated to the acquisition have inadvertently been capitalized, then properly re-characterizing these costs can permit them to be deducted in the year they were incurred. Further, in certain instances, costs incurred to expand your business can be deducted over 5 years, rather than 15 years. A thorough analysis of capitalized acquisition costs often results in a significant New York tax refund and/or a decrease in the Manhattan income tax paid in the years immediately following the acquisition.

Our CPAs would like to talk to you about the potential for accelerating the deduction of some of the costs you currently have capitalized, to better help your New York City LLC, S-corp, C-corp or other small business. Please contact one of our NYC LLC CPAs at our office to arrange a convenient meeting time.

Sincerely yours,
Jonathan Medows, CPA

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

Just A Reminder: Accelerated Tax Deduction For Haiti Earthquake Relief

20.07.2010

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tags: Certified Public Accountant New York City, CPA high net worth individuals Manhattan, income tax manhattan, income tax new york, income tax new york city, income tax nyc, Just A Reminder: Accelerated Tax Deduction For Haiti Earthquake Relief, LLC CPA ew york city, llc cpa nyc, Manhattan Tax Preparation, new york certified public accountant, small business cpa, Small business CPA Manhattan, small business tax advice new york, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC, Taxes NYC

The haunting images of destruction and moving stories of rescue have encouraged Americans to give generously to help their neighbors in Haiti recover from the January 12, 2010 earthquake. To encourage donations to charitable organizations working in Haiti, Congress recently passed, and President Barack Obama signed into law, a special measure making your monetary contributions tax deductible in 2009 even though they are made in 2010. The new law gives you flexibility in deciding when to claim a deduction for your early contributions on your income taxes in NYC. Below is a further look into how this accelerated deduction works, and how an income tax CPA in Manhattan can assist you.

Accelerated deduction. Typically, if you file an itemized individual federal return and you want to deduct your charitable contributions, you can only deduct the contributions you made in that tax year. The earthquake hit Haiti on January 12, 2010. Under the normal rules, charitable contributions made to help Haiti would be deductible when taxpayers file their 2010 New York income tax returns in 2011. The new law makes a special and temporary exception for Haiti relief.

Under the new law, you can treat a contribution made to help Haiti after January 11, 2010 and before March 1, 2010 as if made on December 31, 2009. You can decide whether to deduct your 2010 Haiti contribution on your 2009 Manhattan income tax return or on your 2010 return. However, you cannot deduct the same Haiti contribution on both your 2009 and 2010 income tax returns in New York. You can, however, allocate multiple donations to more than one year. Of course, to take a charitable deduction of any kind, you must opt to itemize your deductions rather than take the standard deduction on your NYC income tax return.

Monetary donations. Your contribution must be monetary to qualify under the new law. You can donate cash or make a donation by check or credit card. Property that is convertible into cash, such as marketable securities, however, is not eligible for this special treatment. Similarly, medical supplies, food and other items of property do not qualify for the accelerated deduction.

Currently, most charities are requesting monetary donations to help the earthquake victims. They use the funds to purchase relief items, such as food, medical supplies and emergency housing. If you want to make a non-cash contribution, make sure the charity will accept it. You will also want to contact our office of trained New York income tax CPAs and we can explain the appropriate tax treatment. Non-cash contributions are subject to special rules. For example, donations of food must be used only for the care of the ill, needy or infants.

Limits on deductions. The tax law imposes a 50 percent limit on the total of all charitable contributions you make during the year. Your deduction cannot be more than 50 percent of your adjusted gross income (AGI) for the year. You can carry over any contributions you are not able to deduct for one year because of the limit. The new law does not raise or remove the 50 percent limit for 2009 or 2010. There are other special limits, for example limits on gifts of capital gain property and qualified conservation contributions. Please contact one of our Manhattan income tax CPAs and we can discuss these limits in more detail.

Another provision in the tax law limits certain itemized deductions, including contributions to charity, for higher income individuals. For 2009, the limitation is reduced by two-thirds. For 2010, the limitation is reduced to zero but this treatment is only available for 2010. Depending on your income and tax strategy, you may find it more valuable to deduct your contributions to Haiti earthquake relief when you file your 2010 new york income tax return in 2011 rather than taking the deduction on your 2009 return filed in 2010.

Qualified charities. Contributions to domestic, tax-exempt, charitable organizations that provide assistance to individuals in foreign lands qualify as tax-deductible contributions for federal income tax purposes, provided that the U.S. organization has full control and discretion over the uses of such funds. Contributions to foreign organizations generally are not deductible. Additionally, contributions to benefit specific individuals or families are also not deductible on your income taxes in Manhattan.

For purposes of the accelerated deduction, contributions must be made specifically for relief of victims in areas affected by the January 12 earthquake. You should ensure that your contribution goes to a qualified charity. If you have a specific charity in mind, one of our Manhattan CPAs can tell you if it is a qualified charity for federal income tax purposes.

Documentation. The IRS has very strict rules about substantiating charitable contributions. To deduct any charitable donation of money, regardless of amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified charitable organization indicating the amount of the cash and a description of any property contributed and whether the organization is provided any goods or services in exchange for the gift.

The new law allows one additional method of substantiation. If you make a donation by texting a contribution to a charity, your telephone bill can provide the required documentation. Your telephone bill must show the name of the charitable organization, the date of the contribution and the amount of the contribution.
IRS disaster designation. Shortly after the earthquake, the IRS designated it as a “qualified disaster for federal tax purposes.” This means that recipients of qualified disaster relief payments may exclude those payments from income on their Manhattan tax returns. Additionally, the IRS is allowing employer-sponsored private foundations to assist victims in Haiti without affecting their tax-exempt status.

Scams. Tragedies not only bring out the best in people, they also sadly encourage fraud. The Haiti earthquake is no exception. First, be an educated donor. Before you make a donation, make sure the charity is legitimate. Many reputable and well known U.S. charities are working day and night to help Haiti.

Be wary about giving out your personal information, such as your Social Security number. Con artists can use your personal and financial information for identity theft. Be especially cautious of emails asking for donations. Some phony charities use names that sound or look like those of respected, legitimate organizations. If you are not sure that a charity is legitimate, call our office or call the Better Business Bureau.
If you have any questions about the accelerated tax deduction or charitable contributions in general, please contact our office. Our New York income tax CPAs will be able to assist you.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

2009 Recovery Act: Benefits for Retired Workers

18.07.2010

category: Uncategorized
tags: accountant new york city, Delinquent Tax Returns Manhattan, income tax manhattan, income tax new york, income tax new york city, income tax nyc, Small business CPA Manhattan, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC

Our Manhattan office of income tax CPAs has been receiving many questions from clients about how the 2009 Recovery act may affect retired workers. Below we will attempt to explain this, and how it will affect your taxes in NYC. The American Recovery and Reinvestment Tax Act of 2009 (2009 Recovery Act) includes provisions that benefit the New York income taxes of certain retired workers. Individuals who receive certain government pensions and annuity payments will receive a $250 credit on their Manhattan income taxes in 2009. Alternatively, economic recovery payments of $250 will be made to individuals who are eligible for certain social security benefits, Railroad Retirement benefits, veteran’s compensation or pension benefits, or supplemental security income (SSI) benefits. These provisions are coordinated with each other and with the “Making Work Pay” credit so that no individual receives a double income tax benefit.

Economic Recovery Payments for Recipients of Certain Federal Benefits. The $250 economic recovery payment is payable to eligible individuals within 120 days of February 17, 2009, the date of enactment of the 2009 Recovery Act. Eligible individuals are those who received benefits in a qualifying program during November 2008, December 2008, or January 2009; and who have an address in the United States or its possessions. A qualifying program includes:

•   Title II benefits under certain provisions of the Social Security Act,
•   Monthly annuity or pension payments payable under certain provisions of the Railroad Retirement Act of 1974,
•   Certain veteran’s compensation or pension benefits, or
•   Supplemental security income (SSI).

Government retirees may qualify for $250 credit for 2009. Some government retirees may not qualify for social security benefits, and therefore may not be eligible for the economic recovery payment on their income tax return in New York City. However, the 2009 Recovery Act includes a $250 credit for certain government retirees who receive an annuity or pension for service performed in the employ of the United States, any state, or instrumentality thereof.

Individuals who receive an economic recovery payment may not claim the credit for government retirees. In addition, if an individual is also eligible for the Making Work Pay credit (MWPC), the amount of the MWPC is reduced by the amount of the economic recovery payment and coordinated with the credit for government retirees.

If you would like to know if you qualify for this credit, and how this would affect your income taxes in New York, please call our CPAs at our Manhattan office at your convenience.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

Travel and Entertainment Review for Self-employed Income Taxes in NYC

16.07.2010

category: Uncategorized
tags: CPA high net worth individuals New York city, CPA LLC NYC, CPA New York City, income tax manhattan, income tax new york, income tax nyc, llc cpa nyc, Small business CPA Manhattan, small business cpa nyc, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC, Taxes NYC

Although the computer age and modern telecommunications have reduced the need for in-person contact, it is still sometimes necessary for New York self-employed people to go out of town on business, or to entertain clients and customers. This also applies if you are an owner of an LLC or other small business in Manhattan and you send employees out on business related travel. How travel and entertainment expenses are handled can have an impact on your net income, your paperwork burden, and on the New York income tax results for you and your Manhattan LLC employees.

If you require employees to substantiate travel or entertainment expenses that are bona-fide business deductions, partial or complete advances or reimbursements are not treated as compensation income to the employee, and the advance or reimbursement is not subject to social security taxes or to New York income tax withholding. However, only 50 percent of any business-related meal or entertainment expense is deductible by the company, including costs of meals consumed by employees while they are traveling. The same applies if you are a New York freelancer or are self-employed in NYC.

To ensure that the reimbursement is not subject to payroll and withholding taxes, the business must maintain a fairly detailed recordkeeping system. For travel, employees and self-employed persons must submit a written statement of the time, place, destination and business purpose of the trip and the amount of expenses incurred by category (e.g., travel, meals, lodging). For meals or entertainment, the employee must submit a written statement showing time, place and cost of the event, who was entertained, and the business purpose of the meal or entertainment (if the event follows or precedes a business discussion, additional recordkeeping is required). Finally, the NYC freelancer must keep and turn in to the employer documentary evidence such as receipts for all lodging expenses, and for other travel and entertainment expenses over $75.

Because the recordkeeping can be onerous, the law provides some shortcuts, depending on the type and frequency of the travel and entertainment expenses. For example, the paperwork burden and the cost of travel expenses can be decreased by giving NYC freelancers who travel for business purposes a flat daily allowance, a per diem, which varies by destination, to cover meals, lodging and incidental expenses. If the daily allowances do not exceed IRS-determined maximums, they are payroll and New York income tax free with a minimum of paperwork; all that is required is a record of the time, place and business purpose of the travel. To-the-penny accounting of expenses and corroborating receipts is not necessary. As with the other examples, this applies equally to those who are self-employed in NYC, own a LLC or other small business in Manhattan, and to those who are freelancers in New York.

One simple way to cut out paperwork while boosting NYC small business tax deductions is to give employees a flat allowance for anticipated travel and entertainment, and not require these expenses to be substantiated. The allowance is fully deductible as compensation (assuming the employees’ compensation packages are reasonable), and there is minimal paperwork required. The allowance, however, is subject to payroll and income tax withholding, and the company may not be able to determine what their actual travel and entertainment expenses are for budgeting purposes. In addition, there are unfavorable tax consequences for the employee, even if the travel and entertainment expenses are deducted on their own returns.
Travel and entertainment expenses are particularly susceptible to challenge by the IRS. However, in some instances, businesses may fail to deduct qualifying travel and entertainment expenses, or may be deducting these expenses improperly. If you are a small business, freelancer, LLC, S-corp, or are other wise self-employed in New york, you need a CPA to help you with the tax burden. Our Manhattan small business and self-employed CPAs can perform a confidential review of your company’s travel and entertainment expenses to ensure compliance with the complex rules that govern these deductions. Please call our LLC and S-corp CPAs in NYC today to arrange an appointment at your earliest convenience.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

Arranging Household Help – New York “Nanny Tax” Law

13.07.2010

category: Uncategorized
tags: accountant new york city, CPA high net worth individuals Manhattan, income tax manhattan, income tax new york, income tax nyc, llc cpa manhattan, llc cpa nyc, Manhattan CPA, Manhattan Tax preparation NYC, Small business CPA Manhattan, small business cpa new york city, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC

It’s tough enough to find the right person to care for your child in the home, without having to worry about the New York nanny tax complications of becoming a household employer. Although the rules for nanny taxes in NYC have been liberalized in some ways, other requirements are just as stringent as they’ve always been. Here’s a snapshot of what you must do to steer clear of trouble with the IRS when you hire someone to take care of your children in the home.

Social Security and Medicare tax (FICA). If you have household workers, you are required to withhold and pay FICA taxes if cash wages paid in 2010 total $1,700 or more (this amount is unchanged from 2009 because of low inflation). As the employer, you have to report and pay the required employment taxes for these domestic employees on Schedule H (Household Employment Taxes), with the tax amount then transferring to the appropriate line on your New York income tax Form 1040 or 1040A. Not paying the “nanny tax” is on your Manhattan income taxes is considered income tax evasion.

There is one limited FICA exception for wages paid to domestic employees who are under 18. Social security and Medicare tax doesn’t apply at all to these employees if domestic work is not their principal occupation. This exception may help with steady evening and weekend baby-sitters, but otherwise it’s not important to those parents who need help with children during the day.

Unemployment tax (FUTA). You must pay the FUTA tax for any household employee whom you pay $1,000 or more in a calendar quarter. The effective FUTA tax rate varies state-by-state. We can give you all the details on the FUTA part of you New York City nanny income taxes.

Payroll tax paperwork. The FICA and FUTA you owe for any household employee is computed on Schedule H of Form 1040 on your Manhattan income taxes and paid along with your regular New York income tax bill. Although you are not required to make estimated tax payments for FICA and FUTA, it might be a good idea to make quarterly payments to avoid winding up with an unexpectedly large bill at tax return time.

Federal income tax withholding. Thankfully, you aren’t required to withhold federal income tax from the wages of household employees. But you are required to file a Form W-2 for every domestic employee whose wages are subject to the social security tax. And you will need to get an Employer Identification Number for yourself, which is not the same as your social security number. Although you are not required to do so, your household employee may ask you to withhold federal income tax. If you agree, you should be aware of the Making Work Pay Credit (MWPC), which is provided to employees through reduced income tax withholding in 2009 and 2010. Otherwise, the individual will claim the credit when he or she files a 2009 return in 2010 and a 2010 return in 2011.

If you pay the nanny’s share of Social Security taxes in addition to your share rather than have the nanny incur that expense, you or the nanny won’t need to pay additional social security taxes on that amount. The nanny, however, will be considered to have additional income for New York income tax purposes.
There may be other Manhattan tax complications as well. For example, depending on state law, many employers of even household help may have to file and pay state unemployment insurance tax for each quarter in which the state wage threshold is reached. And the rules may be somewhat different if you have other employees.
As you can see, the tax rules for child-care help are still complicated. We are in a position to advise you of the least troublesome way to take care of all your tax responsibilities. Our firm of Manhattan income tax CPAs are well versed in dealing with NYC nanny tax laws. Please do not hesitate to call our Manhattan CPA office if we can be of assistance to you.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

2010 New York Vehicle Depreciation

09.07.2010

category: Uncategorized
tags: CPA Estates and Trusts new york city, Estates and trusts cpa new york, income tax manhattan, income tax new york, income tax new york city, income tax nyc, Small business CPA Manhattan, small business cpa new york, small business cpa nyc, small business tax advice new york city, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC, Taxes NYC

Dear Client:
If you own a vehicle in NYC, you need to know about some recent tax changes that will affect your Manhattan income taxes. The IRS has issued the depreciation deduction limitations and lease inclusion amounts for auto mobiles, trucks and vans first purchased and used in 2010. Additionally, the IRS released the annual income inclusion amounts for vehicles first leased in 2010. The basic 2010 depreciation limits for passenger automobiles, trucks and vans are higher than the respective depreciation limits for 2009.

Passenger automobiles. The maximum depreciation limits for passenger automobiles first placed in service during the 2010 calendar year are:
•   – $3,060 for the first tax year;
•   – $4,900 for the second tax year;
•   – $2,950 for the third tax year; and
•   – $1,775 for each tax year thereafter.
Trucks and vans. The maximum depreciation limits for trucks and vans first placed in service during the 2010 calendar year are:
•   – $3,160 for the first tax year;
•   – $5,100 for the second tax year;
•   – $3,050 for the third tax year; and
•   – $1,875 for each tax year thereafter.

Leases. Lease payments for vehicles used for business or investment purposes are deductible in proportion to the vehicle’s business use. However, lessees must include a certain amount in income during the year the vehicle is leased to partially offset the amounts by which the lease payments exceed the luxury auto limits. The IRS has released tables that identify the income inclusion amounts for passenger automobiles, trucks and vans with lease terms beginning in 2010. These amounts can be found on the IRS’s website, www.irs.gov , and in Revenue Procedure 2010-18.

Please call our office of small business CPAs in manhattan at your earliest opportunity if you have questions about the 2010 vehicle depreciation dollar limits or other business vehicle expenses and how they may potentially affect your New York income taxes or Manhattan based S-corp, LLC or other type of NYC small business.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

07.07.2010

Employee Expenses in NYC

category: Uncategorized
tags: income tax manhattan, income tax new york, income tax new york city, income tax nyc, llc cpa nyc, llc new york, lllc new york, Manhattan CPA, s-corp new york, Small business CPA Manhattan, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC, Taxes NYC

Now may be a good time to evaluate the expenses you incur as an employee in connection with your work in a LLC, S-corp or other type of small business in New York City. While your Manhattan small business employer may be reimbursing you for some of these expenses, there may be others for which you are bearing the cost yet not utilizing the New York tax benefit. Through proper substantiation, it is possible that you may be able to obtain greater reimbursement from your employer. Alternatively, you may be entitled to deduct such expenses as miscellaneous itemized deductions on your New York income tax return.

In order to be reimbursed and/or deducted on your NYC income taxes, trade or business expenses must be ordinary, necessary, and reasonable. They also must be properly substantiated. Examples of qualifying expenses include:

•   Travel, transportation, meal, or entertainment expenses
•   Safety equipment, small tools, or supplies
•   Uniforms required by your employer that are not suitable for everyday wear
•   Required protective clothing
•   Dues to professional organizations
•   Subscriptions to professional journals
•   Certain job hunting expenses
•   Certain expenses for the business use of your home
•   Computer costs
•   Work-related educational expenses

You may also benefit from a review of the business expenses related to the use of your home. If you qualify for the home office deduction, you may be able to deduct part of your home’s normal operating expenses, such as utilities and insurance and save lots of cash on your income taxes in New York. The Manhattan tax-savings opportunities available to you are dependent not only on the type of work you do at home, but where in your home you perform it.

The rules for deducting these expenses, as well as substantiating your deduction, vary according to the type of expense involved. It is important to retain all records and receipts that document the time, place, and business purpose of each expense. Please call our experienced small business CPAs in Manhattan at your earliest convenience to find out what deductions you can make to get the most out of your income taxes in New York.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

Educational Savings Plans in New York

06.07.2010

category: Uncategorized
tags: Educational Savings Plans in New York, Income Taxes Manhattan, income taxes new york, Income Taxes New York City, Income Taxes NYC, Small business CPA Manhattan, small business cpa new york, small business cpa new york city, small business tax advice nyc, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC, Taxes NYC

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.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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

New York Vehicles and Tax Deductions

04.07.2010

category: Uncategorized
tags: CPA Estates and Trusts manhattan, income tax manhattan, income tax new york, income tax new york city, income tax nyc, New York Vehicles and Tax Deductions, Small business CPA Manhattan, small business cpa new york, small business tax advice nyc, small business tax new york city, Tax Preparation Manhattan, tax preparation new york, TAX PREPARATION NYC, Taxes NYC

Generally, if you use your vehicle in pursuit of a trade or small business, you are allowed to deduct the ordinary and necessary expenses incurred while operating the vehicle on your new York income tax return. However, any expenses associated with the personal use of the vehicle are not deductible on your NYC income taxes. For purposes of these deductions, “car” includes a passenger vehicle, van, pickup or panel truck.

Personal vs. business miles. Business use of your car can include traveling from one work location to another work location within your New York City tax home area; visiting customers; attending a business meeting away from the regular workplace; and traveling from home to a temporary workplace if you have one or more regular places of work. The costs of travel between home and a regular place of work, however, are nondeductible commuting expenses and you will not be able to deduct them on your Manhattan income tax return.

Standard mileage rate vs. actual cost method. In lieu of proving the actual costs of operating an automobile owned by them, employees and small business owners may compute the deductible costs for their business use of an auto using a standard mileage rate. The 2010 standard mileage rate is 50 cents per mile. You may not depreciate your car or deduct lease payments on your NYC income taxes if you use the standard mileage rate method. If you use the actual cost method, you may take deductions for depreciation, lease payments, registration fees, licenses, gas, insurance, oil, repairs, garage rent, tolls, tires and parking fees on your income taxes in Manhattan. Regardless of the method used, if the vehicle is driven for personal as well as business purposes, only expenses or mileage attributable to the percentage of business use are deductible. There are separate considerations involved in leasing a car for your New York small business.

Substantiation. If you are using your car for business purposes, whether owned or leased, proper recordkeeping is critical. The recordkeeping requirements vary depending upon which method you use. If you use the standard mileage rate, you should keep a daily log showing the miles traveled, destination and business purpose. Recordkeeping under the actual cost method is somewhat more onerous. You should also keep a mileage log if you use the actual cost method in order to establish business use percentage. In addition, you must keep receipts, invoices and other documentation to verify expenses. Finally, you must be able to prove the original cost of the vehicle and the date it was placed in service for business use in order to claim depreciation on your income tax return in New York City.

Motor vehicle credits. Since 2005, Congress has enacted numerous tax incentives to encourage development of alternative fuels for motor vehicles, including the alternative motor vehicle credit (AMV), the alternative fuel vehicle refueling property credit, the plug-in electric vehicle credit, and the plug-in electric drive motor vehicle credit. The AMV credit is actually the total of the following five credit components:
•   the qualified fuel cell motor vehicle credit,
•   the advanced lean burn technology motor vehicle credit,
•   the qualified hybrid motor vehicle credit,
•   the qualified alternative fuel motor vehicle credit, and
•   the plug-in conversion credit.

The technology and federal emission standards required for each vehicle credit varies, as well as the credit amounts and the effective dates.

Vehicle fringe benefits. The fact that an employer allows an employee to use an employer-provided car for personal purposes generally does not deprive the employer of a vehicle expense deduction on their Manhattan income taxes. An employer who provides a vehicle to an employee as a fringe benefit may use one of the special valuation rules, rather than the fair market value (FMV) of leasing a comparable car, to calculate the amount of the benefit that is attributable to the employee’s personal use of the car. These special rules include the lease, cents-per-mile, commuting, and fleet-average valuation rules. An employer is not required to use the same valuation rule for all of the vehicles that are provided to employees. However, once a valuation method for a particular vehicle is elected, it must be used for New York income tax, employment tax, and reporting purposes for all employees who share the vehicle, as well as those who use it in subsequent periods.

Employers must report their employees’ personal use of the car on their W-2, Wage and Tax Statement. They are not required to withhold Manhattan income taxes on this income, although social security and railroad retirement taxes must be withheld. An election not to withhold income taxes may be made on an employee-by-employee basis. However, affected employees must be notified in writing by the later of January 31st of the applicable year, or 30 days after the day on which the employee receives a car.

A small business owner in New York with an employer-provided car must substantiate the business use of the car with adequate records or evidence in order to claim a fringe benefit exclusion from income for personal use of the car. An employee who uses a personal car in the performance of services for his or her employer is entitled to deduct the car expenses on their New York income taxes if the car is used for the convenience of the employer, and is required as a condition of employment. Any unreimbursed employee expenses attributable to such use are deductible only to the extent that they exceed two percent of the employee’s adjusted gross income (AGI).

Whether you are an a small business owner, a S-corporation, a LLC, an employee, or a self-employed individual, we would like to evaluate the business use of your vehicle(s) in order to provide guidance in claiming and substantiating these expenses towards your New York City income taxes. Please call us at your earliest convenience to arrange an appointment with one of our experienced small business CPAs in Manhattan.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

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