WMS & Company Accounting & Tax January Newsletter In This Issue What can we do for you Special Business Tax Deductions Checklist Recent Tax Tips/Hardships with Retirement Plans Quick Links More About Us WMS & Company can take care of your business and individual taxes for an inexpensive price Did you know that you can now e-file your business tax return! Let us give you the best for yourbuck. We offer: 1065 1120 1120S All individual Taxes Business Tax Deductions Checklist Auto expenses. Deductions can be made in one of two ways: either for actual miles driven or for all actual expenses related to business, including gasoline and repair costs. Home office. Work with your tax adviser to determine the percentage of your home that is dedicated to business. Bank charges related to business, including check charges, monthly charges, bank wire fees, or overdraft fees. Interest and fees on business debt. Taxes. Sales tax on business purchases, real estate tax on business property, employer's share of employment taxes, excise taxes and, in some instances, state income tax may be listed as an itemized deduction on federal tax return. Ongoing costs of doing business, including utilities, shipping, office supplies, advertising and marketing (including sponsorships), rental or lease payments (property and equipment), telephone and Internet charges, software licenses, travel expenses, janitorial maintenance, landscaping and grounds maintenance, office/building repairs, and equipment repairs. Depreciation (the decrease in value of equipment from wear and tear over time). Consult with your tax adviser to maximize your deductible amounts. Purchase of office equipment and furniture and business vehicles. Certain percentages can be deducted the year of purchase. This varies for new and used items, so consult with your tax adviser. Business-insurance premiums. Find out more about Your Money and You The Small Business Tax Deduction Checklist Business gifts. This includes items like coffee mugs, notebooks, and pens. Professional fees, including legal, accounting/bookkeeping, architectural, business consulting, and marketing consulting. Business-related education, such as seminars, classes, educational tapes or CDs, and conventions. Trade-show exhibition and/or attendance, including travel, meals, admission fees, and costs of booths/exhibitions. Trade-related journal subscriptions, books, and other literature. Retirement contributions. These can be tricky, so consult with your tax adviser. Fees paid to credit bureaus, better business bureaus, chambers of commerce, and trade associations. Health insurance premiums. Social Security payments. One-half of payments can be deducted if you're self-employed. Moving expenses. Charitable contributions. Losses from theft, fraud, business-property/contents damage not covered by insurance. 2009 Tax Guide! Get the best for yourbusiness! Dear Subscriber, This month's newsletter is very informative and important to this coming 2009 tax season. Lookfor this newsletter to give you important tax updates, business tax deductions checklist and your opportunity to get a head start on your preparation for your business and individual taxes. Reminder: The first day to file is Jan. 16,2009 Choose the Tax Form that Best Fits Your Needs When you file your 2008 individual tax return, you will use one of three IRS tax forms. Be sure to use the simplest form you can, which will help you avoid costly errors or processing delays so you won't have to wait to receive your refund. Each of these forms can be filed electronically, which speeds up the processing of your return. Use the 1040EZ if: Your taxable income is below $100,000 Your filing status is Single or Married Filing Jointly You (and spouse) are under age 65 and not blind You are not claiming any dependents Your interest income is $1,500 or less Use the 1040A if: Your taxable income is below $100,000 You have capital gain distributions You claim certain tax credits You claim deductions for IRA contributions, student loan interest, educator expenses or higher education tuition and fees If you cannot use the 1040EZ or the 1040A, you'll probably need to file using the 1040. You must use the 1040 if: Your taxable income is $100,000 or more You claim itemized deductions You are reporting self-employment income You are reporting income from sale of property When preparing your return, be sure to carefully check the instructions for the appropriate form. All IRS forms and instructions can be found on our Web site, IRS.gov. Help Your Employees Weather the Storm: Hardship Withdrawals and Loans from Retirement Plans Like many people these days, some of your employees may be experiencing financial hardships and need access to the money in their retirement plans. Under certain circumstances, employees might be eligible for a loan or a hardship withdrawal from their retirement plan accounts. Below are questions you may have in helping your employees: Can my employees get a loan or withdraw money from their retirement plan? Although not required to do so, many retirement plans offer loans and hardship withdrawals. Check your retirement plan documents, such as a copy of the plan or the summary plan description, to see if your plan provides loans and/or hardship withdrawals. Remember, the law does not permit loans from IRA-based plans, such as SEPs and SIMPLE IRA plans. What is the difference between a loan and a hardship withdrawal? A loan is an amount employees can borrow from their retirement plan accounts and then pay back with interest. As long as the employee repays the borrowed amount, it is not taxed and the employee's retirement plan account balance is restored by the amount borrowed. Employees are not required to prove financial hardship to get a loan. A hardship withdrawal is an amount that employees can receive from their retirement plan accounts and do not have to pay back. The amount withdrawn permanently reduces their account balance. To be eligible for a hardship withdrawal, employees must meet the requirements of a hardship withdrawal as stated in your plan. Usually, this means the employees must prove they have an unforeseeable financial hardship they cannot meet through any other available means, including a loan, if available, from the plan. Employees will have to pay taxes on the withdrawn amount. How can employees get a loan from the retirement plan? If the plan allow loans, it will outline the procedures employees need to follow to get the loan. Typically, employees will need to fill out loan forms and sign a repayment agreement outlining the number, the amount, and the due dates of repayment. The employees must pay interest on the amount borrowed and, depending upon the terms for loans as stated in your plan, may have to agree to repay the loan using automatic deductions from their future wages. The plan may limit the amount of money employees can borrow, but the maximum amount the plan can loan is: (1) the greater of $10,000 or 50% of the balance of the employee's retirement plan account; or (2) $50,000, whichever is less. All of an employee's outstanding loans must be taken into account when determining the maximum amount he or she can borrow. When are employees eligible for hardship withdrawals from their retirement plan accounts? Your plan documents should state whether employees can make hardship withdrawals and under what circumstances. Typically, hardship withdrawals are only for unforeseeable emergency expenses employees and/or their spouses, dependents, or beneficiaries are facing and are unable to pay using any other available resources, including loans, if available, from the plan. Depending upon the type of plan, these emergency expenses may include having to pay for: (1) medical expenses; (2) funeral expenses; (3) repairs to their primary home after a fire or other damage; (4) prevention of eviction or mortgage foreclosure; (5) tuition expenses; or (6) the purchase of their primary home. Plans may limit the circumstances under which employees can get a hardship withdrawal. For example, some plans may only allow hardship withdrawals to pay funeral or medical expenses, but not to purchase a first home or to pay tuition expenses. Employees are usually required to provide proof of their hardship and, in some plans, cannot contribute to the plan from their wages for the next six months. Some plans may restrict the amount employees can withdraw as a hardship withdrawal to just the amount they have contributed to the plan from their wages, not contributions that the employer has made. How can employees make hardship withdrawals? Plan documents usually state specific procedures to obtain a hardship withdrawal. Generally, these procedures require employees to describe the specific hardship they are undergoing and verify they have no other resources, including potential loans from the plan, to meet their current financial crisis. In IRA-based plans, there are no restrictions on withdrawing amounts, but there are tax consequences as described below. What are the tax consequences of failing to repay a loan or making a hardship withdrawal? The law does not consider a loan taxable income as long as the employee repays the loan. If they fail to repay the loan, the unpaid amount is taxable income in the year they fail to repay it and is subject to an additional 10% early withdrawal tax unless some exception to this early withdrawal tax applies. We hope that this newsletter has given you much insight to what you need to kick off your tax season right. Feel free to visit our website www.wmsandcompany.com to get more information. Sincerely, Tomeika Williams President WMS & Company Accounting & Tax 404-806-7034