Did you know these tax laws exist? Tax Preparation and Tax Filing from the Best Tax Consultants

Did you know these tax laws exist?

This Article is created and published by Tax Preparation and Tax Filing from the Best Tax Consultants

The tax season is around the corner and I am sure most of you would be in a frenzy to file your taxes at the earliest. Well, good for you. But what if I tell you that you might have missed out on some tax exemptions or deductions while preparing your taxes?
Most Americans consider that the tax laws are a bit complicated and, thus, resort to professionals’ help for preparing and filing their tax returns. Are the laws complicated? They are a bit, yes. Moreover, there are some strange tax laws which most of us are not aware of. Here is a list of such weird federal tax laws. Find out if you have ever heard about them:

Allowance for clay miners
Sagger clay is used in pottery. People who mine this clay get a 14% federal depletion allowance. Quite generous, don’t you think? However, there is a catch to this law. If the clay gets deposited in sewer pipes then the allowance is reduced to 7.5%.

Allowance for shell and rock miners
If you are engaged in extracting oyster shells, clam shells and spodumene mineral, you can also claim the federal depletion allowance of 14%.

Body building, anyone?
Body building can be a lucrative professional choice as the special oils used in preparation of body-building competitions are eligible for tax exemption. You can deduct the cost of these special oils from your taxable income. However, buffalo meat and wheat-grass shots do not qualify for tax exemption and their expenses are included in your taxable income.

It is time to pursue your artistic skills
If you are a performing artist and fulfill some employment conditions, you can claim deductions for expenses incurred during such employment. The employment conditions stipulate that you should be employed by a minimum of 2 employers each paying at least $200, the expenses related to your job should be more than 10% of the income generated from the same job and your adjusted gross income should not be higher than $16, 000. If you fulfill these conditions, enjoy tax exemptions on your job-related expenses.

Breast implants are depreciable
This one takes the cake! If your breast implants are a requirement in your chosen field of work, they are considered as a stage prop. Since the prop is for your business, it comes under the category of business assets which are depreciable over time.

Tax Preparation and Tax Filing

Some weird state tax laws
Yes, even the US states are not far behind in weird tax exemptions and deductions.  Here are some weird tax laws prevalent across some popular US states.

• New York Bagels – if you are in New York and love your bagels, decide how you want to buy them to avoid tax. An uncut bagel is tax exempt. However, if you buy your bagel any other way (like sliced or creamed) you have to part with 8 cents in taxes.
• California and its fruits – buying fruits from kiosks or fruit stalls attracts a 33% tax while buying fruits from the grocery store does not. Strange, isn’t it?
• Arkansas and being natural – if you are in Arkansas and get your body pierced, tattooed or underwent electrolysis, you would have to pay a 6% extra tax. Being natural has its perks, doesn’t it?
• Alabama and Nevada and the playing cards dilemma – as gambling is legal in Nevada, the state gifts you a free deck of playing cards when each return is filed. However, in Alabama, the state charges a 10% on decks with 54 or less playing cards.

With these weird tax laws, it is no doubt that Americans find filing their taxes difficult. With both federal and state tax laws having weird tax deductions or charges, it sometimes becomes difficult to figure out whether you can save tax or have to file an extra tax. The next time you file your taxes, look out for these strange tax deductions and save on your tax outgo.

Choosing a Tax Accounting Services

Choosing a Tax Accounting Services

Do you know that accounting method actually used on the initial return is an election of that method, so tax payers should carefully analyze financial data to ensure that the method is applied properly.

A business must use the same accounting method to figure its taxable income and to keep its books, and the method must clearly reflect its income.

Understanding Accounting Methods

An accounting method is a set of rules used to determine when income and expenses are reported on your tax return. In general, there are four types of accounting methods, which dictate how business transactions are recorded in the business financial books:

• Cash Method – income is recognized in the year received, and expenses in the year paid.
• Accrual Method – Income reported in year it is earned and deduct or capitalize expense in the year incurred.
• Special Method – This method of accounting is for certain item of income or expenses and it’s include for Amortization, Bad Debts, Depletion, Depreciation, Installment Sales.
• Hybrid Method – Any combination of two or more above methods of accounting methods, if the combination clearly reflects business income and use it consistently.

Why Method Matters

The accounting method a business uses can have a major impact on total revenue the business reports as well as on expenses that it subtracts from revenue to get the bottom line.

The core underlying difference between these two methods is the timing of transaction recordation. The timing difference between the two methods occurs because revenue recognition is delayed under the cash method until payments arrives in the business.

Similarly, the recognition of expenses under the cash basis can be delayed until such time as invoice paid.

BASIS FOR COMPARISON	CASH ACCOUNTING	ACCRUAL ACCOUNTING
Meaning	The accounting method in which the income or expense is recognized only when there is actual inflow or outflow of cash.	The accounting method in which the income or expense is recognized on mercantile basis.
Nature	Simple	Complex
Applicability of matching concept	No	Yes
Recognition of revenue	Cash is received	Revenue is earned
Recognition of expense	Cash is paid	Expense is incurred
Degree of Accuracy	Low	Comparatively high

Changing your accounting method

Generally, you can use any permitted accounting method when you file your first tax return and you don’t need any IRS approval for the first time. However, you have to use the selected method consistently from year to year and it must clearly reflect your income.

Any business that wants to change its accounting method, need to take permission from IRS for change in accounting method by using Form 3115 to request a change.

A change in your accounting method includes a change not only in your overall system of accounting by also in the treatment of any material item. A material item is one that affects your income or your ability to take a deduction.

Timing and application process: Applications can be made at any time during the tax year, but the earlier the better. You may also get a six month of extension to file the application so long as your tax return for the year in which the change is requested is filed on time.

The IRS looks at two things when deciding whether or not to approve a request for a change in accounting methods:

• Whether the new method will accurately reflect income
• Whether the new method will create or shift profits and losses between businesses.

For any further assistance regarding Bookkeeping feel free to contact us at  bopmanagers@aotax.com or Phone: 703-584-5533We will be very happy to assist you.