Ahhhh, everyone’s favorite time of year. When we’re likely to wake up in the middle of the night, sweaty and shivering, from having nightmares about tax auditors in black suits. When we fear that an IRS agent will somehow appear on our doorstep, complete with devil horns, and ask to see all our receipts dating back to 1992. Even though there isn’t a sane person who looks forward to this time of year, there is hope. There are resources out, there just waiting for you to read them, and there are countless accountants that can make all the jibberish make sense. Sort of. So I gathered some of the most frequently asked questions, according to our friends at www.irs.gov. Here are some answers that might help make your tax season a little less painful: Q. Can I deduct expenses like mortgage, utilities, etc., but not deduct depreciation so that when I sell this house, the basis won't be affected? If you qualify to deduct expenses for the business use of your home, you can claim depreciation for the part of your home that is a home office. Generally, the part of your home that is a home office is depreciated over a recovery period of 39 years using the straight line method of depreciation and a mid-month convention. If you do not claim depreciation on that part of your home that is a home office, you are still required to reduce the basis of your home for the allowable depreciation of that part of your home that is a home office when reporting the sale of your home. Q. Does a small company need a tax ID number? A sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an employer identification number. In this instance, the sole proprietor uses his or her social security number as the taxpayer identification number. Q. Under what circumstances am I required to change my employer identification number (EIN)? If you already have an EIN, and the organization or ownership of your business changes, you may need to apply for a new number. Some of the circumstances under which a new number is required are as follows: - An existing business is purchased or inherited by an individual who will operate it as a sole proprietorship,
- A sole proprietorship changes to a corporation or a partnership,
- A partnership changes to a corporation or a sole proprietorship,
- A corporation changes to a partnership or a sole proprietorship, or
- An individual owner dies, and the estate takes over the business.
This list is not all inclusive. Please refer to the above mentioned website under Business, then Employer ID Numbers. In the next part of this series, I’ll share more questions dealing with tax season and home business owners. |
