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Do you rent property to others? If so, you’ll want to read the following seven tips from the IRS about rental income and expenses.

You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use of or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them.  Publication 527, Residential Rental Property, includes information on the expenses you can deduct if you rent property.

• When to report income. You generally must report rental income on your tax return in the year that you actually receive it.
• Advance rent. Advance rent is any amount you receive before the period that it covers.  Include advance rent in your rental income in the year you receive it, regardless of the period covered.
• Security deposits. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.
• Property or services in lieu of rent. If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income.  If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary.
• Expenses paid by tenant. If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses. See Rental Expenses in Publication 527, for more information.
• Rental expenses. Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income.
• Personal use of vacation home. If you have any personal use of a vacation home or other dwelling unit that you rent out, you must divide your expenses between rental use and personal use.  If your expenses for rental use are more than your rental income, you may not be able to deduct all of the rental expenses.

The IRS has officially announced starting January 1, 2011 they will no longer accept federal tax deposits using the paper coupon booklets, also known as 8109 coupons. They will require all deposits be made using the EFTPS system which must be done online. Federal tax deposits include payroll tax deposits, corporate income tax deposits and federal excise tax deposits.

If you are still using the paper coupon booklets to make your federal tax deposits, here is a link https://www.eftps.gov/eftps/direct/HelpAboutMain.page that will walk you through the enrollment process for EFTPS online. Overall the process will take about 7-10 business days to complete. After completing this enrollment process you will begin making all your federal tax deposits online at the EFTPS website.

Please contact Joe Ramey at our office to assist you in enrolling in EFTPS and to answer any questions you have about federal tax deposits and whether or not you need to enroll in the EFTPS program.

Taxpayers who made some energy efficient improvements to their home or purchased energy-efficient products last year may qualify for a tax credit this year. The IRS wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

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The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2010.

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The National Association of College Stores is urging students and their families to take advantage of the American Opportunity Tax Credit, which applies to textbooks and other course materials in 2009 through 2012.

The credit covers textbooks and other course material expenses —as well as tuition and fees not covered by scholarships or grants up to $2,500 each year for the first four years of college. Forty percent of the credit is refundable.

The NACS has created a Web site, www.textbookaid.org, to provide information about how to best take advantage of the program, according to NACS director of government relations Rich Hershman.

The association has also developed brochures and a Facebook page in partnership with the Internal Revenue Service. It includes a summary of the AOTC, explanatory examples, answers to frequently asked questions about the credit, and direct links for further information from the IRS.

For more information, contact Howard J. Kass, CPA, Partner, at hkass@zinnerco.com.

The much awaited repeal of the 1099 reporting rules has finally come true.

The Senate approved the retroactive repeal of the expanded 1099 reporting requirements and the legislation was signed by President Obama. The signing of this legislation is sure to put a
smile on the faces of CPAs and business owners everywhere.

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Revised instructions to ICE Form I-9 for new employees includes guidance on the E-Verify procedure. E-Verify provides an automated link to federal databases to help employers confirm the employment authorization of new hires. E-Verify is free to employers and is available in all 50 states.

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Even though a one-member limited liability company (LLC) is treated as a “disregarded entity” for income-tax purposes, under state law the LLC is still a separate property owner.

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