Your Fantasy Football Team’s Biggest Fan Is…

The fantasy football season is in full swing as we are approaching the middle of the NFL season. For some, the season is going great and you are eagerly awaiting the playoffs, while others are all but eliminated from contention after drafting a team full of underachieving duds. For those of you lucky enough to be in the thick of the playoff hunt, remember that Uncle Sam is cheering you on. That is, he wants a cut of your winnings.

fantasy-football-winningsSome of you may be thinking, “why would the government care about fantasy football? It’s just a fun hobby and gives me something to talk about at the water cooler.” The truth is, fantasy football is a major industry and the IRS is very aware of such notion. According to an article from the Fantasy Sports Trade Association’s website, nearly 37 million people play fantasy football. According to the article, fantasy football players will spend an average of $111 per year. At 37 million players, that’s a staggering total of $4.1 billion each year. You better believe that Uncle Sam wants in on the winnings!

If your fantasy football skills earn you a payout of $600 or more, you will likely receive a 1099-MISC in the mail come January, which reports your winnings to the IRS. The amount of your winnings that are taxable can be reduced by entry fees, transaction fees, research materials (such as magazines) and losses from other leagues where you weren’t quite as lucky. So be sure to keep records of all your expenditures to support the information reported on your 1040.

Once you come to the net of all your winnings less all expenses, this amount will be reported as “other income” on line 21 of your 1040. Since the amount reported will not match the 1099-MISC you received, you will need to attach a statement to the return reconciling the 1099-MISC to the amount reported. Note that if you were in several fantasy football leagues where you lost money and one where you won, you will not be able claim a loss on your return and will just report income of $0.

So I hope everyone’s season is going well, but remember, Uncle Sam has a rooting interest in your team as well.

By: Mark Sawyer, CPA

Are You an Audit Target?

Each year there are individuals who are targeted for IRS audits based on minor decisions they may have made during the year. One goal during tax season, besides being on time, should be to completely avoid the IRS in an ethical manner. There are multiple ways that individuals may intentionally or unintentionally raise red flags, which makes them susceptible to an IRS audit.
While there are a number actions that may call for an IRS audit, here are some of the more common red flags:

auditCharitable donations. Who would have thought being generous could land you in hot water? The truth is, usually, it won’t. However, people who are audited in regards to charitable donations are the ones who over exaggerate the value of their donations, generally when dealing with non-cash items. Avoid the headache of dealing with the IRS and be realistic when it comes to pricing your donations. Also, remember to keep all of your charity receipts just to be safe.

Reported income. Failing to report income seems like an obvious red flag to most people, but you would be surprised to find out how many people honestly forget to report certain income. If you are an individual with multiple brokerage statements, it may be a good idea to create a checklist to keep on hand, ensuring each form of income is reported. Being organized will keep you safe and less stressed come tax time.

Being a millionaire. While the red flags associated with charitable donations and reporting income are ones that you may be able to avoid, there is one red flag that may be waving regardless of your action. Once you become a millionaire, your chance of being audited increases exponentially. While the current audit rate is at 1% on average, the rate climbs all the way up to 9% if you make $1 million. Just to give you an idea of how much the risk of being audited grows in relation to what you earn, people who bring in more than $10 million have a 27% percent chance of an audit. Let’s hope these individuals are reporting all of their income as well, because this percent does not have a limit!

Overall, there are some red flags that individuals will be able to avoid and some that should be expected. The goal should be to eliminate as many red flags as possible while being remaining. Make sure you keep donation receipts, record realistic values on donations and report all of your income. Hopefully, you will be on your way to a headache free tax season!

By: Jason Wenner, Staff Accountant

October 15 Deadline Upon Us

October 15, the deadline to file extended individual tax returns is fast approaching. This is a great time for a reminder that the extension applies to the filing due date, and it is not an extension of the due date to pay. Penalty and interest are still charged to an account if the resulting tax liability is not fully paid on April 15.

tax deadline

The terms “penalty and interest” sound gruesome enough on their own. Now throw in the fact that they’re showing up on an IRS notice, and it might be enough to make some taxpayers’ bones quiver.

But what if you don’t have the cash to pay the entire bill at once? The IRS will allow individuals to set up an installment plan, but that cost you too. Penalty and interest are still due, and on top of that there is a one time set up fee that can cost over $100. As scary as a large tax liability can be, surely one wouldn’t want to make it worse by adding to it. Well don’t fret, we have a viable solution: pay it down with a credit card and owe the bank instead of the IRS.

By: Anthony Mifsud, Staff Accountant

Special Per Diem Rates for 2014-2015 Travel Expenses Issued

The IRS has released its annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home in 2014 and 2015. IRS Notice 2014-57 includes rates for incidental-expenses-only deduction, special meals and incidental expenses in the transportation industry, and high-low substantiation method.

Transporation_Airplane6Rates for special meals and incidental expenses in the transportation industry are $59 for travel anywhere in the continental United States and $65 for travel outside of the continental United States. Regardless of whether you are traveling inside or outside of the continental United States, the per diem rate for incidental expense-only deduction will be $5 per day. The per diem rates for the high-low substantiation method have increased from $251 to $259 for travel to any high-cost locality and $172 for travel to any other locality in the continental United States. Out of the $259 high rate and $172 low rate, the amounts treated as paid for meals is $65 for travel to any high-cost locality and $52 to any other locality within the continental United States. A list of high-cost localities with a per diem rate of $216 can also be found in Notice 2014-57.

These new per diem rates went into effect on October 1, 2014 and are intended for any employee traveling away from home on or after that date.

By: Rachel Mossing, Accountant

Employee Dishonesty Coverage

Most businesses have insurance policies that cover their employees, but is it enough? Does your business have employee dishonesty insurance? This insurance protects the employer from financial loss due to the fraudulent activities of an employee or group of employees. The loss can be the result of the employee’s theft of money, securities (which includes checks) or other property of the insured. Of course, policy coverage may differ between insurance companies. The employer, the named insured on the policy, is the main entity insured. The “who” of coverage may also include all current or former employees, partners, members, directors, volunteers, trustees, seasonal employees and temporary workers at your direction or control. Employee dishonesty coverage is really a fidelity bond. The normal form of coverage is
a blanket policy which will cover fraud committed by any employee.

Fraud_ThumbprintIf the company has access to other customer’s money, securities or property, the policy can be endorsed to include third party coverage. With the third party endorsement coverage is extended to a customer or client with whom you are under contract to perform services. As an example, employees often have access to patients credit card numbers. Does your insurance cover you if an employee steals that credit card information and uses it? Employee dishonesty coverage can typically be added to another insurance policy, such as the property or the fiduciary liability policy. The coverage may be extended to include forgery or alteration, funds transfer fraud, computer fraud, credit card fraud, money order and counterfeit fraud.

With fraud and identity theft at an all-time high, you may want to review your policies and make sure you are covered!

By: Jenny Furey, CPA

Don’t Miss Out on Ohio’s Workforce Training Voucher Program

ohio_workforce

The Ohio Workforce Training Voucher Program is now in its third year. This employer-driven program is targeted to provide direct financial assistance to train workers and improve the economic competitiveness of Ohio’s employers. The program is designed to offset a portion of the employer’s costs to upgrade the skills of its incumbent workforce and will provide reimbursement to eligible employers for specific training costs accrued during training.

This time around businesses will have a chance to claim a piece of $29.4 million. That’s the good news. The bad news however, is that you have to be quick if your business has a desire to claim any portion of these funds. Similar to round two of the program, a pre-application process is available. The period to complete this process began Sept. 15, and will continue until the application officially goes live on Sept. 30.

According to the state, the funds are to be made available on a first-come, first-served basis. Employers can apply for a credit that will reimburse them up to 50% of eligible training costs – which could mean the business could be reimbursed up to $4,000 per employee.

In order to qualify, training must have been performed between Aug. 1, 2014, and Dec. 31, 2015. Employers have the option to apply for vouchers for training that has already occurred.

Pre-application allows employers to enter as much information and specific details as possible. When the application goes live, all you need to do is log on to your account and submit it. We expect all funds to be accounted for within the first few hours of the application going live. We urge businesses to take time to complete the pre-application process as soon as possible.

What Is Considered Eligible Training?
• Classes at an accredited education institution
• Training that leads to an industry-recognized certificate
• Training provided in conjunction with the purchase of a new piece of equipment
• Upgrading computer skills (e.g. Excel, Access)
• Training for the ICD-10-CM/PCS diagnostics classification system
• Training from national, regional or state trade associations that offers certified training
• Training for improved process efficiency (e.g. ISO-9000, Six Sigma, or Lean Manufacturing)
• HR Certification – limited to HR staff only

What Companies Can Apply?
For-profit entities located in Ohio and that operate in one of the following industries are eligible to apply for the Incumbent Workforce Training Voucher Program:

• Advanced Manufacturing
• Aerospace and Aviation
• Automotive
• Bio Health
• Energy
• Financial Services
• Food Processing
• Information Technology and Services
• Polymers and Chemical
• Research and Development
• Companies with a Corporate Headquarters in Ohio (with limited availability of funds)

Real Estate Investment: 1031 Exchange

What is a 1031 exchange (also called a like-kind exchange) and why would you want to do it? If you own investment real estate you may have already engaged in this activity and reaped the benefits, but for others just getting into real estate investment this may be a new topic of conversation.

A 1031 exchange is a swap of one investment asset for another. If done under the rules of 1031 you will in most cases be able to defer any tax due at the time of exchange, which allows your investment to grow tax deferred. You can roll any gain on the swap over into the new investment asset until you actually sell that investment asset for cash at which time you would then recognize any gain.

realestate

There are special rules that apply when depreciable property is exchanged. It can trigger gain known as depreciation recapture that is taxed as ordinary income. In general if you swap one building for another building you can avoid this recapture.

Some general guidelines regarding this provision: It is only for investment and business property, most 1031 exchanges are for real estate. Properties are of like-kind if they are of the same nature or character, this can have a broad interpretation. If you receive cash after the exchange is complete this cash may be taxed as partial sales proceeds and is generally considered capital gain.

This is a general overview and there are many other rules and regulations to complete a successful 1031 exchange transaction for which you would want to consult your accountant.

By: Christine Schultz, Accountant