eBay Sales Can Be Taxable

IRS employee Andrea Orellana failed to report income from sales on eBay from 200-2005.  During those six years Orellana participated in over 7,000 transactions.  From those transactions Orellana had unreported income of over $36,000.  In 2005 alone she had unreported income of $21,062.  Orellana used many different user IDs during the years. 

Orellana’s defense was the transactions were like “online garage sales”, but the US Tax Court ruled that the sales from the designer clothing were taxable. 

Source: www.accountingtoday.com

There are a few items I find significantly important in this court case. 

First of all this woman was involved in over 7,000 transactions during a 6 year period.  That averages out to 3.2 transactions per day, every day, for 6 years.  Immediately my reaction is if you are that involved in eBay transactions it is not a general “online garage sale” and not a hobby. 

Second, when I see that she used multiple user IDs that makes me believe she may have been trying to avoid being noticed in the system. 

Online commerce is challenging when trying to decipher the difference between some “spring cleaning” and money making venture.  Starting for 2011 tax returns, taxpayers who sell more than $20,000 of merchandise or participate in more than 200 electronic transactions annually could receive a 1099. 

Credit Card Security Standards for Your Business

Does your company accept credit cards?

If the answer is yes, read this following information to make sure you are in compliance with the Payment Card Industry security standards. 

When you have any credit card numbers stored in QuickBooks, CRM database or online Web Store you need to comply with the following standards which are made of six principles and twelve requirements:

1.       Build and Maintain a Secure Network

a.       Requirement 1: Install and maintain a firewall configuration to protect cardholder data. 

b.      Requirement 2:  Do not use vendor-supplied defaults for system passwords and other security parameters. 

2.      Protect Cardholder Data

a.       Requirement 3:  Protect stored cardholder data.

b.      Requirement 4:  Encrypt transmission of cardholder data across open, public networks.

3.      Maintain a Vulnerability Management Program

a.       Requirement 5:  Use and regularly update anti-virus software.

b.      Requirement 6:  Develop and maintain secure systems and applications.

4.      Implement Strong Access Control Measures

a.       Requirement 7:  Restrict access to cardholder data by business need-to-know.

b.      Requirement 8:  Assign a unique ID to each person with computer access.

c.       Requirement 9:  Restrict physical access to cardholder data.

5.      Regularly monitor and Test Networks

a.       Requirement 10:  Track and monitor all access to network resources and cardholder data.

b.      Requirement 11:  Regularly test security systems and processes. 

6.      Maintain an Information Security Policy

a.       Requirement 12:  Maintain a policy that addresses information security. 

HSA & Montana Medical Savings Account

Health Savings Accounts                               Federal Tax Deduction
The 2010 HSA contribution maximums are $3,000 for an individual account and $6,150 for a family. 
(HSA holders 55 and older can contribute an extra $1,000 which means $4,000 max or $7,150)

To be eligible for a Health Savings Account, an individual must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP.  This High Deductible Health Plan must have a minimum deductible for an individual $1,200 and a family $2,400.  The insurance companies know all the details about these HDHP policies. 

For more information about HSA's go to: 

http://www.ustreas.gov/offices/public-affairs/hsa/faq_eligibility.shtml

Montana Medical Savings Account (MSA)    MT ONLY Tax Deduction
All resident taxpayers are eligible to establish a Montana MSA even if they have another health care plan provided by their employer or a Section 125 (Flexible Spending Account) or a Federal HSA. A taxpayer does not have to be in a high deductible plan at work to be eligible for an MSA.

A taxpayer may contribute any amount to a MSA; however each person may only deduct $3,000 plus any interest the account accumulates each year.  Money withdrawn is required to be used for eligible medical expense.  Any money withdrawn not used for eligible medical expenses is subject to a 10% penalty.

You may have a self-administered MSA.  The account must be kept separate from any other account, must be an individual account and you must file an annual report (Form MSA) with your individual Montana return.  
For further information contact Stephanie in our office or
read the following article:
http://msuextension.org/publications/familyfinancialmanagement/mt199817HR.pdf

Increase in IRS Audits

IRS audits have more than doubled in the past decade. Most of the time these are mail audits where an IRS computer mails you a confusingly written message stating there is a mismatch between what was reported on your tax return and what was otherwise reported to the IRS.

As I've mentioned in the past: DO NOT PANIC!!!!! Most of the time we simply have to print out a document and reply to the IRS. With the other audits we simply need to ask a few more questions, but again it does not take too much time to resolve the issue.

Never answer an IRS agent's questions. In the case you get a phone call from an IRS agent, you have a right to representation. If an IRS agent calls you, take the agents' ID number and phone number. Make a note of any questions the agent has and tell them your tax representative will be in touch.

Remember contact us immediately if you get any notice from the IRS. This is why you have a tax accountant, we are here to help you! The IRS has strict deadlines and if you miss a deadline it can be very difficult to challenge an IRS's position after the deadline has passed even if the IRS is in the wrong. 

At this time the IRS does not contact anyone via email.

2010 Standard Mileage Rate

The 2010 federal mileage reimbursement rate is 50¢ per mile.

This is down 8¢ from 2009, mostly due from lower fuel costs.