Friday, January 7, 2011

Smart Year End Tax Moves Part 5

With the year end over, there still may be important tax items individuals should consider. One is your FSA, or Flexible Spending Account.

As most people know, flex spending accounts are used to provide tax deductible health expenses to employees. The types of deductible amounts available for reimbursement in 2010 include: doctor co-pays, out of pocket prescription costs, prescription co-pays, as well as more routine expenses such as cough medicine, band aids, and certain other quasi-medical expenses.

If you still had money in your FSA account and did not turn in your receipts before December 31, 2010, some plans have a grace period. This grace period is designed to allow participants to turn in receipts after year-end for reimbursement, so as to use all of the available money in the account.

Remember that FSA accounts are "use it, or lose it" so you should try to use all the money withheld from your paycheck, so you are not giving money away uselessly. Check with your plan administrator on whether or not your plan has a grace period, if it does, then you will have a short period of time to present receipts and draw down that FSA money to as close to zero as possible.

Check back in a week, when I will talk more about the changes ahead for flexible spending accounts in 2011.

Wednesday, January 5, 2011

IRS releases Audit Technique Guide on Capitalization

There is a fine line between repairs and maintenance costs, and those costs that extend the life of an asset and therefore should be capitalized (depreciable property). One good source of reference for business people in need of guidance are IRS Audit Technique Guides.

As the name would suggest IRS Audit Technique Guides, are the actual guides that IRS Auditors follow when conducting an IRS Audit. For this reason, they can be very powerful to the average business owner, and tax professionals. This guide has specific case examples from prior court cases, including types of documentation to retain in order to form a substantial tax position on repair and maintenance and/or capitalized property.

I would encourage business owners whom are taking bookkeeping into their own hands to review this audit guide, as this particular topic can raise many questions.

Here is a link to the guide on the IRS website:,,id=231440,00.html