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Modi CPA
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Hey Guys,

Welcome to Modi CPA!

Today on Modi CPA videos, we’ll be discussing
How to deduct your home office expenses regardless if you are a Sole Proprietorship, LLC, Partnership, S or C Corporation.

So the IRS lists out two basic requirements for us to take advantage of this deduction.

1. First is that there is a part of your home that is exclusively used for conducting business. For example, you are using a guest or library room to conduct your trade and that space is not used for personal reasons at all.

2. Next that part of your home is the principal place for your business. Which means you can have an outside office of your home, but your home office is the main place where you conduct your business activities such as meeting clients, taking phone calls, doing your work, etc

So now, let’s dive into how you actually take these deductions:
If you have a Sole Proprietorship or a Single Member LLC, you’ll showing be your income and expenses on Schedule C. For Schedule C Filers there are two options available –
First is the Regular method:
For example, you have 300 square footage of your home out of 3000 Square footage of your home that is strictly used for business purposes.
So 10% of your home is used for business, which means you can take 10% of mortgage interest, insurance, utilities, repairs, and depreciation are deductible. All those items are deductible at 10%.

you would show these expenses on IRS Form 8829 and the expenses would flow into Schedule C.
The 2nd method is the Simplified method – Under the simplified method all you need to do is determine the space of the home that is used for business purposes and multiply the square footage of the space by 5 dollars. The maximum space you can use for this deduction is 300 square feet. The deduction can be taken on Schedule C Line 30. This option is fairly straightforward and less record keeping is required versus the conventional method.
Note: The Internal Revenue Code doesn’t recognize LLC as a separate entity from the individuals but at a state level they do. So for liability purposes, it may be best to still have a accountable plan for a LLC. Discussed later.

Now let’s assume you have a C or S corporation:

The concept is similar to using Regular method discussed above for schedule C filers but there is a workaround you have to do. Furthermore, you would still have to meet the two basic requirements as mentioned above.

Keep in mind both that both the corporation and shareholder are two different persons. So you have to treat the shareholder and the corporation separately. Once this concept is understood, it’s much easier to understand on how home office expenses can be deducted.
The corporation has to create an “Accountable Plan” under Regulation 1.62-2. Although there isn’t a written arrangement required, it is a good idea to have the Accountable plan to be written. Modi CPA can assist you in creating one, if needed.

Essentially under an Accountable plan, the Shareholder-employee would be reimbursed by the Corporation for the home office expense on a periodic basis. Then the corporation on its tax return would take the home office expense deductions on your 1120S or 1120.
Partnerships or Multi-member LLC:

Once again, the concept is similar as S-Corporation that either you can create an accountable plan for your partners or if a partnership agreement states that home office expenses must be paid out of the partners own funds, then the partner can deduct those expenses on Schedule E Line 28.

I hope this video gives you a better insight on home office use deductions! And if this video helped you in anyway, feel free to check out some of our other blogs at www.modicpa.com – the link is in the description below and don’t forget to subscribe, like and leave comments below on tax topics you would like to discuss in the future.
If you have any questions on how we can help you or would like learn more about the firm. Please visit us Modicpa.com or email us at Ravi@modicpa.com.

Modi CPA is a licensed Certified Public Accounting firm in the state of Texas in The Colony, TX and service clients in the DFW Metroplex area (Dallas, Addison, Lewisville, Plano, Garland, Forth Worth, Arlington, Richardson, McKinney) and throughout the United States. Furthermore, we are also International & Cross-Border Tax accountants whom look at US-Canada Tax Treaty, US-India Tax Treaty, US-Russia Tax Treaty, US-UK Tax Treaty, US-Egypt Tax Treaty, and others.

We are a qualified accounting firm to discuss Domestic, Cross Border Tax issues between multiple countries, and other International tax services to ensure your compliance with the United States’ International tax laws. Do not hesitate to contact our office should you have further questions. Our Phone number is (214)618-0468 and email is ravi@modicpa.com
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Hey Guys,

Welcome to Modi CPA!
Today on Modi CPA videos, we’ll be discussing
How to deduct your home office expenses regardless if you are a Sole Proprietorship, LLC, Partnership, S or C Corporation.

So the IRS lists out two basic requirements for us to take advantage of this deduction.

1. First is that there is a part of your home that is exclusively used for conducting business. For example, you are using a guest or library room to conduct your trade and that space is not used for personal reasons at all.

2. Next that part of your home is the principal place for your business. Which means you can have an outside office of your home, but your home office is the main place where you conduct your business activities such as meeting clients, taking phone calls, doing your work, etc

So now, let’s dive into how you actually take these deductions:
If you have a Sole Proprietorship or a Single Member LLC, you’ll showing be your income and expenses on Schedule C. For Schedule C Filers there are two options available –
First is the Regular method:
For example, you have 300 square footage of your home out of 3000 Square footage of your home that is strictly used for business purposes.
So 10% of your home is used for business, which means you can take 10% of mortgage interest, insurance, utilities, repairs, and depreciation are deductible. All those items are deductible at 10%.

you would show these expenses on IRS Form 8829 and the expenses would flow into Schedule C.
The 2nd method is the Simplified method – Under the simplified method all you need to do is determine the space of the home that is used for business purposes and multiply the square footage of the space by 5 dollars. The maximum space you can use for this deduction is 300 square feet. The deduction can be taken on Schedule C Line 30. This option is fairly straightforward and less record keeping is required versus the conventional method.
Note: The Internal Revenue Code doesn’t recognize LLC as a separate entity from the individuals but at a state level they do. So for liability purposes, it may be best to still have a accountable plan for a LLC. Discussed later.

Now let’s assume you have a C or S corporation:

The concept is similar to using Regular method discussed above for schedule C filers but there is a workaround you have to do. Furthermore, you would still have to meet the two basic requirements as mentioned above.
Keep in mind both that both the corporation and shareholder are two different persons. So you have to treat the shareholder and the corporation separately. Once this concept is understood, it’s much easier to understand on how home office expenses can be deducted.

The corporation has to create an “Accountable Plan” under Regulation 1.62-2. Although there isn’t a written arrangement required, it is a good idea to have the Accountable plan to be written. Modi CPA can assist you in creating one, if needed.

Essentially under an Accountable plan, the Shareholder-employee would be reimbursed by the Corporation for the home office expense on a periodic basis. Then the corporation on its tax return would take the home office expense deductions on your 1120S or 1120.
Partnerships or Multi-member LLC:

Once again, the concept is similar as S-Corporation that either you can create an accountable plan for your partners or if a partnership agreement states that home office expenses must be paid out of the partners own funds, then the partner can deduct those expenses on Schedule E Line 28.

I hope this video gives you a better insight on home office use deductions! And if this video helped you in anyway, feel free to check out some of our other blogs at www.modicpa.com – the link is in the description below and don’t forget to subscribe, like and leave comments below on tax topics you would like to discuss in the future.
Modi CPA is a licensed Certified Public Accounting firm in the state of Texas in The Colony, TX and service clients in the DFW Metroplex area (Dallas, Addison, Lewisville, Plano, Garland, Forth Worth, Arlington, Richardson, McKinney) and throughout the United States. Furthermore, we are also International & Cross-Border Tax accountants whom look at US-Canada Tax Treaty, US-India Tax Treaty, US-Russia Tax Treaty, US-UK Tax Treaty, US-Egypt Tax Treaty, and others.

We are a qualified accounting firm to discuss Domestic, Cross Border Tax issues between multiple countries, and other International tax services to ensure your compliance with the United States’ International tax laws. Do not hesitate to contact our office should you have further questions. Our Phone number is (214)618-0468 and email is ravi@modicpa.com

Disclaimer: The information provided in this video is for Educational and general information only, so does NOT take into account your objectives, financial situation and needs.This video is not a substitute for proper advice from a licensed attorney, accountant, and/or another service provider.
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US Citizens Living in CANADA! Tax Implications: Tax Free Savings 

Account – TFSA & Registered Education Savings Plan
Having a Tax Free Savings Account or for short TFSA has a great tax advantages for Canadians because similar to a ROTH IRA in the US, the earnings in a TFSA are tax free and so is the principal amount because the amount that you contribute into a TFSA are not deductible on your Canadian Tax Return.
As stated by the Canadian Revenue Agency “It is a way for individuals who are 18 and older and who have a valid social insurance number to set money aside tax-free throughout their lifetime”

Although earnings in TFSA are tax free in Canada, the internal revenue code of the US recognizes income in TFSA as Taxable income in the United States to a person holding a Tax Free Savings Account.
Furthermore, in a similar fashion with a RESP is typically created as a tax deferred vehicle by Canadian parents for their children to assist their child with their qualified education expenses when they are going to college as the grants and earnings received are non-taxable with the Canadian Revenue Agency until the funds are withdrawn.
But similar to TFSA, RESP’s are not recognized as a tax deferred or savings vehicle for US Tax purposes if the Subscriber/grantor and/or the beneficiary is a US Person for tax purposes. Per the Internal Revenue Code, the US recognizes income and grants received under the RESP as taxable income when received to the US Grantors of the Education Savings Plan.

The complications continue for both RESP and TFSA that both of these plans are considered as a foreign Grantor Trust for US Tax purposes. So there is an element if a IRS Form 3520/3520-a to be considered when their ownership, earnings, and/or distributions from RESP and TFSA. IRS Form 3520-A is due 2 and half months after the year ends, so for most, this will be generally be March 15th and IRS Form 3520 must be filed with the Individual person’s tax return.

The minimum penalty for not filing these forms timely is $10,000. It is important to be compliance with the US Tax laws as Foreign Account Tax Compliance Act has commenced in March 2010. Canada and U.S. Signed an intergovernmental agreement (IGA) on a February 5th, 2014. With the IGA, IRS will be receiving information on accounts held by U.S. Persons from Canadian Revenue Agency as the CRA will be receiving this sensitive information from Canadian Financial institutions. Due to this agreement between the US and Canada, the IRS has received roughly 155,000 US Citizens bank records held in Canada. There is another wave of accounts of US persons in Canada to be reported in September 2016.

We assist numerous clients by assisting them to enter into OVDP – Offshore Voluntary Disclosure Program, Streamlined Domestic Offshore Procedure, Delinquent FBAR Submission Procedures, and Delinquent International information Return Submission Procedures.
Modi CPA is a licensed firm in the state of Texas in The Colony, TX and service clients throughout the United States, Canada, India, Russia, UK, and DFW Metroplex area (Dallas, Addison, Lewisville, Plano, Garland, Forth Worth, Arlington, Richardson, McKinney).We are a qualified firm to discuss Domestic and International tax services to ensure your compliance with the United States’ International tax laws. Do not hesitate to contact our office should you have further questions. Our Phone number is (214)618-0468 and email is ravi@modicpa.com
 
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Pick your business entity S Corporation versus Sole Proprietorship! 
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Modi CPA Videos: Picking your Business entity - S Corporation versus Sole Proprietorship 
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have you received your W-2/1099-Misc yet? 

Generally, the deadline to receive your W-2/1099 is on February 1st, 2016. 
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Check out our video officially announcing Modi CPA and the services we offer!
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Check out our video officially announcing Modi CPA and the services we offer!
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Happy Labor Day 2015!!
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