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Federal and Louisiana Taxes

Category Archives: Louisiana Income Tax

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year.

WASHINGTON — The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

Home OfficeThe new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on Revenue Procedure 2013-13 is effective for taxable years beginning on or after Jan. 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

  • E-mail to: Include “Rev. Proc. 2013-13” in the subject line.
  • Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  • Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.


Employee or Independent Contractor? Why Does It Matter?

Jerry L. Stovall, Jr.

Outline of Presentation Made to Lake Charles CPA Society In October 2012

PURPOSE     To provide an overview of the criteria for determining whether an individual should be classified and treated as an employee or independent contractor and to review the risks that may arise from improper classification.

●          ENFORCEMENT      Department of Labor and Internal Revenue Service have recently announced that they plan to step up enforcement of correct categorization of employee v. independent contractor.

●          WHY SHOULD YOU CARE?         Costs, including taxes; Legal implications, Liability


1)      Behavioral – Right to Control – Manner in which the job is done
2)      Financial Economic Realities – Does employer control business aspects of worker’s job (expense reimbursement, provide tools/supplies/insurance…)?
3)      Type of Relationship – Are there written contracts or employee type benefits (pension, insurance vacation)?  Will relationship continue?  Is the work performed integral to employer’s business?  Worker opportunity for profit/loss and ability to take other jobs.
4)      “Right to Control” – Typically used by IRS for purposes of wage withholdings.
5)      “Economic Realities” – Usually used for FLSA, Title VII, Age Discrimination in Employment Act, ADA and FMLA.

●          IRS 20 FACTOR TEST         This test helps analyze the degree of control over manner and method of work

1)      Instructions
2)      Training
3)      Integration
4)      Services rendered personally
5)      Hiring, supervising and paying assistants
6)      Continuing relationship
7)      Set hours of work
8)      Full-time required
9)      Working on employer premises
10)  Order or sequence set
11)  Oral or written reports
12)  Payment by hour, week, month
13)  Payment of business and/or traveling expenses
14)  Furnishing tools and materials
15)  Significant investment by the worker
16)  Opportunity to realize profit or loss
17)  Opportunity to work for more than one business at a time
18)  Making services available to the general public
19)  The business’ right to discharge
20)  Workers’ right to terminate


1)      Employee wanted to be treated as an independent contractor
2)      Employee signed a written contract
3)      Paid only in commission
4)      Has little supervision

●          SECTION 530 SAFE HARBOR

1)      Relief from retroactive assessment of federal tax liabilities
2)      Elements:  a)      Taxpayer did not treat individual as an employee for any period, and  b)      Taxpayer is consistent with treatment of individual as not being an employee, then  c)      Individual will not be an employee unless taxpayer did not have a reasonable basis for not treating individual as an employee.
3)      Reliance upon the following is a “reasonable basis”:  a)      Judicial precedent, published rulings, technical advice to taxpayer or a letter ruling to taxpayer;  b)      Past IRS audit of taxpayer and no assessment attributable to treatment of individuals holding substantially similar positions; or  c)      Long-standing recognized practice of a significant segment of the industry.


1)      September 2011
2)      Provides partial relief from retroactive federal employment tax assessments for eligible employers.
3)      Eligible = taxpayer consistently treated workers as non employees and filed 1099 forms for previous three (3) years.
4)      Tax payer must apply for program.
5)      Tax payer cannot be under audit regarding worker classification at time of audit.
6)      If accepted, tax payer must pay 10% of employment tax liability on compensation paid during most recent tax year.


1)      Unemployment benefit claim
2)      Unpaid wage claim
3)      LA “Payday” Statute (La. R.S. 23:631)
4)      State/Federal Charge of Discrimination/Harassment
5)      State/Federal wage audit
6)      Workers’ compensation claim
7)      Retirement
8)      DOL Audit
9)      Employee complaint/suit
10)  Union “drops a dime”


1)      Unpaid wages (including overtime) and benefits
2)      Attorney’s fees
3)      Back taxes, plus interest and penalties
4)      Civil fines/criminal penalties
5)      Provide employee benefits, including health insurance and retirement
6)      Pay any misclassified injured employees workers’ compensation benefits
7)      Notice to workers (in some states)
8)      Employee claims:   a)        Overtime   b)       Pay Day Statute   c)       Employee benefit plans   d)      Retirement plans   e)       Unemployment   f)        Workers’ compensation

●          CASES

i)         Talbert v. American Risk Inc. Co., Inc. (C.A. 5 Tex. 2010)
ii)       Lindsley v. BellSouth Telecommunications, Inc. (C.A. 5 La. 2010)
iii)     Hopkins v. Cornerstone America (C.A. 5 Tex. 2008)
iv)     Lorentz v. Coblentz, (La. App. 1 Cir. 1992)
v)       Agencies that will come knocking:   (a)     IRS (withholding)   (b)    US D.O.L. (minimum wage and overtime)   (c)     NLRB (employee’s right to organize)  (d)    EEOC (anti-discrimination laws)  (e)     OSHA (workplace safety)  (f)     State agencies


1)       Enter into a written agreement with independent contractor before work begins:   i)         Identify individual as an independent contractor   ii)       Set complete list of tasks to be performed  iii)     Specify results to be obtained   iv)     Do NOT require daily or weekly reports  v)       Do NOT specify work hours or work schedule
2)       Ensure that there are differences between the way you handle employees vs. the way you handle independent contractors
3)       Ensure that there is consistency between similarly-situated employees
4)       Compliance check =         review contracts:   i)         review policies   ii)       review jobs
5)       Document agreements and duties
6)       Collect documents:  employer identification number, business licenses, professional licenses, insurance certificates, business cards, advertisements by contractor (yellow pages, news paper) and invoices.


1)       “Independent Contractor” agreements do not save the day.
2)       Issuance of a Form 1099 rather than a W-2 is not dispositive.
3)       Don’t assume your classification is proper.  Carefully consider statutes, applicable jurisdiction, and all facts underlying the relationship.

Robbing Peter to Pay Paul?

The Louisiana Department of Revenue announced today that it will enhance its Federal to State refund offset program to collect money owed other Louisiana Agencies.  The offset program will compare US government vendors to Louisiana debtors and seize any funds the US government is preparing to pay those vendors should they owe Louisiana money.  For those vendors involved with long term contracts with the US government, having its paymenst seized will likely jeopardize its payment of subcontractors’ and suppliers’ invoices.  Can the state’s economy survive the impact of cash flow arrest?

Hurricane Isaac Tax Relief

Lance J. Kinchen

On September 5, 2012, following recent disaster declarations by the Federal Emergency Management Agency, the IRS announced that affected taxpayers in Louisiana and Mississippi will receive some tax relief.

Following Hurricane Isaac, the President declared the following parishes a federal disaster area:  Ascension, Assumption, East Baton Rouge, East Feliciana, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington and West Feliciana.

As a result, the IRS has postponed certain deadlines for taxpayers who reside or have a business in the designated disaster area.  Under §7508A, the IRS has given affected taxpayers until January 11, 2013 to file most tax returns or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after August 26, 2012 and on or before January 11, 2013.  This includes the quarterly estimated tax payment due on September 17, 2012.  Furthermore, it includes corporations and businesses that previously obtained an extension until September 17, 2012 to file their 2011 returns and individuals and businesses that received a similar extension until October 15.

The IRS will abate any interest, late payment or late filing penalties that would otherwise apply.  In addition, the IRS is waiving failure-to-deposit penalties for federal employment and excise tax deposits normally due on or after August 26 and before September 10 if the deposits are made by September 10, 2012.

The Louisiana Department of Revenue (“LDR”) is granting similar state tax relief to affected taxpayers.  In addition to the parishes listed above, LDR has also granted state tax relief to East Baton Rouge, East Feliciana, Pointe Coupee, West Baton Rouge and West Feliciana.  LDR will waive any late filing penalties, late payments penalties and interest that would otherwise apply.  Any return or amount on which penalties or interest begin accruing before August 26, 2012 will not be eligible for this relief.

As a result, affected individuals and businesses will have until February 11, 2013 to file these state returns and pay any state taxes due.  This includes individuals and corporations that previously obtained an extension until November 15, 2012, to file their 2011 income tax returns.  It also includes the state estimated tax payment for the third quarter of 2012, due September 17, 2012.

Please consult your CPA or tax advisor on whether you qualify for such tax relief.