Accounting Today has the best summary of the new delays caused by last minute changes in the tax laws.
People claiming any of these three items — involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A — will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.
Click the above link to read more.
Thursday, December 30, 2010
Monday, December 27, 2010
Here is our list of last minute tax strategies for 2010
Tax Partners Holdings Inc.
Affordable expert tax preparation
2060 W Monroe
Springfield IL 62704
taxpartner@gmail.com
Visit us online at 1taxes.com or our blog at http://justmakingcommonsenseblogspot.com/
Dear Client,
We know your thoughts are on the holiday and not tax savings ... but taking actions in the next few weeks specifically designed to reduce your 2010 tax liability will prove to be rewarding when you file your taxes next year.
Here is our list of last minute tax strategies for 2010:
1. Increase your contributions to your 401(k) or IRA retirement investment plans. A retirement plan is an easy deduction. If your employer is not participating in your retirement plan, you should consider an IRA or participate in the self funded 401(k) if at all possible. Also, while some employers require a wait time or require employees to wait until open enrollment to start up payroll deductions, some companies will let you start at the end of the year or even on the next paycheck. It’s worth looking into, since the money contributed to a retirement account is typically not subjected to income taxes.
2. Charitable giving. Not only are donations good for your taxes, they're good for society as a whole. While there may be no large tax benefit for some donations, please consider the social benefits to making donation to charitable organization.
Even older computers and cell phones can be useful for training or other charitable causes -- it doesn't have to be an iPad. You're entitled to fair market value for clothes and furniture, among other things, so take time right after Christmas to clean your closets and head to your favorite charity.
The little things add up too, and you can write off out-of-pocket costs incurred while doing good works. For example, ingredients for casseroles you prepare for a nonprofit organization’s soup kitchen and stamps you buy for your school’s fundraising mailing count as a charitable contribution. You can also deduct any out-of-pocket travel expenses for charitable causes, which includes everything from mileage for travel, to taxis or parking expenses.
3. Choose stock donations over cash. If you're thinking about making a large cash donation, you might want to think about using stock in a company that has done well. Make a donation of those shares; if you sell the shares to make a large donation you have to pay the taxes on the profit. However, if you donate the shares then you receive a tax deduction for the fair market value of the stock.
4. Buy an energy-efficient appliance for your home. It’s too late to qualify for a tax credit for buying a new home, but you can get some money for buying an energy efficient appliance. That’s a lot cheaper than buying a house, and tax credits are up to $1,500.
5. There is still time to claim the energy tax credit. If you're adding solar panels, caulking, storm windows or energy-efficiency improvements, you may be eligible for a tax credit of up to $1,500. Work has to be paid for and completed before the end of the year.
6. Double check employment expenses. Did you have any job related expenses? Did you search for a job? If so, some of those expenses can be deducted. Hang on to your receipts for everything from dry cleaning for uniforms to courses for your career. If your employer does not offer reimbursement you may be eligible for additional deductions.
7. Sell losing investments. Capital losses are first used to offset capital gains, and then up to $3,000 of the net loss can be deducted against income, such as your salary. Any excess loss is carried forward to future years.
8. See if you can deduct any medical costs. You have to itemize to qualify for this deduction and expenses have to be more than 7.5% of your adjusted gross income, but if you have a lot of doctors' visits and medical procedures it may be worth checking out. Will you need surgery in near future? If so, try to get it in before the end of the year.
I hope this helps your planning! My wish is for bigger refunds. See you next year!
Donald C. Fuener E.A.
President
TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.
Affordable expert tax preparation
2060 W Monroe
Springfield IL 62704
taxpartner@gmail.com
Visit us online at 1taxes.com or our blog at http://justmakingcommonsenseblogspot.com/
Dear Client,
We know your thoughts are on the holiday and not tax savings ... but taking actions in the next few weeks specifically designed to reduce your 2010 tax liability will prove to be rewarding when you file your taxes next year.
Here is our list of last minute tax strategies for 2010:
1. Increase your contributions to your 401(k) or IRA retirement investment plans. A retirement plan is an easy deduction. If your employer is not participating in your retirement plan, you should consider an IRA or participate in the self funded 401(k) if at all possible. Also, while some employers require a wait time or require employees to wait until open enrollment to start up payroll deductions, some companies will let you start at the end of the year or even on the next paycheck. It’s worth looking into, since the money contributed to a retirement account is typically not subjected to income taxes.
2. Charitable giving. Not only are donations good for your taxes, they're good for society as a whole. While there may be no large tax benefit for some donations, please consider the social benefits to making donation to charitable organization.
Even older computers and cell phones can be useful for training or other charitable causes -- it doesn't have to be an iPad. You're entitled to fair market value for clothes and furniture, among other things, so take time right after Christmas to clean your closets and head to your favorite charity.
The little things add up too, and you can write off out-of-pocket costs incurred while doing good works. For example, ingredients for casseroles you prepare for a nonprofit organization’s soup kitchen and stamps you buy for your school’s fundraising mailing count as a charitable contribution. You can also deduct any out-of-pocket travel expenses for charitable causes, which includes everything from mileage for travel, to taxis or parking expenses.
3. Choose stock donations over cash. If you're thinking about making a large cash donation, you might want to think about using stock in a company that has done well. Make a donation of those shares; if you sell the shares to make a large donation you have to pay the taxes on the profit. However, if you donate the shares then you receive a tax deduction for the fair market value of the stock.
4. Buy an energy-efficient appliance for your home. It’s too late to qualify for a tax credit for buying a new home, but you can get some money for buying an energy efficient appliance. That’s a lot cheaper than buying a house, and tax credits are up to $1,500.
5. There is still time to claim the energy tax credit. If you're adding solar panels, caulking, storm windows or energy-efficiency improvements, you may be eligible for a tax credit of up to $1,500. Work has to be paid for and completed before the end of the year.
6. Double check employment expenses. Did you have any job related expenses? Did you search for a job? If so, some of those expenses can be deducted. Hang on to your receipts for everything from dry cleaning for uniforms to courses for your career. If your employer does not offer reimbursement you may be eligible for additional deductions.
7. Sell losing investments. Capital losses are first used to offset capital gains, and then up to $3,000 of the net loss can be deducted against income, such as your salary. Any excess loss is carried forward to future years.
8. See if you can deduct any medical costs. You have to itemize to qualify for this deduction and expenses have to be more than 7.5% of your adjusted gross income, but if you have a lot of doctors' visits and medical procedures it may be worth checking out. Will you need surgery in near future? If so, try to get it in before the end of the year.
I hope this helps your planning! My wish is for bigger refunds. See you next year!
Donald C. Fuener E.A.
President
TAX ADVICE DISCLAIMER: In accordance with IRS Circular 230, any tax advice included in this communication, including attachments, is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, nor may any such advice be used to promote, market or recommend to another party any transaction or matter addressed within this communication. If you would like such advice, please contact us.
Sunday, November 28, 2010
December 1, 2010 Client Newsletter
As the holidays approach and 2010 draws to a close, I want to thank you for your business over the last year. I hope that it has been a good year for you and your loved ones.
To help minimize your tax bill for 2010, I may be able to identify some opportunities for you to defer income to next year or prepay some of next year’s expenses so that you can take a deduction in 2010.
There are over 350 Tax Deductions and Credits for Small Businesses and Individual Professionals. Although it is almost impossible to say how many of these may be applicable to your specific business without considering your particular scenario, here are some very common deductions that may apply to you.
1. Start-up Expenses
As you get your business started, there are several costs such as furniture, equipment, Computer, Fax etc that may be deducted 100%. Section 179 of the Internal Revenue Code allows you to deduct up to $250,000 of the cost of new equipment or other assets in 2010. Off the shelf Software costs can also be now deducted in the same year as per Section 179.
Although if you know that your business is going to take a couple of years to break even and generate profit, you may want to depreciate these expenses over the years to offset the profits in later years.
2. Business Travel, Meals and Entertainment
If you make a trip for business purposes, travel costs including Airline tickets, Hotel, Taxi, Meals, Shipping business materials, Laundry, Telephone calls, etc are fully deductible expenses.
How about combining business travel with pleasure? It is allowed, as long as the primary purpose of the trip is for Business, although there are strict guidelines on this.
3. Charitable Contributions
This is a great deduction as you can feel good about donating to your favorite cause and save on Taxes at the same time. Charitable contributions are treated slightly different depending on the type of your business entity. If your business is a partnership, a limited liability company, or an S corporation, your business can make a charitable contribution and pass the deduction through to you, to claim on your individual tax return. In case of regular (C) corporations charitable contributions are deducted on the corporation's tax return. There are some important rules for charitable contribution deductions:
- Only contributions to charities listed as ‘qualified organizations' by the IRS are deductible and contributions more than $250 require a written acknowledgement from the qualified charitable organization.
- You can deduct donations of assets such as Property or Equipment at their fair market value. Although a fully depreciated (written off) asset cannot be deducted as a contribution even if it is works well.
- You cannot deduct the value of time or services that you volunteer.
- You cannot deduct the part of a contribution that benefits you. If you receive a gift in exchange for a charitable donation or if the contribution made is in lieu of certain benefits, you can deduct only the amount of the contribution that exceeds the value of the gift. If you are making a large donation, make sure you check with your tax accountant first.
4. Bad Debts
Bad Debts hurt the most. Especially when you have worked so hard to satisfy all of the customer's requirements and they do not pay you. The good news is that certain bad debts are tax deductible.
If your business sells goods, you can deduct the costs of any goods sold, but not paid for, as an ordinary business expense. However, you cannot deduct any lost profits you would have collected from the sale. If your business provides services, no deduction is allowed for the time you devoted to the customer who doesn't pay. For example if you provide medical services and the patient does not pay, you cannot deduct the cost of the time you spent in treating the patient. The rationale is that if businesses were able to deduct unpaid services, it would be quiet easy to inflate the unpaid bills and claim large bad debt deductions making it hard for IRS to catch the fraud.
5. Home Office Deduction
For many years taking a Home Office Tax Deduction was considered a red flag, inviting the IRS to Audit your tax return. But that may no longer be the case, with more and more businesses and individuals taking advantage of working from home and maintaining a healthy work-life balance. IRS is well aware of the rising trend in working from home office. As long as you use the ‘Home Office' as IRS defines it. This one deduction alone can save you several thousand dollars in tax.
For example if you are an independent Information Technology contractor and mostly work out of your client's office, however you use part of your home to manage the administrative aspects of your profession or business, you may qualify to take the Home Office deduction. IRS has specific rules to qualify to deduct expenses for home office. I want to share the two most basic qualifiers.
Trade or Business Use: First of all you must be engaged in a trade or business to take advantage of this deduction. Employees can also take Home Office Deduction in certain situations. You cannot take a deduction if you are only using it for a profit seeking activity that is not your trade or business. For example you use part of your home to review investment journals and carry out your personal investments. You are not a broker or a dealer, so your activities may not be considered part of a trade or business and hence you cannot take home office deduction.
Regular and Exclusive Use: Specific area of your home must be used exclusively and regularly for your business or trade. You don't need a permanent partition to mark the space. For example you use part of your basement exclusively to perform administrative and management tasks of your business, review business paperwork, teleconference or meet with clients etc. on a regular basis and not just once in a while. Your family does not use the same space for recreation or other non-business purposes. You may be able to claim costs associated with part of the basement as a deduction for use as home office, provided you qualify on other rules.
There are other rules and definitions that IRS uses to qualify the Home Office deductions. If you are planning to take advantage of this deduction, I strongly recommend you visit with us. Which leads me to....
I strongly encourage you to visit with us this month to talk about your taxes. A chance for us to visit and discuss your current tax situation. We can estimate your 2010 tax liability and make recommendations now, while there is still time to take action. Please take a minute to call our office today to make an appointment. Set aside 30 minutes. Plan on saving money.
Our 29th version of the same story.
Sally Smith, was a smart businessperson, she knew the basics of year-end tax planning.
1. Postpone income to next year.
2. Pay as many expenses as possible this year.
3. Keep inventory level low.
4. If you are going to make a capital investment, do so before the end of the year.
5. Double check for missing deductions.
6. Invest in an IRA for similar type account.
Sally owns a retail store and faced the year end with her eyes wide open. Sally knew that a few strategies would pay big dividends on April 15. Here is what she did to reduce her tax liability:
Since Sally was operating her business on a cash basis and relied upon cash sales through her cash register, she did not have the opportunity to postpone much income. She has established a policy for many years to close her books on December 28, which gave her opportunity to defer three days of sales to next year.
Sally then reviewed her bills. She started to write out checks for her expenses. She wrote checks for all expenses due, even if some expenses were due in January. She dated her checks for December 28, 2010 to be sure that the expenses were recorded for this year on December's bookkeeping. Her checks written totaled to almost $10,000. Her one simple strategy, accelerating expenses meant that Sally saved over $4,000.00 in income tax this year.
Since you pay tax on your inventory at the end of the year, Sally knew that reducing her inventory to the lowest amount possible was important for her. First, she decided to review her inventory to see if she had things that have been gathering dust. She found items that in fact had been sitting around for more than three years. She decided to mark those items down and immediately started an inventory reduction sale for those items. She knew that the value of her inventory was based upon her costs of the items, not the selling price. She also knew that items that were partially used or supplies not for resale did not count as part of her inventory.
Sally had been debating whether to purchase a new computer for her business. The local computer store was offering a "six-months same as cash" financing offer for the purchase of new computers. Sally decided to purchase the computer now, electing to take advantage of the special financing offer. She knew that she could deduct the full purchase price of the computer on her tax return, even though she did not pay for it right away. When you purchase something using a credit card or borrow the money, as Sally did, you get to deduct the amount when you purchase the item. The $3,000 computer saved Sally $1,200 in income tax.
As part of her year-end review Sally took a minute to see if perhaps she has recorded all her business expenses as part of her monthly record keeping. She knew that the credit card that she had been using exclusively for business had some interest payments that were not included. She made a note to record her year-end statement from her credit card company to make sure that it was included as interest paid on her year-end documents to her accountant. In addition, she decided to review her automobile mileage and other receipts for expenses that she might not have had for her business and had a chance to record in her monthly record keeping.
Sally also knew that she had time to make her annual IRA contribution until April 15 of next year. She decided not to make it till next April. She also made a note to talk to us about Roth IRA accounts and analyze the different options available to her. One of her options was a self-employed Pension Plan commonly called a SEP. IRA's. SEP. IRA's do not have to be opened or funded until the due date of your return. That means that Sally doesn't have to open or make a contribution to a SEP. IRA for the 2010 tax year until April 15, 2010. She can also contribute a larger amount to her SEP. IRA than she could to her regular IRA. However, she was reluctant to open one because she also knew that she would have to contribute an amount to her full time employees. She made a note to ask her accountant what that contribution would be and what her resultant tax savings would equal. She also thought her accountant might have ideas on how to "cushion" the employee's contribution issue.
Sally knew that her year end review of her tax situation saved her almost $7,000 this year. She made a note to review her year end information before we prepared her tax return in 2010.
SAVE TAXES...REMEMBER BEFORE JANUARY 1, 2011
1) Postpone income to next year.
2) Pay as many expenses as possible this year, even if you do not send the checks off till January, be sure to write the checks for the expenses.
3) Keep inventory at a low level.
4) If you are going to make a capital investment, do so before the end of the year.
5) Double check for missing deductions.
6) Invest in an IRA or similar type account.
Please note our office will be closing or have early closing times for the following days:
Friday, December 24, 2010 in observance of Christmas Eve.
Saturday, December 25, 2010 in observance of Christmas.
Friday, December 31, 2010 at 1:00 p.m.
Saturday, January 1, 2011 in observance of New Years Day.
Extended tax season hours start January 19, 2011. We will be open every day until April 18, 2011. IRS has extended the due date for your taxes this year because of the District of Columbia Emancipation Day holiday falling on April 15, 2011.
We are awaiting word from the IRS on the exact amount of taxes they will be required to withhold from your employee paychecks in 2011. The tables generally are released in mid-November, but they are being held this year because of the unresolved issue of the Bush tax cuts. Experts have been predicting that at some point the IRS will have to assume the Bush tax cuts expire and issue new tables, because payroll processing departments require two to three weeks on average to program their computers with new data.
But IRS doesn't seem hurried.
"We understand that businesses and payroll processors need at least a few weeks to implement new withholding tables, and we are hopeful that Democrats and Republicans in Congress will work together to extend tax cuts for 98% of American families and provide the middle class the tax relief they need in these tough economic times," said Treasury spokesman Sandra Salstrom.
Once again, thank you for choosing me as your tax guy. If you have any questions about your tax and/or financial situation, please don't hesitate to contact me. I look forward to hearing from you.
My very best wishes for a happy holiday season and for health and happiness in 2011.
To help minimize your tax bill for 2010, I may be able to identify some opportunities for you to defer income to next year or prepay some of next year’s expenses so that you can take a deduction in 2010.
Taxes are the biggest expense for most Small Businesses and Individual Professionals. And yet most of us provide minimal time for planning and reducing this expense, except perhaps an annual visit to your tax guy’s office during tax season. Is it any surprise then that Small Businesses and Professionals contribute the most to Tax Revenues?
Large Corporations with help from expert tax professionals pay at a much lower effective tax rate. An extreme example is that of Goldman Sachs which paid an effective tax rate of 1% on a $2.3 Billion profit last year. Independent studies over the years suggest that Small Businesses pay up to $160 Billion in excess taxes each year. This is money you can save through proper tax planning. As with everything else in your business, it takes careful planning and professional execution.
There are over 350 Tax Deductions and Credits for Small Businesses and Individual Professionals. Although it is almost impossible to say how many of these may be applicable to your specific business without considering your particular scenario, here are some very common deductions that may apply to you.
1. Start-up Expenses
As you get your business started, there are several costs such as furniture, equipment, Computer, Fax etc that may be deducted 100%. Section 179 of the Internal Revenue Code allows you to deduct up to $250,000 of the cost of new equipment or other assets in 2010. Off the shelf Software costs can also be now deducted in the same year as per Section 179.
Although if you know that your business is going to take a couple of years to break even and generate profit, you may want to depreciate these expenses over the years to offset the profits in later years.
2. Business Travel, Meals and Entertainment
If you make a trip for business purposes, travel costs including Airline tickets, Hotel, Taxi, Meals, Shipping business materials, Laundry, Telephone calls, etc are fully deductible expenses.
How about combining business travel with pleasure? It is allowed, as long as the primary purpose of the trip is for Business, although there are strict guidelines on this.
3. Charitable Contributions
This is a great deduction as you can feel good about donating to your favorite cause and save on Taxes at the same time. Charitable contributions are treated slightly different depending on the type of your business entity. If your business is a partnership, a limited liability company, or an S corporation, your business can make a charitable contribution and pass the deduction through to you, to claim on your individual tax return. In case of regular (C) corporations charitable contributions are deducted on the corporation's tax return. There are some important rules for charitable contribution deductions:
- Only contributions to charities listed as ‘qualified organizations' by the IRS are deductible and contributions more than $250 require a written acknowledgement from the qualified charitable organization.
- You can deduct donations of assets such as Property or Equipment at their fair market value. Although a fully depreciated (written off) asset cannot be deducted as a contribution even if it is works well.
- You cannot deduct the value of time or services that you volunteer.
- You cannot deduct the part of a contribution that benefits you. If you receive a gift in exchange for a charitable donation or if the contribution made is in lieu of certain benefits, you can deduct only the amount of the contribution that exceeds the value of the gift. If you are making a large donation, make sure you check with your tax accountant first.
4. Bad Debts
Bad Debts hurt the most. Especially when you have worked so hard to satisfy all of the customer's requirements and they do not pay you. The good news is that certain bad debts are tax deductible.
If your business sells goods, you can deduct the costs of any goods sold, but not paid for, as an ordinary business expense. However, you cannot deduct any lost profits you would have collected from the sale. If your business provides services, no deduction is allowed for the time you devoted to the customer who doesn't pay. For example if you provide medical services and the patient does not pay, you cannot deduct the cost of the time you spent in treating the patient. The rationale is that if businesses were able to deduct unpaid services, it would be quiet easy to inflate the unpaid bills and claim large bad debt deductions making it hard for IRS to catch the fraud.
5. Home Office Deduction
For many years taking a Home Office Tax Deduction was considered a red flag, inviting the IRS to Audit your tax return. But that may no longer be the case, with more and more businesses and individuals taking advantage of working from home and maintaining a healthy work-life balance. IRS is well aware of the rising trend in working from home office. As long as you use the ‘Home Office' as IRS defines it. This one deduction alone can save you several thousand dollars in tax.
For example if you are an independent Information Technology contractor and mostly work out of your client's office, however you use part of your home to manage the administrative aspects of your profession or business, you may qualify to take the Home Office deduction. IRS has specific rules to qualify to deduct expenses for home office. I want to share the two most basic qualifiers.
Trade or Business Use: First of all you must be engaged in a trade or business to take advantage of this deduction. Employees can also take Home Office Deduction in certain situations. You cannot take a deduction if you are only using it for a profit seeking activity that is not your trade or business. For example you use part of your home to review investment journals and carry out your personal investments. You are not a broker or a dealer, so your activities may not be considered part of a trade or business and hence you cannot take home office deduction.
Regular and Exclusive Use: Specific area of your home must be used exclusively and regularly for your business or trade. You don't need a permanent partition to mark the space. For example you use part of your basement exclusively to perform administrative and management tasks of your business, review business paperwork, teleconference or meet with clients etc. on a regular basis and not just once in a while. Your family does not use the same space for recreation or other non-business purposes. You may be able to claim costs associated with part of the basement as a deduction for use as home office, provided you qualify on other rules.
There are other rules and definitions that IRS uses to qualify the Home Office deductions. If you are planning to take advantage of this deduction, I strongly recommend you visit with us. Which leads me to....
I strongly encourage you to visit with us this month to talk about your taxes. A chance for us to visit and discuss your current tax situation. We can estimate your 2010 tax liability and make recommendations now, while there is still time to take action. Please take a minute to call our office today to make an appointment. Set aside 30 minutes. Plan on saving money.
Our 29th version of the same story.
Sally Smith, was a smart businessperson, she knew the basics of year-end tax planning.
1. Postpone income to next year.
2. Pay as many expenses as possible this year.
3. Keep inventory level low.
4. If you are going to make a capital investment, do so before the end of the year.
5. Double check for missing deductions.
6. Invest in an IRA for similar type account.
Sally owns a retail store and faced the year end with her eyes wide open. Sally knew that a few strategies would pay big dividends on April 15. Here is what she did to reduce her tax liability:
Since Sally was operating her business on a cash basis and relied upon cash sales through her cash register, she did not have the opportunity to postpone much income. She has established a policy for many years to close her books on December 28, which gave her opportunity to defer three days of sales to next year.
Sally then reviewed her bills. She started to write out checks for her expenses. She wrote checks for all expenses due, even if some expenses were due in January. She dated her checks for December 28, 2010 to be sure that the expenses were recorded for this year on December's bookkeeping. Her checks written totaled to almost $10,000. Her one simple strategy, accelerating expenses meant that Sally saved over $4,000.00 in income tax this year.
Since you pay tax on your inventory at the end of the year, Sally knew that reducing her inventory to the lowest amount possible was important for her. First, she decided to review her inventory to see if she had things that have been gathering dust. She found items that in fact had been sitting around for more than three years. She decided to mark those items down and immediately started an inventory reduction sale for those items. She knew that the value of her inventory was based upon her costs of the items, not the selling price. She also knew that items that were partially used or supplies not for resale did not count as part of her inventory.
Sally had been debating whether to purchase a new computer for her business. The local computer store was offering a "six-months same as cash" financing offer for the purchase of new computers. Sally decided to purchase the computer now, electing to take advantage of the special financing offer. She knew that she could deduct the full purchase price of the computer on her tax return, even though she did not pay for it right away. When you purchase something using a credit card or borrow the money, as Sally did, you get to deduct the amount when you purchase the item. The $3,000 computer saved Sally $1,200 in income tax.
As part of her year-end review Sally took a minute to see if perhaps she has recorded all her business expenses as part of her monthly record keeping. She knew that the credit card that she had been using exclusively for business had some interest payments that were not included. She made a note to record her year-end statement from her credit card company to make sure that it was included as interest paid on her year-end documents to her accountant. In addition, she decided to review her automobile mileage and other receipts for expenses that she might not have had for her business and had a chance to record in her monthly record keeping.
Sally also knew that she had time to make her annual IRA contribution until April 15 of next year. She decided not to make it till next April. She also made a note to talk to us about Roth IRA accounts and analyze the different options available to her. One of her options was a self-employed Pension Plan commonly called a SEP. IRA's. SEP. IRA's do not have to be opened or funded until the due date of your return. That means that Sally doesn't have to open or make a contribution to a SEP. IRA for the 2010 tax year until April 15, 2010. She can also contribute a larger amount to her SEP. IRA than she could to her regular IRA. However, she was reluctant to open one because she also knew that she would have to contribute an amount to her full time employees. She made a note to ask her accountant what that contribution would be and what her resultant tax savings would equal. She also thought her accountant might have ideas on how to "cushion" the employee's contribution issue.
Sally knew that her year end review of her tax situation saved her almost $7,000 this year. She made a note to review her year end information before we prepared her tax return in 2010.
SAVE TAXES...REMEMBER BEFORE JANUARY 1, 2011
1) Postpone income to next year.
2) Pay as many expenses as possible this year, even if you do not send the checks off till January, be sure to write the checks for the expenses.
3) Keep inventory at a low level.
4) If you are going to make a capital investment, do so before the end of the year.
5) Double check for missing deductions.
6) Invest in an IRA or similar type account.
Please note our office will be closing or have early closing times for the following days:
Friday, December 24, 2010 in observance of Christmas Eve.
Saturday, December 25, 2010 in observance of Christmas.
Friday, December 31, 2010 at 1:00 p.m.
Saturday, January 1, 2011 in observance of New Years Day.
Extended tax season hours start January 19, 2011. We will be open every day until April 18, 2011. IRS has extended the due date for your taxes this year because of the District of Columbia Emancipation Day holiday falling on April 15, 2011.
We are awaiting word from the IRS on the exact amount of taxes they will be required to withhold from your employee paychecks in 2011. The tables generally are released in mid-November, but they are being held this year because of the unresolved issue of the Bush tax cuts. Experts have been predicting that at some point the IRS will have to assume the Bush tax cuts expire and issue new tables, because payroll processing departments require two to three weeks on average to program their computers with new data.
But IRS doesn't seem hurried.
"We understand that businesses and payroll processors need at least a few weeks to implement new withholding tables, and we are hopeful that Democrats and Republicans in Congress will work together to extend tax cuts for 98% of American families and provide the middle class the tax relief they need in these tough economic times," said Treasury spokesman Sandra Salstrom.
Once again, thank you for choosing me as your tax guy. If you have any questions about your tax and/or financial situation, please don't hesitate to contact me. I look forward to hearing from you.
My very best wishes for a happy holiday season and for health and happiness in 2011.
Sunday, November 14, 2010
Six things you can do right now to reduce your taxes
1. Increase your withholding. About.com suggested this easy tip to get you started. More money will be taken out of your paycheck, but you will get a bigger refund when you file your taxes. It's like forcing you to save.
2. Sell losing investments. Personal finance magazine Kiplinger says that capital losses are first used to offset capital gains, and then up to $3,000 of the net loss can be deducted against income, such as your salary. Any excess loss is carried forward to future years, the magazine says.
3. Increase your contributions to your 401(k) or IRA retirement investment plans. You can start now and keep building for the the rest of the year if you’re not doing so already. Saving for retirement is one of the easiest ways to bring down your taxable income.
4. See if you can deduct any medical costs. You have to itemize to qualify for this and expenses have to be more than 7.5 percent of your adjusted gross income. If you have a lot of doctors' visits and medical procedures it may be worth checking out. Need surgery in near future? Try to get it in before the end of the year. Check out Kiplinger for more information.
5. It’s too late to qualify for a tax credit for buying a new home. But you can get some money for buying an energy efficient appliance. And that’s a lot cheaper than buying a house. Tax credits are up to $1,500. Check out this site for more details.
6. Give to charity. Give to your favorite non-profit by Dec. 31 and you can deduct it from your taxes.
2. Sell losing investments. Personal finance magazine Kiplinger says that capital losses are first used to offset capital gains, and then up to $3,000 of the net loss can be deducted against income, such as your salary. Any excess loss is carried forward to future years, the magazine says.
3. Increase your contributions to your 401(k) or IRA retirement investment plans. You can start now and keep building for the the rest of the year if you’re not doing so already. Saving for retirement is one of the easiest ways to bring down your taxable income.
4. See if you can deduct any medical costs. You have to itemize to qualify for this and expenses have to be more than 7.5 percent of your adjusted gross income. If you have a lot of doctors' visits and medical procedures it may be worth checking out. Need surgery in near future? Try to get it in before the end of the year. Check out Kiplinger for more information.
5. It’s too late to qualify for a tax credit for buying a new home. But you can get some money for buying an energy efficient appliance. And that’s a lot cheaper than buying a house. Tax credits are up to $1,500. Check out this site for more details.
6. Give to charity. Give to your favorite non-profit by Dec. 31 and you can deduct it from your taxes.
A discussion about the new health care acts.
On March 23, President Obama signed the “Patient Protection and Affordable Care
Act.” On March 30, he signed the companion “Health Care and Education
Reconciliation Act of 2010.” Together, the two acts represent the biggest change in
how we finance healthcare since Medicare was created in 1965. They also include
some of the most significant tax changes in a generation.
Healthcare reform has been an intensely political process. Not one single
Republican voted for the law in either the House or the Senate. And polls show that
Americans are overwhelmingly confused and concerned. They don’t know just what
the new law does, and they don’t know how much it’s going to cost. That’s no
surprise considering the actual texts of the bills runs over 2,500 pages. There’s
probably not a single person on the planet who understands it all.
I’m not here to debate the merits of the bill – it’s going to take a long time before
historians can make that call. But I can help by explaining some of the most
important changes – as well as how Washington plans to pay for it all.
Let’s start with the changes that go into effect this year.
On the tax side, small businesses with up to 25 employees earning $40,000/year or
less will get a tax credit for 35% of the cost of providing health benefits to their
employees.
And who can overlook a new 10% excise tax on indoor tanning services that use
certain ultraviolet lights? That rule takes effect on July 1, just as outdoor tanning
season goes into full swing.
On the health care side, insurers companies can’t deny coverage to children for preexisting
conditions. They have to let children stay on their parents’ plans through
age 26. They can’t set lifetime limits on plan coverage.
Finally, Medicare Part D recipients who enter the so-called “donut hole” will get
rebates and discounts on prescription drug coverage. For those of you who don’t
know, the “donut hole” is a gap in prescription coverage where the government pays
nothing and beneficiaries pay the full cost of drugs themselves.
Starting in 2011, employers will have to report the value of health benefits they
provide employees on Form W2. that doesn’t mean benefits will be taxable – but
employers will face penalties if they don’t provide that information.
On the health care side, Medicare Part D recipients entering the “donut hole” qualify
for discounts rather than rebates on prescription drugs.
2013 is a big year for tax changes:
Right now, medical and dental expenses are deductible if they exceed 7.5% of
your “adjusted gross income,” or AGI. Unless, of course, you’re subject to
Alternative Minimum Tax, in which case they have to exceed 10% of your AGI.
Starting in 2013, that floor rises to 10% of AGI for everyone. Unless you or your
spouse are 65 or older – in which case it stays at 7.5% of AGI. Unless, of course,
you’re 65 and subject to AMT. Are we all clear here?
If you participate in a healthcare flexible spending account at work, your
contributions will be capped at $2,500/year, with no contributions for over-thecounter
medications.
If your earned income is above $200,000 – or $250,000 if you file jointly – you’ll
pay an extra 0.8% Medicare tax on earned income above those amounts. Remember,
the Obama administration has already proposed extra Social Security taxes in the 24%
range on this income. If you’re in the top 39.6% marginal tax bracket that we
can expect to see in 2011, these extra taxes could push your actual marginal rate
well above 40%.
Finally, you’ll pay a 3.8% “Unearned Income Medicare Contribution” on
investment income if your AGI is above those same thresholds. “Investment
income” is defined as interest, dividends, capital gains, rents, royalties, and
annuities.
2014 is another big year on the tax side. Employers with more than 50 employees
will have to offer health benefits or pay a penalty of up to $2,000 per employee.
Generally, employers will have to pick up at least 50% of premium costs. There’s
also a 90-day limit on waiting periods before offering new employees coverage.
Most individuals who aren’t covered through their employer will have to maintain
“minimum essential coverage” or pay individual penalties. We’ll talk about that
more in a bit.
2014 is also the year when the biggest health care changes go into effect.
Specifically:
Insurance companies can’t deny coverage to anyone for pre-existing conditions.
Plans can’t set annual limits on coverage. (Remember, the ban on lifetime limits
takes effect in 2010.)
States can expand Medicaid eligibility to non-elderly, non-pregnant individuals
with incomes up to 133% of the federal poverty level. For 2014-2016, the federal
government will pick up 100% of those costs.
Finally, the law requires states to establish insurance “exchanges” where
individuals and small businesses can comparison-shop for coverage.
Finally, in 2018, the law imposes a 40% excise tax on “Cadillac plans” costing more
than $10,200 per year for singles or $27,500 per year for families. The goal here is
simply to rein in costs. But this provision doesn’t take effect until 2018 – which
many experts think means it won’t ever take effect at all.
Let’s talk a little more about the one of the most controversial parts of the law – the
so-called “individual mandate.” The law says that by 2014, all Americans have to
maintain “minimum essential coverage.” If not, they face a penalty starting at $95
or 1% of income in 2014, and rising to $695 or 2.5% of income in 2016. After 2016,
the $695 amount is indexed for inflation.
Obviously, “universal coverage” is one of the new law’s primary goals. But there’s
another reason to make sure everyone plays the insurance game. Right now, plenty
of healthy people who can afford coverage choose not to buy it. They’re
comfortable assuming the risk of not having coverage. But their decision not to buy
makes coverage more expensive for the rest of us, because we can’t share costs with
the ones who choose not to buy.
That’s a pretty big step. The government has never required us to buy commercial
products or services before. If you drive a car, most states mandate you buy car
insurance – but nobody says you have to buy a car.
Of course, there are plenty of exceptions to the rule. If your taxable income is under
the federal poverty line, or the cost of coverage is more than 8% of your household
income, you don’t have to pay. And if your taxable income is less than four times
the federal poverty limit, you’ll get tax credits to help pay for coverage.
But here’s the weirdest part of the new law. There’s no way for the government to
enforce those penalties. In fact, here’s what the congressional Joint Committee on
Taxation had to say in their explanation of the bill:
“The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.”
That means no interest. No liens. No levies. No jail time. It will be interesting to see
how many Americans actually pay if there’s no real consequence for not doing it.
Legislation this complex and far-reaching is bound to attract opposition. And in this
case, the opposition isn’t folding, even though it’s now the law of the land.
Many prominent Republicans have vowed to overturn the law. They don’t have the
votes to do it now, and they aren’t likely to get 67 votes necessary to sustain a
certain Presidential veto even if they do overturn it in the Senate. But most experts
expect the Democrats to lose congressional seats in this year’s election, and if they
lose enough, the Republicans can certainly make political hay.
State governments have also stepped up to oppose the new law. Many states are
afraid it pushes too many costs onto them, especially increased Medicaid costs. A
group of 11 state attorneys general have argued that the new law violates states’
rights, and plan to join together to block enforcement.
Politicians in 36 states have introduced and in two cases even passed legislation that
would limit or oppose various provisions of the law. For example, Virginia has
passed a law making it illegal for the federal government to require Americans to
buy health insurance. You can scoff at laws like that – but they can tie up
enforcement in red tape and court challenges.
Opponents also object that the “individual mandate” is unconstitutional. The
argument here is that while Congress can certainly regulate economic activity,
there’s no authority to penalize inactivity – specifically, not buying insurance.
There’s no telling how these challenges will play out. Right now, the “smart money”
says there aren’t five votes in the Supreme Court to repeal such a broadly political
decision.
So – where do we go from here?
There’s no doubt that what we’ve seen is just a first step in an ongoing process. You
can count on us to follow the challenges we just discussed, as well as update you as
more details become available.
I also want to remind you that there are already concepts and strategies in place to
help you cut health care costs for yourself and your business. Medical expense
reimbursement plans may let you write off family medical bills as business
expenses, avoiding the floor on itemized deductions. Health savings accounts also
let you finance deductibles and out-of-pocket expenses with pre-tax dollars.
So please, call us with your questions. If we can’t answer you right away, we’ll find
an answer for you. And don’t panic over changes like the individual mandate or tax
on “Cadillac plans.” We’ve got lots of time to see how health care reform really
shakes out.
Act.” On March 30, he signed the companion “Health Care and Education
Reconciliation Act of 2010.” Together, the two acts represent the biggest change in
how we finance healthcare since Medicare was created in 1965. They also include
some of the most significant tax changes in a generation.
Healthcare reform has been an intensely political process. Not one single
Republican voted for the law in either the House or the Senate. And polls show that
Americans are overwhelmingly confused and concerned. They don’t know just what
the new law does, and they don’t know how much it’s going to cost. That’s no
surprise considering the actual texts of the bills runs over 2,500 pages. There’s
probably not a single person on the planet who understands it all.
I’m not here to debate the merits of the bill – it’s going to take a long time before
historians can make that call. But I can help by explaining some of the most
important changes – as well as how Washington plans to pay for it all.
Let’s start with the changes that go into effect this year.
On the tax side, small businesses with up to 25 employees earning $40,000/year or
less will get a tax credit for 35% of the cost of providing health benefits to their
employees.
And who can overlook a new 10% excise tax on indoor tanning services that use
certain ultraviolet lights? That rule takes effect on July 1, just as outdoor tanning
season goes into full swing.
On the health care side, insurers companies can’t deny coverage to children for preexisting
conditions. They have to let children stay on their parents’ plans through
age 26. They can’t set lifetime limits on plan coverage.
Finally, Medicare Part D recipients who enter the so-called “donut hole” will get
rebates and discounts on prescription drug coverage. For those of you who don’t
know, the “donut hole” is a gap in prescription coverage where the government pays
nothing and beneficiaries pay the full cost of drugs themselves.
Starting in 2011, employers will have to report the value of health benefits they
provide employees on Form W2. that doesn’t mean benefits will be taxable – but
employers will face penalties if they don’t provide that information.
On the health care side, Medicare Part D recipients entering the “donut hole” qualify
for discounts rather than rebates on prescription drugs.
2013 is a big year for tax changes:
Right now, medical and dental expenses are deductible if they exceed 7.5% of
your “adjusted gross income,” or AGI. Unless, of course, you’re subject to
Alternative Minimum Tax, in which case they have to exceed 10% of your AGI.
Starting in 2013, that floor rises to 10% of AGI for everyone. Unless you or your
spouse are 65 or older – in which case it stays at 7.5% of AGI. Unless, of course,
you’re 65 and subject to AMT. Are we all clear here?
If you participate in a healthcare flexible spending account at work, your
contributions will be capped at $2,500/year, with no contributions for over-thecounter
medications.
If your earned income is above $200,000 – or $250,000 if you file jointly – you’ll
pay an extra 0.8% Medicare tax on earned income above those amounts. Remember,
the Obama administration has already proposed extra Social Security taxes in the 24%
range on this income. If you’re in the top 39.6% marginal tax bracket that we
can expect to see in 2011, these extra taxes could push your actual marginal rate
well above 40%.
Finally, you’ll pay a 3.8% “Unearned Income Medicare Contribution” on
investment income if your AGI is above those same thresholds. “Investment
income” is defined as interest, dividends, capital gains, rents, royalties, and
annuities.
2014 is another big year on the tax side. Employers with more than 50 employees
will have to offer health benefits or pay a penalty of up to $2,000 per employee.
Generally, employers will have to pick up at least 50% of premium costs. There’s
also a 90-day limit on waiting periods before offering new employees coverage.
Most individuals who aren’t covered through their employer will have to maintain
“minimum essential coverage” or pay individual penalties. We’ll talk about that
more in a bit.
2014 is also the year when the biggest health care changes go into effect.
Specifically:
Insurance companies can’t deny coverage to anyone for pre-existing conditions.
Plans can’t set annual limits on coverage. (Remember, the ban on lifetime limits
takes effect in 2010.)
States can expand Medicaid eligibility to non-elderly, non-pregnant individuals
with incomes up to 133% of the federal poverty level. For 2014-2016, the federal
government will pick up 100% of those costs.
Finally, the law requires states to establish insurance “exchanges” where
individuals and small businesses can comparison-shop for coverage.
Finally, in 2018, the law imposes a 40% excise tax on “Cadillac plans” costing more
than $10,200 per year for singles or $27,500 per year for families. The goal here is
simply to rein in costs. But this provision doesn’t take effect until 2018 – which
many experts think means it won’t ever take effect at all.
Let’s talk a little more about the one of the most controversial parts of the law – the
so-called “individual mandate.” The law says that by 2014, all Americans have to
maintain “minimum essential coverage.” If not, they face a penalty starting at $95
or 1% of income in 2014, and rising to $695 or 2.5% of income in 2016. After 2016,
the $695 amount is indexed for inflation.
Obviously, “universal coverage” is one of the new law’s primary goals. But there’s
another reason to make sure everyone plays the insurance game. Right now, plenty
of healthy people who can afford coverage choose not to buy it. They’re
comfortable assuming the risk of not having coverage. But their decision not to buy
makes coverage more expensive for the rest of us, because we can’t share costs with
the ones who choose not to buy.
That’s a pretty big step. The government has never required us to buy commercial
products or services before. If you drive a car, most states mandate you buy car
insurance – but nobody says you have to buy a car.
Of course, there are plenty of exceptions to the rule. If your taxable income is under
the federal poverty line, or the cost of coverage is more than 8% of your household
income, you don’t have to pay. And if your taxable income is less than four times
the federal poverty limit, you’ll get tax credits to help pay for coverage.
But here’s the weirdest part of the new law. There’s no way for the government to
enforce those penalties. In fact, here’s what the congressional Joint Committee on
Taxation had to say in their explanation of the bill:
“The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.”
That means no interest. No liens. No levies. No jail time. It will be interesting to see
how many Americans actually pay if there’s no real consequence for not doing it.
Legislation this complex and far-reaching is bound to attract opposition. And in this
case, the opposition isn’t folding, even though it’s now the law of the land.
Many prominent Republicans have vowed to overturn the law. They don’t have the
votes to do it now, and they aren’t likely to get 67 votes necessary to sustain a
certain Presidential veto even if they do overturn it in the Senate. But most experts
expect the Democrats to lose congressional seats in this year’s election, and if they
lose enough, the Republicans can certainly make political hay.
State governments have also stepped up to oppose the new law. Many states are
afraid it pushes too many costs onto them, especially increased Medicaid costs. A
group of 11 state attorneys general have argued that the new law violates states’
rights, and plan to join together to block enforcement.
Politicians in 36 states have introduced and in two cases even passed legislation that
would limit or oppose various provisions of the law. For example, Virginia has
passed a law making it illegal for the federal government to require Americans to
buy health insurance. You can scoff at laws like that – but they can tie up
enforcement in red tape and court challenges.
Opponents also object that the “individual mandate” is unconstitutional. The
argument here is that while Congress can certainly regulate economic activity,
there’s no authority to penalize inactivity – specifically, not buying insurance.
There’s no telling how these challenges will play out. Right now, the “smart money”
says there aren’t five votes in the Supreme Court to repeal such a broadly political
decision.
So – where do we go from here?
There’s no doubt that what we’ve seen is just a first step in an ongoing process. You
can count on us to follow the challenges we just discussed, as well as update you as
more details become available.
I also want to remind you that there are already concepts and strategies in place to
help you cut health care costs for yourself and your business. Medical expense
reimbursement plans may let you write off family medical bills as business
expenses, avoiding the floor on itemized deductions. Health savings accounts also
let you finance deductibles and out-of-pocket expenses with pre-tax dollars.
So please, call us with your questions. If we can’t answer you right away, we’ll find
an answer for you. And don’t panic over changes like the individual mandate or tax
on “Cadillac plans.” We’ve got lots of time to see how health care reform really
shakes out.
Thursday, November 4, 2010
November 4, 2010 Client Newsletter
Welcome to the 21st century.
Later on this month we will be enrolling all of the clients who we haven’t previously enrolled, in the Electronic Federal Tax Payment System or EFTS. Starting January 2011, banks will no longer will accept the tax deposit coupons. All payments made for you and your employee federal and FICA withholding will have to be made electronically. In addition, all submissions of you and your employees W2 forms will be submitted by us electronically in February 2011. The state of Illinois will continue to process mailed in check payments.
Later this month my colleague Lori will be calling you to gather the information needed to enroll in EFTS. Specifically we will need your bank routing number and account number. After we process your enrollment you will be mailed a pin number by IRS. Please forward us the pin number mailing after you receive it.
After we enroll you this month, we will mail a quick guide about what the changes mean to you and how we will handle the new payments for you. But for now please remember that with the exception of scheduling a debit from your checking account...no more trips to rushing to your bank to make the deadline...nothing has changed.
One of the ideas I picked up in August at the IRS Nationwide tax form was the importance of meeting with you in December rather than next April What a brilliant idea. Go belly to belly with the clients in December, when we still have a chance to save money.
Tax planning made easy. Lori will call you in late November to schedule a meeting.
S corporation compliance. We talked earlier about the importance of keeping minutes and enclosed is a boiler plate standard by law form that is necessary to meet virtually of the compliance requirements for small business corporations. Fill in the blanks, sign it, and file it away. That is all you need to do.
I had to call a client who works at Springfield based auto dealer today. No one answers the phone. I mean no one. An automated message says that you have reached the dealership, and the receptionist, I mean the receptionist cannot answer your call. The message then instructs you to hold until the receptionist is free to answer your call. I waited on hold five minutes to talk to the receptionist only to be transferred to my client’s voice mail. Interesting way to handle incoming telephone calls.
In fact if there was a competition for worst use of an automated telephone attendant ever, they have to be in the running for the top prize.
This phone call inspired me to write about the wrong and right ways to handle your business telephone calls as well as announcing our about to be upgraded telephone system. As it turns out the automated telephone attendant has permeated business is considered acceptable. Even though it is universally hated. The live person answering the phone is very much what our customers want. So do your customers. Despite what the experts say, it really doesn’t matter how you answer the phone today.
We once ventured into the dark side for our Planet Travel Agency. The automated telephone attendant proved to be frustrating for our customers as well as for ourselves. Rather than increase customer contacts it did nothing but cause more hang ups. Never again.
However, we have recognized that we have outgrown our existing telephone system. So pardon our dust as we install a new system next month. One still features a real live person answering the call during business hours.
Lame duck sessions produce interesting results. Stay tuned to find out whether your 2011 tax liability will sky rocket or remain the same. It is our understanding that gridlock means taxes are going up. Will see if the experts predictions come true.
Di you know for many years, Nordstrom's employee handbook consisted of a single 5"×8" card that had only 75 words on it:
“Welcome to Nordstrom. We're glad to have you with our Company. Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.
Nordstrom Rules: Rule #1: Use best judgment in all situations. There will be no additional rules.
Please feel free to ask your department manager, store manager, or division general manager any question at any time.” Stunningly beautiful in its simplicity and efficacy. ‘
Our office will be closed Thursday, November 11, 2010 for Veteran’s Day, Thursday, November 25, 2010 and will be open for payroll only on Black Friday .
Later on this month we will be enrolling all of the clients who we haven’t previously enrolled, in the Electronic Federal Tax Payment System or EFTS. Starting January 2011, banks will no longer will accept the tax deposit coupons. All payments made for you and your employee federal and FICA withholding will have to be made electronically. In addition, all submissions of you and your employees W2 forms will be submitted by us electronically in February 2011. The state of Illinois will continue to process mailed in check payments.
Later this month my colleague Lori will be calling you to gather the information needed to enroll in EFTS. Specifically we will need your bank routing number and account number. After we process your enrollment you will be mailed a pin number by IRS. Please forward us the pin number mailing after you receive it.
After we enroll you this month, we will mail a quick guide about what the changes mean to you and how we will handle the new payments for you. But for now please remember that with the exception of scheduling a debit from your checking account...no more trips to rushing to your bank to make the deadline...nothing has changed.
One of the ideas I picked up in August at the IRS Nationwide tax form was the importance of meeting with you in December rather than next April What a brilliant idea. Go belly to belly with the clients in December, when we still have a chance to save money.
Tax planning made easy. Lori will call you in late November to schedule a meeting.
S corporation compliance. We talked earlier about the importance of keeping minutes and enclosed is a boiler plate standard by law form that is necessary to meet virtually of the compliance requirements for small business corporations. Fill in the blanks, sign it, and file it away. That is all you need to do.
I had to call a client who works at Springfield based auto dealer today. No one answers the phone. I mean no one. An automated message says that you have reached the dealership, and the receptionist, I mean the receptionist cannot answer your call. The message then instructs you to hold until the receptionist is free to answer your call. I waited on hold five minutes to talk to the receptionist only to be transferred to my client’s voice mail. Interesting way to handle incoming telephone calls.
In fact if there was a competition for worst use of an automated telephone attendant ever, they have to be in the running for the top prize.
This phone call inspired me to write about the wrong and right ways to handle your business telephone calls as well as announcing our about to be upgraded telephone system. As it turns out the automated telephone attendant has permeated business is considered acceptable. Even though it is universally hated. The live person answering the phone is very much what our customers want. So do your customers. Despite what the experts say, it really doesn’t matter how you answer the phone today.
We once ventured into the dark side for our Planet Travel Agency. The automated telephone attendant proved to be frustrating for our customers as well as for ourselves. Rather than increase customer contacts it did nothing but cause more hang ups. Never again.
However, we have recognized that we have outgrown our existing telephone system. So pardon our dust as we install a new system next month. One still features a real live person answering the call during business hours.
Lame duck sessions produce interesting results. Stay tuned to find out whether your 2011 tax liability will sky rocket or remain the same. It is our understanding that gridlock means taxes are going up. Will see if the experts predictions come true.
Di you know for many years, Nordstrom's employee handbook consisted of a single 5"×8" card that had only 75 words on it:
“Welcome to Nordstrom. We're glad to have you with our Company. Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.
Nordstrom Rules: Rule #1: Use best judgment in all situations. There will be no additional rules.
Please feel free to ask your department manager, store manager, or division general manager any question at any time.” Stunningly beautiful in its simplicity and efficacy. ‘
Our office will be closed Thursday, November 11, 2010 for Veteran’s Day, Thursday, November 25, 2010 and will be open for payroll only on Black Friday .
Thoughts about the election
It's finally official. The Republicans have taken over the House of Representatives and clawed away much of the Democrats' edge in the Senate. Here are some thoughts on what we can expect from the new Congress:
- The consensus around the office is that we are very skeptical that Congress would get their act together and extend the 2001 and 2003 Bush tax cuts — even just for those earning under $250,000 — in the lame duck session of Congress convening on November 13. But White House Press Secretary Robert Gibbs announced just today that the administration is open to extending the cuts for all.
- Word on the street suggests we may see a one-year extension for everyone, then fight it all out again with the new Congress in 2011. However, the Republicans may wait until the new Congress convenes in January to address the issue. In that case, clients can expect to see less take-home pay as the IRS adjusts withholding tables to reflect the new, higher rates.
- If Congress reaches the consensus necessary to resolve the Bush tax cuts question, they'll also manage to "patch" the AMT to avoid soaking millions of unsuspecting Americans. If, for some reason, we don't see that patch, plan on us bringing word to you as soon as possible, to avoid any ugly April 15 surprises!
- The new Republican House makes it unlikely that we'll see the estate tax roar back with a vengeance like it's scheduled to on January 1. But Congress isn't going to come up with a compromise imposing it retroactively for 2010, either. At this point, the smart money is betting on a compromise with a unified credit in the neighborhood of $3.5-5.0 million and rate of 45%.
- Republican leaders insist they plan to repeal The Legislation That Washington Laughingly Refers to as Healthcare Reform. But even L. Ron Hubbard can't imagine an alternate universe that gives them the votes they need to overcome a Senate Democratic filibuster or presidential veto. However, prospects are good that they can cherry-pick some of their least-favorite provisions — specifically, the requirement that all business file 1099s for all purchases over $600. Some clients may be breathing sighs of relief that the Republican victory will keep taxes low. But that view ignores the reality that deficits are still going up — and taxes will ultimately have to follow. This week's elections may have postponed that day of reckoning, but they haven't eliminated it. And even clients who'd rather bury their heads in the sand than recognize this economic inevitability should realize that continued gridlock means uncertainty — and even mere uncertainty makes us even more important to you. From Tax Coach Briefs 11-04-10
Burning Down The House
Back in 1984, the band Talking Heads produced their Top 10 hit, "Burning Down the House." But did you know that you might get a tax deduction for burning down your own house?
Imagine you're looking to build your dream house. You've found the perfect lot in the perfect location. The only problem is, there's already a house on the lot – an old house, not worth renovating, that you'd like to get rid of as fast as possible.
Sure, you can hire a contractor to come in and tear it down the old-fashioned way. But what if you're looking for something more dramatic? And what if you want a way to demolish your tax bill along with the old house?
Many taxpayers have claimed fat deductions for donating the house (but not the land) to the local fire department, to burn down for practice. They claim the value of the house, as determined by the local auditor, as a charitable gift. They can deduct up to 50% of their "adjusted gross income" (AGI) the year they burn down the house. If the value of the house is more than 50% of their AGI, they can carry forward the rest of the gift up to 15 years.
Maybe they even get to invite the new neighbors to a marshmallow roast!
Of course, there are still some rules to follow.
Back in 2004, former Ohio State quarterback and ESPN commentator Kirk Herbstreit claimed a $330,000 deduction for donating his home to the Upper Arlington fire department. Firefighters used it to simulate search-and-rescue drills, while police officers used it to simulate hostage rescues and similar situations. Then the fire department burned it to the ground, and Herbstreit rebuilt on the lot.
This was hardly an uncommon arrangement. Since 1988, the city has burned 28 donated homes.
Earlier this year, however, the IRS disallowed the deduction, arguing that Herbstreit hadn't donated his "entire interest" in the home. Herbstriet paid the tax and took his case to Tax Court. This isn't the first time the issue has reached the court. Back in 1973, the court ruled that a homeowner who donated a building to the local fire department "benefited only incidentally" from the demolition and was entitled to take the deduction. But in Herbstreit's case, the court hasn't ruled yet.
You're probably not looking to claim tax benefits from burning down your house. But Herbstriet's case shows just how valuable the right tax-planning strategy can be – even in some pretty unique circumstances! So be sure to call us before you make any major charitable gifts. We can help you make sure you get all the benefit you deserve.
Imagine you're looking to build your dream house. You've found the perfect lot in the perfect location. The only problem is, there's already a house on the lot – an old house, not worth renovating, that you'd like to get rid of as fast as possible.
Sure, you can hire a contractor to come in and tear it down the old-fashioned way. But what if you're looking for something more dramatic? And what if you want a way to demolish your tax bill along with the old house?
Many taxpayers have claimed fat deductions for donating the house (but not the land) to the local fire department, to burn down for practice. They claim the value of the house, as determined by the local auditor, as a charitable gift. They can deduct up to 50% of their "adjusted gross income" (AGI) the year they burn down the house. If the value of the house is more than 50% of their AGI, they can carry forward the rest of the gift up to 15 years.
Maybe they even get to invite the new neighbors to a marshmallow roast!
Of course, there are still some rules to follow.
Back in 2004, former Ohio State quarterback and ESPN commentator Kirk Herbstreit claimed a $330,000 deduction for donating his home to the Upper Arlington fire department. Firefighters used it to simulate search-and-rescue drills, while police officers used it to simulate hostage rescues and similar situations. Then the fire department burned it to the ground, and Herbstreit rebuilt on the lot.
This was hardly an uncommon arrangement. Since 1988, the city has burned 28 donated homes.
Earlier this year, however, the IRS disallowed the deduction, arguing that Herbstreit hadn't donated his "entire interest" in the home. Herbstriet paid the tax and took his case to Tax Court. This isn't the first time the issue has reached the court. Back in 1973, the court ruled that a homeowner who donated a building to the local fire department "benefited only incidentally" from the demolition and was entitled to take the deduction. But in Herbstreit's case, the court hasn't ruled yet.
You're probably not looking to claim tax benefits from burning down your house. But Herbstriet's case shows just how valuable the right tax-planning strategy can be – even in some pretty unique circumstances! So be sure to call us before you make any major charitable gifts. We can help you make sure you get all the benefit you deserve.
Friday, October 22, 2010
Tax Strategies for Somali Pirates
Ahoy, matey!
Today’s rough economy has cost the country millions of jobs. At the same time, news reports that Somali pirates have raked in seven- and eight-figure ransoms have many laid-off Wall Streeters contemplating a more traditional form of piracy. Here’s what you’ll need to know about taxes before you join the Somalis for a life of adventure:
If the Indian Navy or other coastal defense fleets destroy your ship, you can deduct the remaining basis as a capital loss (subject to the 10% floor on adjusted gross income).
Unfortunately, there’s no deduction for the cost of illegal expenses. This is a gray area, but we suggest you treat the cost of surplus Kalashnikovs, ammunition, and similar items as nondeductible expenses — just to be safe!
If you start feeling guilty about the ransom amounts you collect, relax! Most shippers carry insurance for such expenses — which, of course, they pay for with deductible dollars. And most of those policies are written with international giant AIG, which has received over $160 billion in government bailouts. So ultimately, it’s all your tax dollar anyway!
Meals and entertainment are ordinarily just 50% deductible. But — you can deduct 100% of the cost of meals that you furnish employees (and yourself, unless you’re taxed as a proprietor) for the convenience of the business and not for compensation. These include meals you furnish on-premises to let employees stay available for emergency calls, meals you furnish during short lunch periods (up to 45 minutes), meals you furnish where there aren’t adequate eating places near the workplace, and any meals you furnish to over 50% of employees. You can also deduct off-premises meals you provide as part of required business meetings (i.e., meals you serve onboard commandeered vessels).
Finally, remember that while piracy may be lucrative, it's still illegal. Be aware that while reporting your income protects you from bootlegger Al Capone’s fate, you may still be subject to federal and international regulatory and criminal sanctions.
Be sure you call us to help you make smart choices before you launch any business venture.
Today’s rough economy has cost the country millions of jobs. At the same time, news reports that Somali pirates have raked in seven- and eight-figure ransoms have many laid-off Wall Streeters contemplating a more traditional form of piracy. Here’s what you’ll need to know about taxes before you join the Somalis for a life of adventure:
- U.S. citizens are taxed on all income from whatever sources derived. This includes income from illegal activities, even if those activities are conducted abroad.
Cash ransoms are taxable as ordinary income. Noncash “treasure” and “booty” are taxed at fair market value. This is true even if the cash proceeds you generate from “fencing” ultimately total less than that initial fair market value.
If you pay foreign income tax on your booty, you may qualify for the Foreign Earned Income Exclusion.
Business Expenses
- Ships and other equipment you buy to conduct raids are capital assets. You’ll depreciate these over the applicable period. (Guns, grappling hooks, outboard motors for inflatable craft, and similar items may qualify for first-year expensing.)
If you start feeling guilty about the ransom amounts you collect, relax! Most shippers carry insurance for such expenses — which, of course, they pay for with deductible dollars. And most of those policies are written with international giant AIG, which has received over $160 billion in government bailouts. So ultimately, it’s all your tax dollar anyway!
Meals and entertainment are ordinarily just 50% deductible. But — you can deduct 100% of the cost of meals that you furnish employees (and yourself, unless you’re taxed as a proprietor) for the convenience of the business and not for compensation. These include meals you furnish on-premises to let employees stay available for emergency calls, meals you furnish during short lunch periods (up to 45 minutes), meals you furnish where there aren’t adequate eating places near the workplace, and any meals you furnish to over 50% of employees. You can also deduct off-premises meals you provide as part of required business meetings (i.e., meals you serve onboard commandeered vessels).
Finally, remember that while piracy may be lucrative, it's still illegal. Be aware that while reporting your income protects you from bootlegger Al Capone’s fate, you may still be subject to federal and international regulatory and criminal sanctions.
Be sure you call us to help you make smart choices before you launch any business venture.
Thursday, October 14, 2010
ATT Jails Blind Springfield Man
From the State Journal Register online:
Bob Simonson blew up. As a result, he is in the Sangamon County Jail in Springfield, facing a felony terrorizing charge. He is accused of threatening to blow up the AT&T call center in East Baton Rouge, La. However, finding his way to it would have been a challenge for Bob. He is blind.
Read more by clicking the above link.
Bob Simonson blew up. As a result, he is in the Sangamon County Jail in Springfield, facing a felony terrorizing charge. He is accused of threatening to blow up the AT&T call center in East Baton Rouge, La. However, finding his way to it would have been a challenge for Bob. He is blind.
Read more by clicking the above link.
Monday, October 4, 2010
September 30, 2010 Client Newsletter
Where to start?
Last week the IRS announced that they are going to get tougher on unpaid employment taxes.
What it means to us. The large number of in-business taxpayers who are pyramiding trust fund tax liabilities is a major compliance problem for the IRS. The collection of taxes through employment tax returns is a significant source of revenue for the federal government. As of Sept. 30, 2009, the total IRS inventory of currently not collectible amounts included almost $20.7 billion of unpaid employment taxes from business taxpayers. Of that total, approximately $1.1 billion (roughly 5 percent) was from in-business taxpayers. Expect more scrutiny from IRS collection personnel if you plan on continuing in business and decide not pay your payroll taxes. They call it follow up compliance checks. However in typical IRS efficiency don’t expect this new scrutiny to start right away. It took three years to study the problem and anticipate another two years to implement it.
No movement from Congress in regards to the expiring tax rates.
What that means to us. Little or no impact for this year. However, if nothing happens in the November lame duck session, and something will happen, it will have a huge impact on every taxpayer’s return filed for 2011. Congress is beginning to feel the heat about the excesses in the Health Care provisions passed earlier this year. Specifically the new 1099 filing requirements for purchases buried deep in the Health Care law will be a huge administrative problem for most businesses both large and small. Several laws repealing this provision have already been introduced.
President Obama put his John Hancock on a $30 billion small business lending bill intended to spur economic growth among, well... small businesses.
What it means to us. I just think it's ironic it takes $30 billion to generate the 500k new jobs projected by President Obama to be created as a result of the new bill. Government math has never been my strong suit but I will give it a try. My calculations are $60,000 per job created. Pretty expensive stuff. Our experience is that small business loans are in fact tougher to get today. Some very qualified clients have had their loan packages rejected by banks. Victims of the credit crunch and tighter underwriting standards. Bankers have told me that small business loan demand is down. Way down. It’s too early to tell if demand will increase, or loan qualifications will change. However I can tell you that some banks were waiting for this bill to pass before saying yes to some of our clients.
The bill includes eight business-oriented tax cuts:
I have added a link on our blog with a discussion of these tax cuts. More to follow.
Starting in 2011, paper tax coupons payments will no longer be accepted by your bank as a means of paying your income tax.
What it means to us. We are working out the kinks. Expect an announcement about what we plan to do once IRS announces the new rules later this year. More than likely, we will be instituting electronic payments for our clients starting in January 2011.
The recession is over. According to the National Bureau of Economic Research (NBER), the recession ended in June of 2009, but they just got around to announcing it last week
What it means to us. Please forgive us if this comes as news to us — it's come as news to many people, not least the small business owners who've been struggling to survive in an economy where credit is tight, health care costs are high, and consumers and investors remain skittish. Our crystal ball is very cloudy right now when it comes to predicting better business seas ahead.
Calendar
Our office will be closed for Columbus Day, October 11, 2010.
Drop dead due date for 2009 personal income tax return filing is October 15, 2010.
Quarterly payroll returns due November 1, 2010.
Client Workshops
OK I’m incorporated, what’s next? Whether you are a brand new corporation, or been around for years, you chose wisely. We will show you how to avoid IRS problems with one of the most complicate tax structures that remain the most popular corporate tax entity in America today.
Saturday, October 9, 2010 at 10:30 a.m.
Cash –It’s hard to get and there is never enough.
Cash flow 101. 45 minutes talking about sales and pricing and things that we can do to make more money in today’s very difficult times. Please don’t miss it.
Wednesday, October 13, 2010 at 5:30 p.m.
Saturday, October 16, 2010 at 10:30 a.m.
All workshops are free to active clients and held in our office. Since space is limited,l please let us know if you are planning to attend. Refreshments will be served.
Talk to you soon.
Donald C. Fuener E.A.
President
September 29, 2010
Last week the IRS announced that they are going to get tougher on unpaid employment taxes.
What it means to us. The large number of in-business taxpayers who are pyramiding trust fund tax liabilities is a major compliance problem for the IRS. The collection of taxes through employment tax returns is a significant source of revenue for the federal government. As of Sept. 30, 2009, the total IRS inventory of currently not collectible amounts included almost $20.7 billion of unpaid employment taxes from business taxpayers. Of that total, approximately $1.1 billion (roughly 5 percent) was from in-business taxpayers. Expect more scrutiny from IRS collection personnel if you plan on continuing in business and decide not pay your payroll taxes. They call it follow up compliance checks. However in typical IRS efficiency don’t expect this new scrutiny to start right away. It took three years to study the problem and anticipate another two years to implement it.
No movement from Congress in regards to the expiring tax rates.
What that means to us. Little or no impact for this year. However, if nothing happens in the November lame duck session, and something will happen, it will have a huge impact on every taxpayer’s return filed for 2011. Congress is beginning to feel the heat about the excesses in the Health Care provisions passed earlier this year. Specifically the new 1099 filing requirements for purchases buried deep in the Health Care law will be a huge administrative problem for most businesses both large and small. Several laws repealing this provision have already been introduced.
President Obama put his John Hancock on a $30 billion small business lending bill intended to spur economic growth among, well... small businesses.
What it means to us. I just think it's ironic it takes $30 billion to generate the 500k new jobs projected by President Obama to be created as a result of the new bill. Government math has never been my strong suit but I will give it a try. My calculations are $60,000 per job created. Pretty expensive stuff. Our experience is that small business loans are in fact tougher to get today. Some very qualified clients have had their loan packages rejected by banks. Victims of the credit crunch and tighter underwriting standards. Bankers have told me that small business loan demand is down. Way down. It’s too early to tell if demand will increase, or loan qualifications will change. However I can tell you that some banks were waiting for this bill to pass before saying yes to some of our clients.
The bill includes eight business-oriented tax cuts:
- Zero Taxes on Capital Gains from Key Small Business Investments
- Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments
- Extension of 50% Bonus Depreciation
- A New Deduction of Health Insurance Costs for Self-Employed
- Tax Relief and Simplification for Cell Phone Deductions
- An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses
- A Five-Year Carryback Of General Business Credits
- Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business
I have added a link on our blog with a discussion of these tax cuts. More to follow.
Starting in 2011, paper tax coupons payments will no longer be accepted by your bank as a means of paying your income tax.
What it means to us. We are working out the kinks. Expect an announcement about what we plan to do once IRS announces the new rules later this year. More than likely, we will be instituting electronic payments for our clients starting in January 2011.
The recession is over. According to the National Bureau of Economic Research (NBER), the recession ended in June of 2009, but they just got around to announcing it last week
What it means to us. Please forgive us if this comes as news to us — it's come as news to many people, not least the small business owners who've been struggling to survive in an economy where credit is tight, health care costs are high, and consumers and investors remain skittish. Our crystal ball is very cloudy right now when it comes to predicting better business seas ahead.
Calendar
Our office will be closed for Columbus Day, October 11, 2010.
Drop dead due date for 2009 personal income tax return filing is October 15, 2010.
Quarterly payroll returns due November 1, 2010.
Client Workshops
OK I’m incorporated, what’s next? Whether you are a brand new corporation, or been around for years, you chose wisely. We will show you how to avoid IRS problems with one of the most complicate tax structures that remain the most popular corporate tax entity in America today.
Saturday, October 9, 2010 at 10:30 a.m.
Cash –It’s hard to get and there is never enough.
Cash flow 101. 45 minutes talking about sales and pricing and things that we can do to make more money in today’s very difficult times. Please don’t miss it.
Wednesday, October 13, 2010 at 5:30 p.m.
Saturday, October 16, 2010 at 10:30 a.m.
All workshops are free to active clients and held in our office. Since space is limited,l please let us know if you are planning to attend. Refreshments will be served.
Talk to you soon.
Donald C. Fuener E.A.
President
September 29, 2010
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