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The Domestic Production Activities Deduction…. An often overlooked deduction – Tax Tip of the Week #38 April 28, 2010

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The Domestic Production Activities Deduction (DPAD) is a much overlooked deduction by business owners.

This deduction is available to businesses that pay wages (W-2 wages) and meet one of the following requirements:

In 2009, the DPAD is equal to 6% of the smaller of:

In 2010, the DPAD percentage will increase to 9%.

This could be a very significant deduction for business owners and should not be overlooked.

You might have some questions on this one… Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

Whew – Tax season wraps – Tax Tip of the Week No. 37 April 21, 2010

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Aaaah……The week after tax season (and the first full weekend home in two and half months) is the best week in a tax accountant’s life!

Even though tax season is over—we will continue our Tax Tip of the Week mailing for the rest of the year.  We will keep you updated on the constant changes as well as spotlighting specific tax planning ideas.

If there are any special tax topics you would like us to cover, just send us an email or give us a call.

We enjoyed meeting new clients this year as well as working again with the many clients we have gotten to know over the years. Thanks for being part of the Bradstreet community.

Need help with last minute tax issues? Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

How to file for an extension – Tax Tip of the Week April 14, 2010

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April 15 tax deadlineIf you haven’t filed your tax return by now, you should probably consider filing for an extension.  It is a lot easier to file for an extension than it is to amend a return later for a mistake you made trying to rush your return to completion.  Even more costly are underpayment penalties and interest if the IRS finds a mistake.

To file for an extension, you simply need to submit Form 4868. After submitting this form, you have until October 15, 2010 to file your return.  Note however, that an extension of time to file is not an extension of time to pay.  If you suspect you will owe some taxes, you must send a payment along with the extension.  This is true for your federal, state and city returns.

Ohio will automatically accept the federal extension.  Some cities, however, require a special city extension form.  Also, some cities will not allow extensions if you only have W2 income.  Be sure to check with your work and/or resident cities before April 15th.

Another reason to file for extension is that some speculate your chances for an audit decreases for extended returns.  How?  One of the methods the IRS uses to select a return for audit is to select a random sample of returns filed by April 15th.   If your return is not in that sample—then you don’t get picked!

Editor’s Note:  One of the pledges I make to all of my clients is that my personal return will be the last one filed each year. When my most procrastinating client’s return is filed on October 15th, mine is right behind it!  And has been that way for nearly 20 years!

Need help with last minute tax issues? Just give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

Biggest Tax Blunder? – Not carrying forward capital losses – Tax Tip of the Week April 7, 2010

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Tax Tip of the Week | Apr. 7, 2010 | No. 35
Carry Forward of Capital Losses

Last week we talked about the possibility of having unused foreign tax credits that have carried-over from prior years.

This week we are going to talk about a potentially much larger loss carry forward.

If you have investments that you sell, you must determine the gain or loss of that sale on your tax return each year.  With the market being down for the last several years, many investors have reported losses on their tax returns.  In many cases the losses are significant.

Unfortunately, you can only report a maximum capital loss of $3,000 on your tax return each year.  (Editor’s note:  this $3,000 limitation has been in place for as long as I can remember and really needs to be increased…but I doubt it will happen.)  I have seen clients who have accumulated $50,000, $80,000 and more in capital losses!

One other particularly painful aspect of the capital loss limitation is that the carry forwards cease at death.  So if Uncle Charlie passes away with a $80,000 capital loss carry forward…it’s lost forever.

One of the biggest tax blunders we have seen is when we work with new clients who have not carried forward capital losses to which they are entitled.  That is why we always ask to review at least five years of prior tax returns.  There are also other carry forwards we look for (besides the foreign tax credit and capital losses) but they go beyond the scope of this tax tip.

Note:  For a refresher on capital gains and losses, review our Tax Tip of the Week: What you need to know about Capital Gains.

Questions? Just give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.