jump to navigation

Don’t Miss the September 15 Deadline | Tax Tip of the Week | No. 55 August 25, 2010

Posted by bradstreetblogger in : Tax Tip , add a comment

September 15 tax deadlineIf you need to file a Form 1065 (partnership return), Form 1120S (S corporation return) or Form 1041 (fiduciary return) the deadline to file your 2009 return is September 15, 2010.  This assumes you had filed for an extension prior to April 15, 2010.

The IRS shortened the extension period for all pass-through entities that issue K-1s a couple of years ago.

If you put your personal tax return on extension (Form 1040), you still have until October 15, 2010 to timely file your 2009 return.

As we mentioned a few weeks ago, putting your tax returns on extension can be a good thing—but penalties to miss the extension deadline can be steep.

Give us a call if you need help meeting your deadlines.

As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.

Rick Prewitt – the guy behind TTW

Recent Court Ruling on Self-Prepared Tax Returns | Tax Tip of the Week | No. 54 August 18, 2010

Posted by bradstreetblogger in : Tax Tip , add a comment

New court ruling on self-prepared tax returns.A couple had prepared their own tax returns for several years using a popular tax preparation software product.  The wife reported expenses for her real estate business and unrelated losses on a Schedule C.  Most of these deductions were inaccurately reported.  Adjustments to this schedule resulted in most of the taxpayer’s taxable income to be significantly reduced.  As a result, the IRS assessed accuracy-related penalties.

The couple decided to appeal the penalties in Tax Court.  At trial, the wife said that they consistently filled out their tax returns using this software and she consistently confused capital gains and losses with ordinary income and expenses.  She believed the tax software would accurately prepare their return.

In rejecting the taxpayer’s software misuse (even if unintentional or accidental) as a defense to the penalties, the Tax Court noted that “tax preparation software is only as good as the information one inputs into it.”  Relying on a tax professional’s advice can establish reasonable cause and good faith to avoid a penalty, but the taxpayers did not rely on a professional – they self-prepared the returns.

Reference: Lam, TC Memo 2010-82

Give us a call if you have any questions about your tax return.

As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.

Rick Prewitt – the guy behind TTW

…until next week.

Answering questions about Social Security | Tax Tip of the Week | No. 53 August 9, 2010

Posted by bradstreetblogger in : Tax Tip , add a comment

As you near retirement…
Inquiring minds need to know!

With the Baby Boomer generation (born between 1946 and 1964) coming into the age of retirement, many wonder about their Social Security benefits.  Some of the questions that may arise include:

For more information, visit your local Social Security office, or go online at www.ssa.gov.

We highly encourage you to contact us for tax planning advice prior to signing up for Social Security benefits.

As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.

Linda Johannes – author of this week’s TTW
Rick Prewitt – the guy behind TTW

…until next week.

Taxable Interest Versus Non-taxable Interest | Tax Tip of the Week | No. 52 August 4, 2010

Posted by bradstreetblogger in : Uncategorized , add a comment

Examining Investment Alternatives – US Obligations and Municipal Bonds

Editors note: Before we dig into this week’s TTW, I want to acknowledge the 52nd tip – or a full year of Bradstreet’s Tax Tip of the Week! To those who have been with us from the beginning – THANK YOU. For those who have joined in along the way – WELCOME! We’d love to hear from you about what you like, don’t like and how we can improve. Shoot me an email or comment here. Happy Anniversary – We hope you’ve learned a few tricks and tips over the past year!

Savings Bonds can be a good choice  for reducing taxesInterest generated from your non-retirement investment accounts such as savings, money markets, CDs, and corporate bonds are all taxed at your ordinary tax rate on both your federal & state tax returns (we will use Ohio in this example).  Depending on your tax bracket, the additional tax on interest-bearing investments can cut deeply into your returns.

One way to minimize interest tax is to invest in U.S. Obligations (Federal Treasury Bonds, U.S. Savings Bonds, etc) and Municipal Bonds.

What are US Obligations and Municipal Bonds?
U.S. Obligations are debt obligations issued by the U.S. federal government and the interest that these U.S. obligations generate is not taxable on your state (OH) income tax return by federal law.  Municipal Bonds are bonds issued by municipalities in the U.S. to complete large projects or to fund cities budgets.  The interest received on municipal bonds is not taxable on your federal tax return and if the municipality that issued the bond is in Ohio, the interest is not taxable on your Ohio tax return.

After factoring in the reduction of tax on interest earned in these types of investment vehicles, bonds of this nature can become quite attractive because of the rate of return plus the tax-free bonus they provide.  However, they are not for all taxpayers, and the decision should not only be based on your tax bracket (see chart below), but should be a part of your overall investment strategy after careful consideration with your investment adviser.  These types of investments are usually not suitable in retirement accounts because of their tax deferred status.

Your federal income tax bracket: Is a municipal bond fund appropriate?
15% Unlikely
25% Likely
28% Very Likely
33% Highly Likely
35% Highly Likely

For example:  If you are in a federal tax bracket of 33% and an Ohio tax bracket of 6% and could find an Ohio Municipal Bond that offered a 3% interest rate, it would be equivalent to a fully taxable investment that yields a 4.91% interest rate.

Want the math?

.33 + .06 = .39

.39 – 1 = .61

3/.61 = 4.91

Or you could just Google—Interest rate calculators

Should you have any questions about the tax implications on bonds or other types of investments please don’t hesitate to give us a call.

As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.

Lance Bradstreet – author of this week’s TTW
Rick Prewitt – the guy behind TTW

…until next week.