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Congress Promises AMT Patch Soon | Tax Tip of the Week | No. 68 November 24, 2010

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AMT May Affect Millions

Capital Building and FlagRanking members of the House and Senate tax committees are promising to do “whatever is necessary” to enact Alternative Minimum Tax (AMT) relief for the 2010 tax year.

In a letter to IRS Commissioner Shulman, leaders stated that the IRS should prepare to “take all steps necessary to plan for changes.”  The anticipated legislation would allow the personal credits against the AMT and the exemption amounts for 2010 to be set at $47,450 for individuals and $72,450 for married taxpayers filing jointly.

Without congressional action, more than 20 million taxpayers would have to pay this additional AMT tax when they file their 2010 tax returns.

If congress lives up to this promise, you should recalculate any fourth quarter estimated tax payments that were scheduled.  You may be writing a smaller check!

Call us if you have any questions.

We’ll keep you posted.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Planning Tips | Tax Tip of the Week | No. 67 November 16, 2010

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Planning Tips to Consider:
Tax SavingsLast week we looked at some of the pending tax increases in 2011 if congress does not act by the end of the year.  Since no one can predict what congress may or may not accomplish, the following are some planning tips to consider:

As you all know, the only thing that is constant is change.; Some changes, however, are better than others!
 
We’ll keep you posted.
 
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Taxes are Going Up—For Everyone | Tax Tip of the Week | No. 66 November 10, 2010

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Tax Tip of the Week | November 10, 2010 | No. 66
Taxes are going up—–for everyone.

Increasing TaxesTax Rate Changes

Unless Congress acts very quickly, everyone will see their federal income tax increase in 2011.  This week we will look at the pending tax increases.  Next week we will discuss what you can do before the end of the year to possibly lessen your tax burden.

Personal Income Tax Rates Will Rise:

In 2011, the 10% bracket will be eliminated and replaced with an expanded 15% bracket
The 25% bracket rises to 28%
The 28% bracket rises to 31%
The 33% bracket rises to 36%
The 35% bracket rises to 39.6%

See TTW – 9.16.09 for a more detailed look at the marginal tax brackets.

Child Tax Credit

The credit will be cut in half from $1,000 per child under age 17 to $500.  In addition, the portion of the credit that may be a refundable credit will be eliminated if there are less than three children in the household.

Capital Gains Tax Increases

The current 0% and 15% long-term capital gains rates will increase to 10% and 20% in 2011.   A special 18% tax rate will be added for investments held more than five years.

See TTW – 9.23.09 for a more detailed look at capital gains rates.

Qualified Dividends

Dividends that are currently taxed at capital gains rates will be eliminated.  Starting in 2011, all dividend income will be taxed as ordinary income.  This means dividends that were taxed at a 15% rate may now be taxed as high as 39.6%.

The “Marriage Penalty”

The penalty for married couples filing joint or separate returns will be back in 2011.  Currently, married couples receive 200% of the standard deduction as a single filer.  They also receive tax rates that are 200% of a single person’s tax bracket.  In 2011, these deductions and rates will be tightened.

The Return of the Estate Tax

In 2010, Congress allowed the estate tax to be eliminated.  In 2011 it comes roaring back.  Those who leave an estate in excess of $1 million will be faced with a 55% estate tax rate.

Education Expenses

The current and generous American Opportunity Credit for higher education expenses will be replaced with a less generous Hope Education Credit.

In addition, the option of using the Tuition and Fees Deduction is eliminated.

Other Increases


These are just a few of the changes that may occur.  As always, we’ll keep you posted.


You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Why You Need A Year End Planning Meeting With Your Accountant | Tax Tip of the Week | No. 65 November 3, 2010

Posted by bradstreetblogger in : Business Consulting, Tax Tip , 3comments

Tax Tip of the Week | November 3, 2010 | No. 65
Why You Need A Year End Planning Meeting With Your Accountant

Importance of Year End Planning

Year End Planning(1)   TAX PLANNING

Taxes may be one of a business owner’s largest expenditures.  Therefore, they deserve the planning and monitoring that accompanies any other major expense.  A year end meeting with your accountant should always include an estimation of your taxes.  The discussion should include the projected tax amount, along with the various methods and opportunities to negate or reduce the taxes at both your company and personal levels.  However, sometimes paying the tax is cheaper than incurring the costs of reducing them.  No one wants to spend $10 on something of little or no value to save $2.  With the exception of a retirement plan contribution, tax planning must be complete by New Year’s Eve.  Trying to do tax planning for the prior year while sitting with your accountant in early April for your tax return preparation is simply a day late, a dollar short.

(2)   BUDGETING

Too often, when the time to prepare the budget arrives, the tendency is to blow off the entire process.  Too many business owners believe the budgeting process is simply not worth the effort.  But, this task need not take days, usually a few hours is adequate.  The end result is usually enlightening and definitely something to review with your accountant.  With their fresh eye you can discuss the many hurdles that may jump up during the year as predicted by the budget, such as cash flow needs for operations to fund growth, capital asset financing, tax estimates and staffing requirements.  The budget is also a model to use for benchmarking during the year.  Is the variance just an anomoly, a coincidence or, more importantly a trend that must be reckoned with?

(3)   FINANCIAL STATEMENT ANALYSIS

Your accountant has seen hundreds, maybe even thousands, of financial statements in a multitude of industries.  Use their experience to enhance your bottom line.   They can help you interpret and understand your financials by examining your trends and ratios, such as accounts receivable turnover, inventory turnover, current ratio and debt coverage.  These analytical procedures can provide you with the information to help you drive your business forward.

(4)   BANK FINANCING

We are not in normal times.  Banks and businesses continue to take a beating.  As a result, meetings with your bank may take some unexpected twists.  Don’t get caught off guard by some unusual requests or demands by your banker. To be forewarned is to be forearmed.  If you are ramping up your business following a trough, additional financing may be necessary to fund the growth in accounts receivable and inventory that accompanies an increase in revenues.  The bank, who made such past funding available to you, may not be there to bat for you this time.  One may have to turn to unconventional methods that your accountant can discuss.

Your year end planning meeting with your accountant should be one of the most important meetings of your year.  It sets the stage for overall tax minimization, while maximizing your future net income and cash flow.

Mark Bradstreet, CPA…this week’s author

As always, give us a call if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.