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Look For More End-of-the-Year Changes to Come | Tax Tip of the Week | No. 121 November 30, 2011

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

The Latest Tax Law Changes

Congress recently passed legislation repealing a provision that would have required federal, state and local governments to withhold 3% of any payments over $10,000 from government contractors and certain other vendors.  The provision was intended to combat tax avoidance, but critics argued that it would restrict the cash flow of businesses and was too costly to implement.

In addition to repealing the withholding requirement related to government contractors, this bill also:

– Expands tax incentives to encourage employers to hire veterans

– Expands the IRS’s continuous levy authority

– Extends the authority of the US Department of Veterans Affairs to obtain information from the IRS

– Directs the Treasury Department to prepare a report on how to reduce the tax gap attributes to federal contractors

To pay for the $12.8 billion cost of the 3% withholding repeal and expanded hiring incentives for veterans, the legislation adjusts the calculation of the modified adjusted gross income for determining eligibility for certain federal health care programs.  It also delays scheduled reductions in fees for VA mortgage applications.

We expect there will be continued tax law changes based on the actions—and inactions of Congress in the coming weeks.

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

Tax Tip of the Week Video Series:

http://www.youtube.com/user/bradstreetcpas?feature=mhee#p/u/0/XdYGlaFwbD4

 

A Review of Upcoming Tax Law Changes | Tax Tip of the Week | No. 120 November 23, 2011

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Year-End Tax Planning-Part 4

As we said when we started this series of year-end strategies, you should normally look at the current year and the next year when doing your planning. This year, however, you should also take into account some of the future tax law changes that may occur.

Currently over 50 tax provisions are scheduled to expire by the end of 2011.  Many others are scheduled to expire at the end of next year.  This group of provisions often known as “the extenders” may or may not be renewed by Congress who is concerned with many issues such as deficit spending.

A quick recap of what we believe to be some of the more relevant ones that will expire at the end of 2011:

EXPIRING PROVISIONS FOR INDIVIDUALS

– Employee share of their OASDI portion that was formerly reduced from 6.2 percent to 4.2 percent.

– Reduction of AMT exemption amount

– Deductibility of mortgage insurance premium

– IRA distributions to charity up to $100,000

EXPIRING PROVISIONS FOR BUSINESSES

– Bonus Depreciation – 100 percent deductions of qualified capital assets (typically “new” assets) placed in service in 2011 is currently allowed.  This is scheduled to decrease to 50 percent in 2012 and zero thereafter.

– Section 179 Depreciation – For 2011, the global asset expensing limitation for qualifying (typically new or used) capital assets is set at $500,000, which lowers to $125,000 in 2012, and to $25,000, thereafter.

ADDITIONAL TAXES COMING IN 2013

Some future tax changes have already been enacted but have yet to take effect:

– Effective January 1, 2013, a new Medicare Hospital Insurance (HI) tax applies to high income individual taxpayers.

– The Medicare Hospital Insurance tax is 0.9 percent of earned income in excess of $200,000 for single filers ($250,000 for joint returns).

– A 3.8 percent tax applies to investment income (including dividends, annuities, royalties and rents, etc.) for the same individuals.  Consider talking with your tax adviser about strategies for minimizing this tax.

– In 2013, the threshold for the itemized deduction for unreimbursed medical expenses is increased to 10 percent of adjusted gross income from the current 7.5 percent.  You may want to plan for unreimbursed medical procedures in 2011 or 2012 to maximize your tax benefit.  There is a break for older taxpayers.  If an individual or spouse is age 65 or older, the threshold remains at 7.5 percent of adjusted gross income through 2016.

Year-end planning typically revolves around the deferral or acceleration of income and/or expenses to take advantage of either a “sunsetting” provision or a new upcoming tax law which may also entail a change in tax brackets.  Being proactive, especially in today’s uncertain economic times, can reap some huge tax savings.

Year-end tax planning is really a year-round process.  We’re here 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

Tax Tip of the Week Video Series:

http://www.youtube.com/user/bradstreetcpas?feature=mhee

…until next week.

 

Year-End Strategies For Small Business Owners | Tax Tip of the Week | No. 119 November 16, 2011

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , 20comments

Year-End Tax Planning-Part 3

The following is a summary of actions for small business owners to consider as 2011 draws to a close.  To read a more detailed discussion of these items click here.

– Reevaluate, or establish, the company’s retirement plan.  Some plans need to be established prior to 12/31/11, even though they may not be funded until 2012.  In addition to gaining significant tax savings, some retirement plans offer the potential to receive a tax credit.

– Consider how to depreciate any assets you purchased.  Evaluate both the Section 179 option (ability to immediately write-off up to $500,000) and the Bonus Depreciation option (which gives the ability to write-off up to 100% of the asset purchase price).  Qualified leasehold improvements are also eligible for Section 179 and the bonus depreciation for 2011.  They are also eligible for the special 15 year recovery period.  These special rules are not available after 12/31/11.

– Determine if a Cost Segregation study should be conducted.  Buildings and other real estate may not qualify for the above mentioned accelerated depreciation treatments.  However, land improvements and qualified leasehold improvements have special depreciation rules.

– Make sure you do not miss any of the available research and development tax credits.

– Make sure you do not miss taking the Health Insurance tax credits which were offered for the first time in 2011.

– Review your new hires in 2011 to see if they qualify for any of the employment credits available in 2011.

– If you own a pass-through entity (LLC, partnership or S corporation) and expect to show a loss this year you need to determine if you can take the loss on your personal tax return.

– Should any dividends be paid (if you own a C corporation)?

– Now is a good time of year to review your company’s financial ratios.

These are a few ideas you should consider if you own a business.  Give us a call if you want to schedule a personalized year-end planning meeting.

We are also excited to announce an addition to the Tax Tip of the Week series, a video portion!  We would love to know what you think:

http://www.youtube.com/watch?v=jAyuATyDud0

Let us know 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.

 

Year-End Strategies For Individuals | Tax Tip of the Week | No. 118 November 9, 2011

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Year-End Tax Planning-Part 2

The following is a summary of actions to consider as 2011 draws to a close.  To read a more detailed discussion of these items click here. 

– Accelerate or defer compensation or billings depending on your 2011 and 2012 earnings expectations.

– Consider your short-term and long-term capital gains rates.  Be sure to include any prior year capital loss carry-forwards.

– Look closely at any installment sales (Example:  Selling home on land contract) to determine the effect on current and future years. 

– Use credit cards to pay for tax-deductible expenditures—including charitable deductions in 2011.  You will get the deduction this year even if you don’t pay for it until 2012. – Consider any suspended passive activity losses you may have. – Make charitable contributions from your IRA.  If you are over 70.5 and have required minimum distribution requirements this is an especially strong planning tip. (Note:  This provision is set to expire on 12/31/2011). 

– Look at contributing appreciated assets to fulfill charitable obligations. 

– Install energy-efficient home improvements to receive tax credits.  (Note:  You need to look at any credits you took in 2009 or 2010 to see if you still qualify). 

– There are several tax credits available for fuel-saving or alternative-fuel technology vehicles. 

– Try to maximize the zero percent capital gain and dividend income you may qualify for in 2011. 

– Pay any fourth quarter state or city estimated tax payments in 2011 if you can itemize your deductions. 

– Always factor in any potential Alternative Minimum Taxes (AMT).  An increasing number of middle-income earners and retirees are being subjected to the AMT. 

– Consider maximizing your retirement plan and/or IRA contributions. 

– See if making a ROTH conversion makes sense for you this year. 

– This is a good time to reevaluate, or establish, your estate plans.  The current estate exclusion is $5 million but the future still remains unclear. 

– A part of your estate planning may include some gift planning.  The annual gift exclusion remains at $13,000. 

These are just a few ideas to consider.  Give us a call if you would like to schedule a year-end planning meeting. 

Let us know 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.

 

As The End of 2011 Approaches…. | Tax Tip of the Week | No. 117 November 2, 2011

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Year-End Planning 

Many clients tell us their year-end planning appointment is their most important meeting of the year.

(Editor’s note:  This is the first of four Tax Tips looking at year-end tax planning.  This week is the foundation.  Week 2 will address individual tax planning ideas.   Week 3 will focus on small business planning tips.  Week 4 will look at upcoming tax law changes).

As the end of 2011 approaches, now is a good time to start year-end tax planning to minimize your individual and business tax burden.  Generally, year-end tax planning involves considering at least two years – in this instance, 2011 and 2012.  With tax changes on the horizon, you should consider the likelihood of future changes.  Tax planning is a dynamic process and is best accomplished with forethought and assistance from your tax adviser.

Before going into more specific, detailed planning tips, here are two basic principles that can help guide your overall thinking:

• If you expect your tax rate will be higher in 2012, you may benefit from accelerating income into 2011 and deferring deductions into 2012.

• If you think your tax rate might be lower next year or will be unchanged, consider deferring income to 2012 and accelerating deductions into 2011.

Remember, the focus is on your marginal tax rate.  That is the highest rate at which your last, or marginal, dollar of income will be taxed.  Even though overall tax rates may rise in the future, if your income will be substantially lower in 2012 than in 2011, your marginal tax rate may decrease because of our graduated tax bracket system.

In drafting this tax tip, we have focused on tax planning opportunities that involve actions you can take during the remainder of 2011.  This series of tips does not include every tax planning opportunity that may be available to you, and it is advised that tax projections confirm planning strategies.

Let us know 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.