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Tax Tip of the Week | No. 326 | Finish the Year with Effective Tax Planning October 28, 2015

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes , add a comment

Tax Tip of the Week | October 28, 2015 | No. 326 | Finish the Year with Effective Tax Planning

The fourth quarter is often make-or-break time in sports. Likewise, tax-cutting steps you take in the last three months of the year can transform a financial plan into a bona-fide winner.

Late-year tax planning is often a matter of reviewing your inflows and outflows. For instance, income from capital gains can be subject to both capital gains tax and the 3.8% Medicare surtax. To offset capital gains, you might sell investments that have lost value since you purchased them. Net capital losses can be used to reduce ordinary income by up to $3,000.  A tax-saving examination of your portfolio is also a good time to rebalance your holdings between asset classes.

Interest and dividend income can be subject to the 3.8% Medicare surtax too. Plan for this by considering municipal bonds tax-free interest.

On the outflow side, look for opportunities to maximize deductions. Accelerate your charitable donations and consider donating appreciated securities you have owned for more than one year. This strategy can offer double value – you get the benefit of a deduction and you don’t have to pay tax on the gain.

Take advantage of increased retirement plan contribution limits for 2015. This year you can contribute as much as $5,500 to a Roth or traditional IRA ($6,500 if you’re age 50 or over). The limit for 401(k) plans is $18,000, plus an additional $6,000 if you’re 50 or older. The limit for SIMPLE IRA plans are $12,500 plus an additional $3,000 if you’re 50 or older. While checking on the status of your retirement plan contributions, review your list of beneficiaries too.

Another important fourth quarter exercise is an analysis of your income tax withholdings and estimated payments. These can be affected by personal events such as a change in marital status, the sale of property, or a new job.

Effective tax planning is a matter of finishing well. Contact our office to discuss steps you can take to make the fourth quarter a strong one for you.

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 Tip of the Week | No. 325 | Tax Breaks for People with Disabilities October 21, 2015

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Tax Tip of the Week | October 21, 2015 | No. 325 | Tax Breaks for People with Disabilities

Have you heard about the new “Achieve a Better Life Experience” (ABLE) accounts? They’re tax ­favored savings accounts you can establish to set aside money to pay expenses for a disabled family member. Assets in ABLE accounts grow tax-free and withdrawals are nontaxable if used to pay qualified disability expenses.

ABLE accounts were authorized under a federal tax law, and individual states are responsible for setting up the programs. That means you may have to wait a while longer to open an account. However, the tax code currently offers other benefits for people with disabilities that may help reduce your federal income tax bill.

For example, when you’re legally blind, you can claim an enhanced standard deduction in addition to the basic amount. If you itemize, you can deduct medical expenses related to your disability, including the care and maintenance of a guide dog as well as certain home improvements such as access ramps. Other itemized
deductions to keep track of: out-of-pocket expenses you incur so you can work.

If you’re the parent or spouse of a disabled family member and you pay for care of your loved one so you can work, you may be able to claim the child and dependent care credit. The credit directly reduces the federal income tax you owe.

Contact our office for more detailed information about these tax breaks.

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 Tip of the Week | No. 324 | Form 8300 Filing Requirements October 14, 2015

Posted by bradstreetblogger in : Business consulting, General, Tax Tip , add a comment

Tax Tip of the Week | October 14, 2015 | No. 324 | Form 8300 Filing Requirements

What do you do when you receive a payment in excess of $10,000?

The IRS recently reminded business that they have an obligation to report any cash payments in excess of $10,000 on Form 8300.

The simple rule is:  You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive cash payments in excess of $10,000 cash per customer. These requirements apply to cash transactions occurring in all 50 states and the District of Columbia, as well as U.S. possessions and territories.

The IRS indicates you must report cash payments if they are:

– More than $10,000

– Received as:

One lump sum of more than $10,000, or Installments totaling more than $10,000 within one year of the initial payment

-Received in the ordinary course of your trade or business

Received from the same agent or customer

-Received in a single transaction or two or more related transactions

-Received from an individual, corporation, partnership, association, trust or estate

Avoid these common mistakes:

Not reporting in time.  Generally you must file Form 8300 within 15 days after you receive the payment. If the 15th day falls on a weekend or holiday, you must file the report by the next business day.

Not reporting related transactions. You must file Form 8300 for related transactions. Related transactions can be those occurring between you and the same customer within a 24-hour period, as well as transactions that occur outside of the 24-hour window, but may be one of a series of connected transactions.

Not getting the right information. You must provide the correct taxpayer identification number (TIN) of the person from whom you received the cash, and you may be subject to penalties if this is incorrect or missing. If you’re unable to obtain the TIN, file Form 8300 and include information about the circumstances surrounding the missing number.

Not providing a written statement to customers. Generally, when you file a Form 8300, you must provide written notification to your customer. You must provide the written statement on or before January 31 of the year following the cash payment.

Not keeping a copy of your records. Keep a copy of every Form 8300 you file – as well as the required statement sent to your customers – for at least five years from the date filed.

A complete discussion of this filing requirement goes beyond the scope of this article.  Just remember to give us a call if you receive a payment over $10,000.

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 Tip of the Week | No. 323 | Tax Strategies Scan: Munis on the Rise October 7, 2015

Posted by bradstreetblogger in : General, Tax Tip , add a comment

Tax Tip of the Week | October 7, 2015 | No. 323 | Tax Strategies Scan:  Munis on the Rise

Here is a roundup of tax-related investment articles that recently appeared:

Muni-bond appetite on the rise as investors seek tax-free safety:   More investors are looking to add municipal bonds in their portfolios as they prefer safer investments in the wake of the Fed’s decision not to raise interest rates, according to MarketWatch. In addition to its “defensive nature,” this asset class also offers tax exemption on investors’ interest payments. This bullish environment should spell well for the absolute value performance for munis, according to a report from Bank of America. – MarketWatch

Buying an MLP fund?  Look at its tax history: Funds invested in master limited partnerships that have suffered losses this year may have an upside, benefiting from a tax write-off, according to a report from Global X Research. A fund with more than 25 percent of its assets invested in MLPs is structured as a C corporation, and accrues corporate level taxes on the appreciation of its holdings. — Barron’s

6 advantages of real estate investing for savvy investors: Are you taking advantage of all the tax benefits of owning real estate? Do you even recognize all the advantages? Brandon Turner, writing in Entrepreneur, says that rental owners aren’t subject to self-employment taxes, one of several unseen benefits from investing in real estate. – Entrepreneur

Give us a call if you want to review your portfolio for possible new tax strategies. 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.