Monthly Archives: May 2012

FBAR TDF90-22.1 Deadline

May is over and June represents another filing deadline for persons who have foreign bank
accounts and investments

Some things to remember to prepare Form TD F 90-22.1, Report of Foreign Bank and
Financial Accounts, commonly referred to as FBAR, for calendar year 2011:

1. Make sure to use the most current version of the form (dated January 2012) to ensure the
filing is not rejected by FinCEN. The government does not process expired versions of this

2. Calendar 2011 FBARs must be received by Treasury on or before the June 30 due date in
order to be considered timely filed. Therefore, one should plan accordingly and file the
FBAR in sufficient time in advance of the due date. No extension of time is permitted. The
familiar mailbox rule that applies for income tax returns is not applicable with respect to

3. For those who are able, consider the use of the BSA E-Filing system to electronically
submit the calendar 2011 FBAR. Electronic filing of FBAR is only currently available by the
actual FBAR filer, and is not yet available for practitioners to file on behalf of their clients for
calendar 2011 FBARs. All should keep in mind that FinCEN is moving forward with plans
to require mandatory electronic filing for all FBARs in the future.

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Common Payroll Mistakes

1. Classification of Employees as Independent Contractors
2. Failure to Subject Vendor Payments to Backup Withholding
3. Failure to Issue Form 1099s
4. Not Including the Fair Market Value of Gift Cards,
Prizes and Awards in Employees’ Income
5. Failing to Timely Deposit Withheld Taxes
6. Incorrectly Handling Expense Reimbursements
7. Not Including the Appropriate Value of Taxable Fringe Benefits
in Employees’ Income

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Patient Protection and Affordable Care Act of 2010

Starting in 2013, an increased Medicare tax will apply to high income taxpayers and a new Medicare contribution tax will apply to investment income.

The changes enacted by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, will be partially financed by an increase in the Medicare Hospital Insurance (“HI”) tax on employees and self employed individuals and the imposition of a 3.8 percent Medicare contribution tax on net investment income, both beginning in 2013.

With respect to trade or business income from partnerships, LLCs and Subchapter S corporations, the income attributed to the taxpayer will not be excluded from investment income unless the taxpayer materially participates in the activities of the trade or business in accordance with the passive activity rules. Investment income from the investment of working capital of a trade or business is subject to the same general rules as under the passive activity rules.

Tax Tip

Net investment income does not include the following:

Active trade or business income
Gain on sale of an active interest in a partnership or S corporation
Distributions from IRAs or qualified retirement plans
Income from tax exempt municipal bonds
Tax deferred non-qualified annuities
Income taken into account for self-employment tax purposes
Capital gain excluded under I.R.C. §121

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Insights to Create Charitable Deductions

Clean out your closet. Consider donating clothes and linens in good condition to a local homeless shelter, battered women’s shelter or charitable thrift store such as Goodwill or Salvation Army.

Hold a garage sale. Many charities prefer cash. The allows the charity to buy necessary supplies related to their cause.

Shop with a cause. A lot of retailers donate a percentage of the purchase price to the charity.

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Tax Planning Summer Series

Tax Alert: Plan now for changes coming in 2013

What’s the summertime forecast? From a tax perspective, the outlook calls for planning now to prepare for changes gathering on the horizon – specifically, provisions currently expected to take effect in January 2013. Here are four new rules to think about during your mid-year tax review.

1. A decrease in tax-free contributions to your flexible spending account. Starting in January 2013, the maximum you can contribute to your FSA will be $2,500. In addition, the “use it or lose it” feature of FSAs means you won’t be able to carry any 2012 excess remaining in your account into 2013 (unless your plan provides a 2½ month grace period for using prior-year funds).

Planning move: Schedule elective medical procedures during the last half of 2012.

2. An increase in the threshold for claiming the itemized medical expenses deduction. Do you itemize? For 2012, you can claim a deduction on your federal income tax return for qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI).

Beginning in 2013, if you’re under age 65, your medical expenses will have to exceed 10% of your AGI to be deductible. This is the same percentage applied to qualified medical expenses when calculating the alternative minimum tax.

Planning move: Review your itemized deductions for 2012 to determine whether accelerating or delaying deductions makes the most sense for you. What to keep in mind: phase-outs and other limitations to itemized deductions that were in effect in prior years, as these may return in 2013.

3. An increase in Medicare tax on certain wages. The amount of Medicare tax you pay on wages and self-employment income is scheduled to go up next year. When you’re single and your wages are greater than $200,000, your employer will withhold an additional 0.9% of Medicare tax from your paycheck. Are you self-employed? The tax applies when net self-employment income exceeds the threshold. The income threshold is $250,000 for married couples.

Planning move: If you’re self-employed, review the way your business is organized. While you always want to pay yourself a reasonable amount of compensation, some entity types can allow for flexibility in the timing of wages or salary.

4. A new Medicare tax on unearned income. You probably associate Medicare tax with earned income – that is, the 1.45% tax your employer deducts from your pay. But a provision in the 2010 health care laws extends the Medicare tax to certain unearned income, beginning in 2013.

The new surtax is a flat rate of 3.8%, and will apply to interest, dividends, capital gains, annuities, royalties, and rents. It kicks in when your AGI exceeds $250,000 (for married filing jointly). When you file as single, the AGI threshold is $200,000.

Planning move: Consider adding tax-exempt bonds to your portfolio. The interest is not subject to the new tax. Roth conversions and selling assets with capital gains may also be a wise move in 2012.

Many other tax law changes are expected in 2013. Timely planning is essential for preserving tax- saving opportunities. Please give us a call to discuss strategies to put in place now to maximize your benefits.

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Payroll Cost Indexed for 2012

Costs for Employers 2012

Social Security: 6.2% up to $110,100 wages/salary

Medicare: 1.45% on total wages/salary

Federal Unemployment Tax (FUTA): 0.6% up to $7,000 wages/salary

Federal Income Tax Payroll Withholding

Use form W4

State Income Tax Withholding

Florida State Tax: Florida does not have a state income tax.

Unemployment Insurance (UI) contributions and administrative fund taxes range from:
In Florida use form UCT 6

Unemployment Rates vary by state contributions and administrative fund taxes range from: 1.00% – 6.30% of $27,000 wages/salary
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Quickbooks Billing

Billing for Time and Expenses: How It Works

Billing for inventory parts is easy. Pick the items from a list and specify a quantity. Poof. Done.

Billing for costs, time or mileage is a little more complex. QuickBooks has built-in tools to help you do this, but it’s a bit of a process.

To simplify your workflow, do this groundwork first:

  • Go to Edit | Preferences | Time & Expenses | Company Preferences. Click the Yes button under Time tracking and indicate your choices under Invoicing options. If you plan to mark up some costs and want a default number, enter a percentage and account (these can be changed on individual invoices).

Figure 1: As you do with other QuickBooks processes, make sure that your Preferences are set correctly.

  • Add any billing items necessary by clicking Lists | Item List and then Item | New in the lower left corner.
  • If you plan to bill for mileage, go to Lists | Customer & Vendor Profile List | Vehicle List and enter information about every business vehicle.

Invoicing for Services

If you’re a service-oriented company, you bill for time frequently. This is easy. You’re probably already familiar with the Enter Time entry in the Employees menu. Whether you make individual time entries or complete a timesheet, it’s critical that you make the correct selections for each Customer: Job, Service Item and Payroll Item field, and check the Billable box.

When you create invoices, this box will open after you select a customer:
Figure 2: QuickBooks lets you know when there are time and costs to be billed for each customer.

You can let QuickBooks enter the time totals now, or add them later by clicking the Add Time/Costs button. Either way, the Choose Billable Time and Costs window opens. Add a checkmark next to each entry that should be billed, and click Options… to indicate whether you want one line for each time entry or would rather combine all similar service item types.
Figure 3: QuickBooks wants to know which entries should be invoiced.

More Complexity

If you’re done with billable expenses for this invoice, click OK. If there are other costs that you covered, click the Expenses tab to see all transactions that you earmarked for this client on a bill, check or credit card. You have the option here to mark up the cost by a percentage or amount (even if you established this in Preferences), and to specify an account.

Do the same for Mileage, which you would have entered previously — when it was incurred — at Company | Enter Vehicle Mileage. Then select any Items that you purchased for the customer. Your records should be correct, assuming that you were conscientious about assigning expenses to customers and jobs.
Figure 4: It’s easy to pull billable expenses into invoices if they’re documented carefully.

Turning expenses into invoices and then into income can be complicated. Let us know if we can help. We are your partner in building a successful business.

QuickBooks Tip: Here’s a cool little keyboard shortcut. Hit F2 while you’re in QuickBooks, and you’ll get the Product Information screen. It’ll tell you everything you want to know about your specific copy of QuickBooks, like your release and license number, the file size, number of users logged in, audit trail status and the total number of accounts, customers, employees, etc.

QuickBooks News Update

Please note that as of May 31, 2012, Intuit is discontinuing support for QuickBooks Pro, Premier and Simple Start 2009, QuickBooks for Mac 2009 and QuickBooks Enterprise Solutions 9. You can continue to use these solutions, of course, but live technical support and add-on services like payroll, credit card processing, online banking and bill-pay will not be accessible. Talk to us about upgrading if you’re using any of these products or services.

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To Amend or Not Amend?

To Amend or Not Amend?
Is it always a good idea to amend your tax return?

There’s usually an element of relief after your annual tax return has been filed. But what do you do if you find an error on your tax return? Should you always file an amended return? Here are some things to consider.

Errors in the IRS’ favor

Errors discovered that lead to an additional tax obligation are legally required to be fixed by filing an amended tax return. This is especially true if the discovered error is from missing information found on a 1099 form or W-2 reported income. Why? This information is being reported to the IRS and matching programs will typically catch the error. The sooner you amend your return and pay the tax the lower the possible interest and penalties.

Errors that result in lower tax

If correcting the error or omission results in a large additional refund the answer is usually obvious. File the amended return. But this is not always the case.

  1. Your tax return is now open to audit for a longer period of time. Federal tax returns are typically subject to audit for three years after the original tax return due date OR the date the return was filed whichever is later. If you file an amended tax return the audit clock resets based on the amended return filing date. So if you have other areas in your tax return that might be audit risks you may have second thoughts regarding amending your return.
  2. The amended return may become examined. Amending a tax return could put a spotlight on your tax return. The IRS has certain topics that could trigger individual examination when amended returns are requested. Amended tax returns based on things like the Earned Income Tax Credit, Small Business Income and the Research Tax Credit for small businesses, could result in a visit from your local IRS examiner. Do you have the necessary records to substantiate your amended tax return?
  3. Amending one tax return, may require amending a number of them. Making a minor change in one year may require you to make changes in other tax years. This could result in resetting the audit clock on as many as three to four tax years. Is it worth it?
  4. Don’t forget other taxing authorities. Making a change on your federal tax return may require you to file an amended state or local tax return. Do not assume that an amendment in your favor on the federal level will necessarily be in your favor on the state/local level.
  5. Don’t expect the refund to be timely. Amended tax returns can take a long period of time to be reviewed. There have been cases where the IRS has delayed initial review of an amended return for more than a year, then decided to examine the return. While not typical, the process could take up to 1 1/2 years to resolve.
  6. Timing is important. Remember there is also a time limit to request a change in your tax return and receive an additional refund. This is typically set to three years after the initial filing deadline of the tax return. Make sure you file these tax returns using certified mail. Should the IRS delay responding to your amended return, you may need to prove it was filed timely.
  7. You have a chip in your pocket. If the refund amount is not large enough to justify an amended tax return, still keep the documentation. Should you be chosen for an audit, you can often present your case at that time to offset any additional tax.

While finding an error or omission on your tax return can be unsettling, rest assured there are ways to fix the problem, but it is often worth taking a balanced approach to determine the best solution.

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In 1998 Peter Rudolph, CPA created a firm that was more innovative and entrepreneurial than the competition. The goal was to provide superb income tax and accounting services to businesses and individuals while building a full-service firm. We took the risk and succeeded. Every year since then, Safe Harbor Accounting has grown and evolved in anticipation of our clients’ changing needs. Safe Harbor Accounting is a full service certified public accounting firm offering income tax preparation, financial and management consulting services to a growing list of business and individual clients. Recently the public has become aware that Warren Buffett and President Obama pay income taxes at a lower rate than their secretaries, who make much less. The firm considers itself a CPA advocate for small business. Let us show you why some Fortune 500 Firms pay less in Income Taxes than you.

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Deerfield Beach CPA

Deerfield Beach CPA

Deerfield Beach CPA


IR-2012-53, May 21, 2012

WASHINGTON — The Internal Revenue Service today announced another expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.


Please contact us 954 596 1120

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May 22, 2012 · 11:23 am