Category Archives: Deerfield Beach CPA

Deerfield Beach CPA

What The Fiscal Cliff Means For Your Taxes

After tense negotiations—with a lot of publicity and the threat of deadlock and S & P credit downgrades—the terms of a fiscal cliff resolution have finally been successfully negotiated.







The major tax provisions are as follows:

• The income tax rate increases to 39.6% (up from 35%) for individuals making more than $400,000 a year ($450,000 for joint filers; $425,000 for heads of household);

• The two-percentage-point reduction in payroll taxes for Old Age, Survivors and Disability Insurance (OASDI) tax, commonly known as the Social Security tax, will be allowed to expire;

• The higher exemption amounts for alternative minimum tax (AMT)—the so-called “patch”—are made permanent, resulting an estimated 30 million taxpayers escaping being subject to the AMT;

• Dividends and capital gains are taxed at 20% (up from 15%) for individuals making at least $400,000 ($450,000 for joint returns);

• The Personal Exemption Phaseout (PEP), which had previously been suspended, is reinstated with a starting threshold of $300,000 for joint filers and a surviving spouse, $275,000 for heads of household, $250,000 for single filers, and $150,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. Under the phaseout, the total amount of exemptions that can be claimed by a taxpayer subject to the limitation is reduced by 2% for each $2,500 (or portion thereof) by which the taxpayer’s adjusted gross income (AGI) exceeds the applicable threshold;

• The “Pease“ limitation on deductions, which had previously been suspended, is reinstated with a threshold of $300,000 for joint filers and a surviving spouse, $275,000 for heads of household, $250,000 for single filers, and $150,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. Thus, for taxpayers subject to the “Pease” limitation, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer’s AGI exceeds the threshold amount, with the reduction not to exceed 80% of the otherwise allowable itemized deductions;

• For estate, gift, and generation-skipping transfer (GST) tax purposes, for individuals dying and gifts made after 2012, there is a $5 million exemption (adjusted for inflation), and the top estate, gift and GST rate is permanently increased from 35% to 40%;

• Tax credits for businesses, including the Code Sec. 41 research credit and the Code Sec. 199 domestic production activities deduction, are generally extended through the end of 2013;

• A number of individual tax provisions have been retroactively extended through 2013. In addition, there is a five-year extension of credits that were enhanced as part of the stimulus, including the college tuition credit, the Code Sec. 32 earned income tax credit, and the Code Sec. 24 child tax credit;

• Various energy credits are also extended.

• Other nontax provisions in the bill include a “doc fix,” which stops a 27% reduction in payments to Medicare doctors scheduled to go into effect. Spending cuts as offsets to accomplish this. Unemployment benefits, which were set to expire at the end of 2012, are extended for the long-term unemployed through the end of 2013

For more details please contact us. The information contained within this website is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.


CPA Deerfield Beach



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Tax breaks to those who do volunteer work for charity

Charitable deduction

Charitable deduction

Thanks to the people in this world that do volunteer worker for a charity. We believe that you should be aware that your generosity permits deductions/tax breaks.

To many taxpayer’s surprise no tax deduction is allowed for the value of services you perform for a charitable organization. However some deductions are permitted for out-of-pocket costs you incur while performing the services (subject to the deduction limit that generally applies to charitable contributions).  This includes items such as:

Away-from-home travel expenses while performing services for a charity (out-of-pocket round-trip travel cost, taxi fares and other costs of transportation between the airport or station and hotel, plus lodging and meals). However, these expenses aren’t deductible if there’s a significant element of personal pleasure associated with the travel, or if your services for a charity involve lobbying activities.

The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor (but the cost of your own entertainment or meal is not deductible).

If you use your car while performing services for a charitable organization you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs. Alternatively, you may deduct a flat 14¢ per mile for charitable use of your car. In either event, you may also deduct parking fees and tolls.

You can deduct the cost of a uniform you wear when you do volunteer work for the charity, as long as the uniform has no general utility (e.g., a volunteer ambulance worker’s jumpsuit). You can also deduct the cost of cleaning the uniform.

No charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution by a written acknowledgment from the charitable organization. The acknowledgment generally must include the amount of cash, a description of any property contributed, and whether you got anything in return for your contribution. This presents a problem where you as a volunteer make a contribution on behalf of rather than directly to a charity. One way around this is for the charity to pay for the expenses, itself, and then be reimbursed by you (or you can make the donation before the expense is incurred). If this isn’t possible, you can safeguard your deductions as follows:

Get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, get a letter from the charity explaining why you’re needed at the out-of-town location.

If you are out-of-pocket for substantial amounts, you should submit a statement of expenses and, preferably, a copy of the receipts, to the charity, and arrange for the charity to acknowledge in writing the amount of the contribution.

You should maintain detailed records of your out-of-pocket expenses—receipts plus a written record of the time, place, amount, and charitable purpose of the expense.

We would be happy to assist you with any other questions you may have about deductions related to your charitable contributions.

CPA Deerfield Beach

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Business Tax strategies for Purchasing a New Car

The decision of whether to trade in an old business car or try to sell it for cash generally should be based on factors such as the amount you can get on a sale versus a trade-in, and the time and bother a sale will entail. However, important tax factors also may affect your decision-making process. Here’s an overview of the complex rules that apply to what appears to be a simple transaction, and some pointers on how to achieve the best tax results.

In general, the sale of a business asset yields a gain or loss depending on the net amount you receive from the sale and your basis for it. “Basis” is your cost for tax purposes and, if you bought the asset, usually equals your cost less the depreciation deductions you claimed for the asset over the years. Under the tax-free swap rules, trading in an old business asset for a new, like-kind asset doesn’t result in a current gain or loss, and the new asset’s basis will equal the old asset’s remaining basis plus any cash you paid to trade up. The rules generally are the same for business cars, with a couple of extra twists. Here are some pointers.

As a general rule, you should trade in your old business car if you used it exclusively for business driving, and its basis has been depreciated down to zero, or is very low. The trade-in often avoids a current tax. For  example, if you sell your business car for $9,000, and your basis in it is only $7,000, you will have a $2,000 taxable gain, but if you trade it in, a current tax is avoided. True, your basis in the new car will be lower than it would be if you bought it without a trade-in, but that doesn’t necessarily mean lower depreciation deductions on the new car. Because of the so-called “luxury auto” annual depreciation dollar caps, your annual depreciation deductions on the new car may be the same whether you sold the old car or traded it in.

However, you should consider selling your old business car for cash rather than trading it in if you used it exclusively for business driving and depreciation on the old car was limited by the annual depreciation dollar caps. In this situation, your basis in the old car may exceed its value. If you sell the old car, you will recognize a loss for tax purposes. However, if you trade it in, you will not recognize the loss. By way of a simplified example, let’s assume a business person bought a $30,000 car several years back and used it 100% for business driving. Because of the annual depreciation dollar caps, she still has a $16,000 basis in the car, which has a current value of $14,500. Now, she wants to buy another $30,000 car. If the old car is sold, a $1,500 loss will be recognized ($16,000 basis less $14,500 sale price). If the old car is traded in for a new one, there will be no current loss. Of course, if the old car’s value exceeds its basis, the tax-smart move is to trade it in and thereby avoid a gain.

You also may be better off selling your old business car for cash rather than trading it in, if you used the standard mileage allowance to deduct car-related expenses. For 2011, the allowance is 51¢ per business mile driven from Jan. 1, 2011 through June 30, 2011, and 55.5¢ per business mile driven from July 1, 2011  through Dec. 31, 2011. (For 2012, the allowance is 55.5¢ per business mile driven.) The standard mileage allowance has a built-in allowance for depreciation, which must be reflected in the basis of the car. The deemed depreciation is 22¢ for every business mile traveled during 2011 (23¢ for every business mile traveled in 2012). When it’s time to dispose of a car, the depreciation allowance may leave you with a higher remaining basis than the car’s value. Under these circumstances, the car should be sold in order to recognize the loss.

Did you use your car partially for business, partially for personal use? The rules are more complicated in this situation, which can occur if you are self-employed, or an employee required to supply a car for business use.

  • If you sell the part-business, part-personal-use car, cost and depreciation must be allocated between the business and personal portions. Gain or loss on the business part is recognized; gain, but not loss, is recognized on the personal part.
  • If you trade in the part-business, part-personal-use car, a special basis rule applies for depreciation purposes only: The basis of the new car as computed under the normal trade-in rules is reduced by any difference between (1) the depreciation that would have been allowable had the old car been used 100% for business driving, and (2) the depreciation claimed for its actual business use.

Are you thinking of leasing a business car? The complex rules that apply to purchased business autos are one reason many businesses are leasing vehicles instead of buying them. You simply deduct the business/investment use portion of annual lease costs, and, if the vehicle is a “luxury” model, you add back to income during each lease year an income inclusion amount derived from an IRS table. For auto leases that begin during 2011, the auto is a “luxury” if the auto’s fair market value exceeds $18,500 ($19,000 for certain trucks and vans treated as autos for purposes of the “luxury” auto rules). There are, however, a few special angles you should be aware of:

  • If you pay an additional sum up-front, it should be amortized over the life of the lease.
  • Any refundable deposit required as part of the lease deal can’t be deducted at all.

All of this sounds very complicated, and it is. Before you sell or trade in your business car or lease a new one, please give us a call and we’ll set up a meeting to discuss your options.

CPA Deerfield Beach


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Filed under Deductions, Deerfield Beach CPA, Depreciation

Business website costs

The business use of websites is widespread, but IRS has not yet issued formal guidance on when Internet website costs can be deducted.

Fortunately, established rules that apply to the deductibility of business costs in general, and formal IRS guidance that applies to software costs in particular (the “software guidelines”), provide a taxpayer launching a business website with some guidance as to the proper treatment of the costs. Here is a brief discussion of some relevant principles:

The time for deducting website design costs (i.e., costs of the website’s overall structure, functionality and appearance) depends on whether the costs are costs of “software” within the meaning of the “software guidelines.” Generally, the portions of the website’s design that are produced from sophisticated programming languages (for example, the “C++” language widely used in website design) will qualify as “software.” On the other hand, there is some doubt as to the extent to which the portions of a design produced from HTML (hypertext markup language) will qualify as “software.”

Website design costs that are “software” costs are deductible under “safe-harbor” rules. The deductibility of website design costs that are “software” costs is governed by the following “safe-harbor” rules.

Generally, if the individual or company launching the website “purchases” the design (i.e., acquires the design from a contractor who is at economic risk should the software not perform), the design costs are amortized (ratably deducted) by that individual or company over the three-year period beginning with the month in which the website is placed in service. Also, non-customized computer software placed in service in tax years beginning before 2013 qualifies as “section 179 property,” and is thus eligible for the Code Sec. 179 elective expensing deduction that is generally available only for machinery and equipment. For tax years beginning in 2011, the deduction is limited to $500,000. For tax years beginning in 2012, the deduction is limited to $139,000. The limits are reduced by the cost of other section 179 property for which the election is made. Also, the election is phased out for taxpayers placing more than $2,000,000 of section 179 property into service during a tax year beginning in 2011 (more than $560,000 for a tax year beginning in 2012). Non-customized software acquired and placed in service in calendar year 2011 is, alternatively, eligible for a 100%-of-cost depreciation deduction (100% bonus depreciation) unlimited by any dollar amount. For software placed in service in calendar year 2012, the bonus depreciation deduction is 50% of cost. The bonus depreciation for an item of software is reduced to take into account any portion of the item’s cost for which a Code Sec. 179 election is made, and regular depreciation deductions are reduced to take into account both the bonus depreciation and any Code Sec. 179 election.

If, instead of being purchased, the website design is “developed” (designed in-house by the individual or company launching the website or designed by an independent contractor who is not at risk should the software not perform), the individual or company launching the website can choose among alternative treatments, including, but not limited to, “currently deducting” the costs (deducting the costs in the year that the costs are paid, or accrued, depending on the taxpayer’s overall accounting method) or amortizing the costs under the three-year rule, discussed above, for a “purchased” design.

Website design costs that aren’t costs of “software” are deductible in accordance with useful life. The time for deducting website design costs that are costs of portions of the design that aren’t “software” depends on the expected “useful life” of these non-software portions of the design. Thus, these costs must be amortized over the number of years that it is expected that the non-software portions of the design will be used in the business (except if it is expected that these non-software portions of the design will have a useful life of no more than a year, in which case the costs can be currently deducted.)

Website content that is advertising is generally currently deductible; the treatment of other content costs will vary. Advertising costs are, generally, currently deductible. Thus, the costs of website content that is advertising are, generally, currently deductible. Website content that isn’t advertising will be currently deductible, or amortized over a multi-tax year period, depending on its useful life.

The deductibility of some website costs that are business start-up costs is limited. Where website costs that would otherwise be currently deductible are paid or accrued before a business begins, the costs are deductible only upon the termination or disposition of the business, unless the taxpayer elects to (1) deduct up to $5,000 of the costs in the year that the business starts and/or (2) amortize the costs over a period of 60 months or more beginning with the month that the business starts.

The above principles, and others that effect the deductibility of website costs, suggest ways in which the individual or company launching the website can “take charge” of the treatment of website costs. For instance, an individual or company who contracts for a website design that qualifies as software, and who seeks the favorable tax treatment that applies to the costs of “developed” software, can, if acceptable as a business matter, include, in its written agreement with the developer/contractor, terms that will put the risk that the software won’t perform on the individual or company. Another example of a way to manage the tax treatment of website costs is detailed, descriptive allocations of costs, both in contracts and in internal records.

If you are considering launching a business website, I will be pleased to discuss with you further, and help you implement, the above planning steps or others that will help you manage the tax treatment of your website costs.

Deerfield Beach CPA


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Filed under Amortization, Deductions, Deerfield Beach CPA, Depreciation, Tax Planning

Avoiding hobby-loss restrictions

Like many of us, you’ve probably dreamed of turning a hobby or avocation into a regular business. You won’t have any unusual tax headaches if your new business is profitable. However, if the new enterprise consistently generates losses (deductions exceed income), IRS may step in and say it’s a hobby—an activity not engaged in for profit—rather than a business.
What are the practical consequences? Under the so-called hobby loss rules, you’ll be able to claim those deductions that are available whether or not the enterprise is engaged in for profit (such as state and local property taxes). However, your deductions for business-type expenses (such as rent or advertising) will be limited to the excess of your gross income from the hobby over those expenses that are deductible whether or not the enterprise is engaged in for profit. Deductible hobby expenses are claimed on Schedule A of Form 1040 as miscellaneous itemized deductions subject to a 2%-of-AGI “floor.” By contrast, if the new enterprise isn’t affected by the hobby loss rules, all otherwise allowable expenses would be deductible on Schedule C, even if they exceeded income from the enterprise.
There are two ways to avoid the hobby loss rules. The first way is to show a profit in at least three out of five consecutive years (two out of seven years for breeding, training, showing, or racing horses). The second way is to run the venture in such a way as to show that you intend to turn it into a profit-maker, rather than operate it as a mere hobby. The IRS regs themselves say that the hobby loss rules won’t apply if the facts and circumstances show that you have a profit-making objective.
How can you prove that you have a profit-making objective? In general, you can do so by running the new venture in a businesslike manner. More specifically, IRS and the courts will look to the following factors: how you run the activity; your expertise in the area (and your advisers’ expertise); the time and effort you expend in the enterprise; whether there’s an expectation that the assets used in the activity will rise in value; your success in carrying on other similar or dissimilar activities; your history of income or loss in the activity; the amount of occasional profits (if any) that are earned; your financial status; and whether the activity involves elements of personal pleasure or recreation.
The classic “hobby loss” situation involves a successful businessperson or professional who starts something like a dog-breeding business, or a farm. But IRS’s long arm also can reach out to more prosaic situations, such as businesspeople who start what appears to be a bona-fide sideline business.
Please call our offices to get more details on whether a venture of yours may be affected by the hobby loss rules, and what you should do right now to avoid a tax challenge.

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New IRS Rules May Offer Tax Breaks for Property Owners

The IRS has published temporary regulations on the tax treatment of tangible property. These regulations are effective now, and they may create valuable tax saving opportunities for property owners.

What they cover

The new rules provide guidance on amounts paid to acquire, produce, or improve tangible property. The IRS states that they cover the accounting for, and dispositions of, property subject to depreciation. The published regulations are 68 pages long, covering many topics.

Among those topics, the regulations illustrate when taxpayers can immediately deduct outlays for property repairs. Such costs usually are considered deductible repair expenses if they do not materially add to the value or to the useful life of property. Conversely, activities that increase or restore a property’s value, substantially add to its useful life, or adapt it to a different use are considered improvements. The money spent on improvements must be capitalized and depreciated over a period of years.

Under the new regulations, repairs made during a time when a property is being renovated or rehabilitated may be deducted if they were not incurred because of the improvement. The costs of routine maintenance on property that is not a building or structural component are generally deductible.

The regulations define routine maintenance as a recurring activity that a taxpayer expects to perform to keep property in its ordinarily efficient operating condition. Examples include inspection, cleaning and testing of an item of equipment, and replacement of parts of the equipment with comparable replacement parts

The regulations also may provide tax relief to property owners who remove a component of a building and replace it. An owner in this situation is not required to capitalize and depreciate the amount paid for the old part while also capitalizing and depreciating the amount paid for the new one. The retirement of a structural component of a building can be considered a separate disposition; the new regulations allow the property owner to recognize a loss on the disposition of a structural building component before the disposition of the entire building. Therefore, the owner will not have to keep depreciating building components that are no longer in service.

Under these new rules, property owners may want to commission certain studies to see if any substantial tax savings can be realized under the new rules. For instance, a property owner might benefit from a building component study that documents the original cost of building components or systems that the owner has replaced.

Example 1: Mary Palmer owns an apartment building. She spends $225,000 to replace the entire roof of the building. Under the new regulations, Mary must capitalize the cost of the new roof and recover her expense via depreciation.

Mary hires a qualified party to perform a building component study, which concludes that the old roof had a cost of $150,000. The new regulations permit Mary to deduct the adjusted depreciable basis of the old roof. If that adjusted depreciable basis is $112,500, Mary is entitled to a $112,500 tax deduction in the year the new roof is installed. Mary won’t have to keep depreciating the old roof and deducting a few thousand dollars each year.

Looking at leases

A lease abandonment study also might be worthwhile. Such a study could document the costs necessary to prepare a property for a new tenant.

Example 2: Nick Raymond purchased a fully occupied building a few years ago. In 2012, one tenant vacates a leased space. Nick decides that he needs to remove and replace some of the components put in place for the former tenant in order to attract a new tenant. The replacement items include walls, electrical wiring, plumbing lines, and ceiling tiles.Nick commissions a lease abandonment study and determines the replaced items cost $60,000. Under the new regulations, Nick can deduct the adjusted basis of the replaced items, which might come out to be about $51,000, in 2012. Again, this upfront deduction is more valuable than extended depreciation.If you are a property owner and you plan on replacing a structural component or renovating a tenant’s space, contact our office to see if the temporary regulations can help deliver sizable tax savings.


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Filed under Deductions, Deerfield Beach CPA, Rental Property, Tax Planning

Finding a New Job Can be Tax Deductible

CPA Deerfield Beach

CPA Deerfield Beach



Don’t miss this often overlooked deduction

With continued turmoil in the job market, the number of people searching for work continues to be at a high level. Because of this, the amount of time it takes to find a new job can be long and expensive. Don’t overlook the ability to deduct qualified job hunting expenses on your tax return. Here is what you need to know.


If you are searching for a new job in your present line of work, you may take qualified job search expenses as a miscellaneous itemized deduction on Schedule A of your tax return. When combined with other miscellaneous expenses you may deduct any amounts over 2% of your Adjusted Gross Income. Think you may not have sufficient expenses? Think again, especially since your income may be temporarily lower as you transition into a new position. To qualify you must pass three hurdles;

  • The new position must be in the same line of work. There is leeway here, but if you decide accounting is not for you and you wish to become a doctor, the expenses do not qualify.
  • There can be no substantial gap in time. If you are out of the workforce for a long period of time AND have not been looking for a job, you run the risk of having the expenses disallowed. So keep up activity to defend your deduction.
  • Sorry recent graduates, this deduction is not for you. It only qualifies for obtaining a new job in your present line of work.

Qualifying Expenses

The following expenses are usually deductible even if you don’t end up with the job:

  • Costs to prepare your resume, letters, and other correspondence. This includes the cost of printing stationery and paying for someone to help you organize your resume.
  • Fees to employment agencies, recruiters, and consultants
  • Advertisements in newspapers and trade magazines
  • Transportation to interviews including out-of-town lodging
  • Meals while out-of-town related to the job hunt (subject to 50% deductibility)
  • Telephone expenses. This includes job hunting related cell phone use.
  • Other related expenses. This can be things like printer cartridge ink for printing your correspondence or parking fees.

If the expense can be directly related to your job hunt, document it.


Keep track of all your job related expenses to substantiate your deductions. Here are some hints:

  1. Keep a log of your activities. A small note book or calendar can be a handy tool to log your activities.
  2. Keep receipts and canceled checks. You’ll need to document the deductibility of your expenses.
  3. Keep copies of job ads. This will help you defend the search is in your present line of work.
  4. Keep potential employer letters. This will show that your expenses are legitimate.

Don’t forget to keep track of other miscellaneous expenses to help cross your 2% threshold. Once the threshold is met, each incremental dollar could result in a reduction in your taxes. Other common miscellaneous deductions include; union dues, continuing education related expenses, uniforms, special work clothing, expenses for the production of income, tax preparation fees, and hobby expenses.


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