Tag Archives: Certified Public Accountant

Tax Due Dates for June 2012


Tax Due Dates for June 2012

June 11

Employees – who work for tips. If you received $20 or more in tips during May, report them to your employer. You can use Form 4070.

June 15

Individuals – If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 and pay any tax, interest, and penalties due. (U.S. citizens living in the U.S. should have paid their taxes on April 17.) If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then file Form 1040 by October 15. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline.Individuals – Make a payment of your 2012 estimated tax if you are not paying your income tax for the year through withholding (or will not pay enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2012.

Corporations – Deposit the second installment of estimated income tax for 2012. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in May.Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in May.



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How to Verify that A Charitable Donation is Tax Deductible?

The IRS launched a new online search tool, Exempt Organizations Select Check, to help  find key information about tax-exempt organizations, such as federal tax status and filings.

By using the tool, you can check if the organization:

  • Is eligible to receive tax-deductible charitable contributions. This used to be done using IRS Publication 78, which is incorporated in the new tool. Taxpayers can rely on this list in determining deductibility of contributions (just as they did when Publication 78 was a separate electronic publication rather than part of EO Select Check).
  • Has its federal tax exemption automatically revoked under the law for not filing a Form 990-series return or notice for three consecutive years. (This is known as the Auto-Revocation List).
  • Has filed a Form 990-N (e-Postcard) annual electronic notice. (Most small organizations whose annual gross receipts are normally $50,000 or less are required to electronically submit Form 990-N, unless they choose instead to file a completed Form 990 or Form 990-EZ.)

EO Select Check also offers new search functions. For example, users can now look for organizations eligible to receive deductible contributions by Employer Identification Number (EIN), which was previously not a searchable or sortable field in the electronic Publication 78. And information about organizations eligible to receive deductible contributions is now updated monthly, rather than quarterly.


This is the web address for to check on charities.


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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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Investing on Margin Increases Risk and Potential Rewards

Investment Page

CPA Deerfield Beach

Although stocks have been volatile lately, they have been attractive longterm investments. The broad U.S. stock market has returned approximately 10% a year for the past 25, 30, 35, and 50 years—and that’s still true after the bear markets of 2000–2002 and 2008–2009. If you have a long time horizon and can tolerate periodic slides, you probably should hold some of your portfolio in stocks or stock funds. Investors who can tolerate stock market risks may be able to enhance returns by investing on margin, or borrowing from their broker to buy securities using their own holdings to secure the loan. Assuming that stocks continue to rise, long term, margin investing can increase your exposure and your overall gains. You shouldn’t overlook the risks of margin investing, but you also should realize that tax advantages may push your investment results toward the plus side.

Double play

When you invest on margin, you borrow money to buy securities. Once you set up a margin account with your brokerage firm, the firm will lend you money, secured by your holdings there. Base interest rates on margin loans might be in the 6%–7% rangenow, but you can pay more or less if you have a small or large account with the firm. Interactive Brokers is notably cheap. Here is a cheaper firm

$0 – $49,999 2.00% + 1.75% (3.75%)
$50,000 – $99,999 2.00% + 1.00% (3.00%)
$100,000 – $249,999 2.00% + 0.50% (2.50%)
$250,000 – $499,999 2.00% (2.00%)
$500,000 – $999,999 2.00% – 0.50% (1.50%)
$1,000,000 + 2.00% – 0.75% (1.25%)

Typically, the maximum margin allowed on stocks is 50%. By borrowing, say, $50,000 on margin, you can buy as much as $100,000 worth of stocks. Then you’ll stand to gain or lose twice as much as you would if you had not invested on margin.

Where do the tax benefits come in? The interest you pay on a margin  loan may be tax deductible (see the Trusted Advice column “Deducting
investment interest” for more information).

Example: Say you get a margin loan at a 6.5% interest rate, and your effective tax rate (federal, state, local) is 35%. With a 35% tax deduction,
your net borrowing cost is 4.225%: 65% of 6.5%. If your after-tax investment returns from the assets bought on margin top 4.225%, you’ll benefit from using the margin loan. Based on long-term stock market results, investing on margin can be a reasonable strategy for those who can
tolerate the risk.Moreover, the tax savings from deducting margin interest come right away. For many stock market investors, substantial taxes are deferred for many years, until they sell the shares, and favorable long term capital gains rates may apply. Although the numbers may seem favorable, don’t downplay the risks involved with investing on margin. If your investments lose value, you may get a margin call—a demand for more cash or securities in your brokerage account. If you don’t provide the cash or securities that your broker requires, the firm can sell securities from your account and use the proceeds for loan repayment.
One way to reduce this risk is to use less margin—20% or 30%, perhaps, instead of 50%. You’ll own less stock, but you’ll also have less chance of
receiving a margin call.




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Filed under Deductions, Investing

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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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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