Tag Archives: Tax Preparation

Deductions Still Available For 2012

Deductions Still Available  For 2012

 

 

Tax Saving Tips // Tax Preparation

 

 

 

Tax Savings Ideas For 2012

There is good news there is still a way to make a deduction for the previous year. The most sensible, legal tax-saving move for anyone that wants deductions for last year is to to fully fund one’s  IRA or SEP.

 

The funding can be postponed until the due date of the return, so there isn’t a panic to fund those right now.

 

 

What is an IRA?

 

 

IRA stands for Individual Retirement Account, and it’s basically a savings account with big tax breaks, making it an ideal way to sock away cash for your retirement. A lot of people mistakenly think an IRA itself is an investment – but it’s just the basket in which you keep stocks, bonds, mutual funds and other assets.

 

 

What is a SEP?

 

 

A SEP is a simplified employee pension plan. A SEP plan provides a way for the self-employed to fund their own retirement.

 

Frequently a client with a second business will ask, “If I am an employee and participate in my employer’s retirement plan, can I set up a SEP for self-employment income?

 

Yes. A SEP can be set up for a person’s business even if he or she participates in another employer’s retirement plan.

 

We are here to accommodate clients with good service that is convenient, and priced fairly. Our office is here to answer any tax questions that you need help with.

 

CPA Deerfield Beach

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Filed under Deductions, Tax Planning

Understanding Gift Taxes

Understanding the Gift Giving Tax

Excess gift giving could cause a tax surprise

In an effort to keep taxpayers from transferring wealth from one generation to the next tax-free, there are specific limits to the amount of gifts one may give to any one person each year. Amounts in excess of this limit are subject to a potential gift tax and require filing an annual gift tax form. For most of us, this is not something we need to worry about, but if handled incorrectly it can create quite a surprise when the tax bill is due.

The Gift Giving Rule:

You may give up to $13,000 to any individual (donee) within the calendar year 2012 and avoid any gift tax filing requirements. If married you and your spouse may transfer up to $26,000 per donee. If you provide a gift to your spouse who is not a U.S. citizen, the annual exclusion amount is $139,000.

Gift Tax Reporting:

Amounts given in excess of this annual amount are subject to potential gift tax. The amount of tax is currently unified with estate taxes with a maximum rate of 35%. The donor of the gift is responsible for paying any associated tax. When you exceed the annual gift giving amount, this triggers the need to file a gift tax form with your individual tax return. It does not necessarily trigger a taxable event in the year the gift is given. The excess gift amounts are netted against your lifetime unified credit. If your lifetime gifts do not exceed the credit you may not have additional taxes owed.

When might a gift tax problem occur:

  • Gifts for college. Grandparents like to help out with the tremendous expense of funding a college degree and amounts donated can quickly surpass the annual gift threshold. To avoid the gift tax problem consider making payments directly to the college as this form of payment can be excluded from the annual gift giving limit AS LONG AS the funds are not used to pay for books, room or board on behalf of the donee.
  • Be careful with 529 plan funding. If your children are anticipating going to college,  many consider creating a 529 college savings plan. You may then fund the savings plan (or have someone else fund it) on behalf of your child. However, remember the deposits into 529 accounts are considered a gift and are subject to the annual gift giving limits.
  • Gifts to cover medical expenses. It is very easy to mount up a large medical bill. While you may want to step in and help out by giving money to the individual with the medical bills, you may be creating a gift tax obligation. Better: make payments directly to health care providers for medical services on behalf of the patient to avoid gift tax exposure.
  • Gifts to help make a down payment. It is becoming more common to have family members help their kids with the down payment on a first home. This can be tricky. Lenders will look for recent deposits in bank accounts and ask the prospective buyers to substantiate the source of funds. Providing the funds as a loan may disqualify the couple for taking on the mortgage. Even worse, if the purchasing couple claims the funds are a gift, this action may create a gift tax obligation to the person providing the funds. Care must be taken to provide the correct audit trail to prove the gift does not exceed the annual amounts.
  • Gift of real estate.  If you give property to a relative for little or nothing in return, this generates the need to file a gift tax form as well.  Recent IRS studies suggest over 50% of taxpayers fail to declare property transfers as gifts.

Other things to consider:

  • You may provide gifts to or receive gifts from ANYONE. There are no limits or restrictions on who you may give a gift to or who may provide a gift to you. Creative gift giving can be a useful tool to help someone in need without creating a tax obligation.
  • Do not give a lump sum gift for the maximum amount. If you provide a gift for the maximum allowable to an individual, you may not provide any other gifts to this person during the year or the event would be deemed excess gift giving and require filing a gift tax form. For example, a grandparent gives $13,000 to her granddaughter for college. She also pays for a vacation trip to send the family to Disney World and provides a wonderful birthday gift. Technically, the additional gifts are in excess of the annual limit and would present a gift tax event.

What you need to know:

Understanding when to file the gift tax form each year is the most important thing to remember.  The IRS is paying attention to the massive non-compliance in the timely filing of the annual gift tax form.  So much so, that it is actively researching property transfers in key states to ensure the gift tax filing is taking place.

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Filed under Gifting, Tax Planning

Paying Taxes on Stock Gains in 2012

Prospective changes in the capital gains tax rate after 2012 may motivate investors to sell holdings that have appreciated. Capital gains rates are set to go up 33% in 2013, and a proactive capital gains strategy may save you some money.

There is a generally accepted principal that is regarded as standard advice in taxation, “Postpone paying taxes for as long as possible.” On offshoot of this principal is holding onto stocks and letting them appreciate to postpone payment of capital gains taxes.

Consider this, speeding up the payment of capital gains to the government this year. Why? Bush Tax cuts expire, and there may be higher capital gains rates down the road.

The Bush tax cuts are set to expire at the end of this year. The current rate on capital gains is 15%. The rate may rise to 20% in 2013, barring an extension. Most people in the industry do not expect a capital-gains tax cut any time in the near future.

The rush to pay taxes is not right for everyone. This generally applies to investors who have held investments longer than one year.

Older investors can avoid taxes by passing these stocks to their heirs with a stepped up tax free basis. Also, investors with strict investment methodologies should not make trades based on taxes.

Some investors are considering their long-time holdings and selling some of them— recognizing the gains — and paying taxes on stock gains at the current rate, rather than the future one.

This plan is not right for everyone; however there are circumstances when investors have made significant gains in a stock. They want to remain long term investors, and they can guarantee one of the lowest gains rate they are probably going to get.

Tax Bill

Typical long term investor buys Ebay Inc. 10 years ago and has a gain of more than 100%, rushing the tax bill could save money.

For example you put $50,000 into Ebay 10 years ago, and it’s worth $105,000 today.

Sell now —gain of $55,000 — makes a tax bill of $8,250 at today’s 15% capital-gains tax rate.

Say the capital gains rate becomes 20%, the tax bill on that same gain would be $11,000, a difference of $2,750.

An investor can decrease their tax bill 33% on certain items. This is something to mull over as you analyze and work on your portfolio. There is still a lot of time left this year; run the numbers and make the calculations. The 15% capital gains rate may not be extended, creating value in accelerating gains this year. The greater the tax increase, the greater the savings by doing it this year.

The preceding information is not intended to replace the services of a professional. Consult a CPA or an Attorney who can better understand your particular circumstances. Please contact us.

Tax Prep Deerfield Beach

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Filed under Capital Gains, Tax Planning

Setting up Vacation Policies in Quickbooks

Quick Books Vacation Setup

Vacation time is an opportunity for workers to rest and return to work rejuvenated.

Time off can increase productivity, boost morale and instill
an appreciation for the benefits of working for a company.

Surprisingly, not accounting for this diligently can cost the company money. Many employers often complain about this.

To set up an employee to track sick/vacation in QuickBooks Pro and Premier:

1) Click on Employees on the top menu bar, then choose Employee Center.

2) Double-click the employee’s name.

3) From the Change tabs drop-down menu, select Payroll and Compensation Info.
Click Sick/Vacation.

4) In the Vacation part of the Sick & Vacation window, enter the amount of hours of vacation currently available for the employee in the Hours Available as of box. Note: This is the hours available as of today regardless of the date field. The date field defaults to the employee’s hire date in QuickBooks and does not impact the accruals. This field should indicate the amount of time available as of today.
In the Accrual period drop-down box, select how often the employee will accrue vacation.

There are 3 different ways to accrue Sick and vacation in QuickBooks:

Beginning of Year–Grant a certain amount of hours in the beginning of year.

Every Paycheck–Accrue certain number of hours per paycheck

Every Hour on Paycheck–Accrue every hour on paycheck.

In the Hours Accrued window, enter the amount of hours that will be accrued based on how often the employee accrues hours which you selected in the Accrual period drop-down box.

Enter the total amount of vacation hours the employee can have in the Maximum number of hours window.
Click the Reset hours each new year box if you want the number of vacation hours for the employee to start over at zero each new calendar year.

Click OK twice

Call us or contact us your Deerfield Beach Quickbooks Consultant

CPA Deerfield Beach

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Filed under Bookkeeping, Organized Records, Tax Planning

Quickbooks Setup

Quickbooks Consultant

Quickbooks Consultant

The chart of accounts is the first part of the setup. This is the foundation to getting your QuickBooks in order.

Making a good chart of accounts is can save cost, time later, money and frustration. We can have your QuickBooks setup correctly to suit your particular needs.

When is set-up and working properly, we can train the staff to operate QuickBooks specifically for your business. If you are a small business you understand the importance of keeping current and accurate financial records. And, with accurate information you can make educated decisions regarding your business!

Keep in mind – we are training you or your staff in how to use QuickBooks. We are NOT training you how to be an accountant. We’ll make it easy to understand and move at a pace that you’re comfortable with.

Why choose one-on-one attention instead of taking a class?

We’ll come to your location

  • We’ll focus on the individual issues facing your business
  • We’ll be there to answer your specific questions and concerns
  • No need to spend time on features that don’t impact your business
  • It’s probably cheaper than you think
  • You learn at your own pace

How Do We Get Started?

Call or fill out the contact form so we can learn a little more about your specific needs.

Next we’ll send you a detailed list of topics we’ll cover.

And lastly, we’ll schedule your training either at your office or ours.

(Click here to see the full QuickBooks training outline)

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Filed under Organized Records, Tax Planning