kNOwTaxes - Part 3

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Highlight January Tax Deadlines on Your Calendar

Jan 3rd 2012

By: kNOw TAXES

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* January 17 – Final 2011 individual estimated tax payment is due, unless your 2011 tax return is filed and taxes are paid in full by January 31, 2012.

* January 17- Due date for calendar-year trusts and estates to pay final installment of 2011 estimated tax.

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* January 31 – Employers must furnish employees with W-2 statements for 2011. 1099 information statements for 2011 must be furnished by payers. (Deadline for 1099-B and consolidated statements is February 15.)

* January 31 – Employers must generally file 2011 federal unemployment tax returns and pay any tax due.

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Calendar year, Employment, income tax, Internal Revenue Service, IRS tax forms, Tax
New Law Provides Tax Credits for Hiring Veterans

Dec 29th 2011

By: kNOw TAXES

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A law signed by President Obama on November 21, 2011, creates new tax credits for hiring military veterans. A “Returning Heroes Tax Credit” of up to $5,600 per employee is available to employers who hire veterans who have been looking for work for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks, but less than six months. A “Wounded Warriors Tax Credit” provides a credit of up to $9,600 for hiring veterans with service-related disabilities who have been looking for work for more than six months. Contact us if you need more information.

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Returning Heroes Tax Credit, Tax credit, Veteran, White House, Wounded Warriors Tax Credit
To Succeed in Business, Have A Plan

Dec 28th 2011

By: kNOw TAXES

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Taking a trip without a map may get you lost, and trying to run a business without a plan is likely to have the same result. Read more.

A business plan is a map, your company’s written guide into the future. Not only does a good plan let you know where you are and where you’re headed, it provides potential lenders and investors with a portrait of your company.

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Each plan will differ, but certain items are essential.

* First, you must define your market niche and identify the competition. How does your product or service differ from theirs?

* Next, determine your product and delivery costs; then look at your product pricing.

* Do you need new equipment or skills to compete now and in the future?

* What is your marketing scheme?

* How will you get the capital you need for your plans?

* Examine your key operating ratios, and determine projected profits for years covered by the plan.

Most business plans fail because they lack detail. A well-developed plan gives a new company immediate respect in the eyes of lenders, not only because it shows you to be thorough and far-sighted, but because lenders rarely see good business plans.

Wayne Gretzky, when asked the reason for his success said, “Some people skate to where the puck is. I skate to where the puck is going to be.” A good plan should help you do the same for your business.

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Business, Business plan, Consulting, Entrepreneur, Map, Niche market, Small business, Wayne Gretzky
Get the Facts Before Getting a Reverse Mortgage

Dec 22nd 2011

By: kNOw TAXES

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Have you noticed the increasing number of advertisements expounding the merits of reverse mortgages? Smiling celebrities advise seniors that their lives could improve immensely if they simply harvested the available equity in their homes. Take an expensive trip, remodel your home, or just have fun with the extra money. They can make it sound pretty appealing.

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As the name implies, a reverse mortgage is the opposite of a traditional mortgage. With a traditional mortgage, you borrow a sum of money to purchase a home, then pay off the debt over time. With a reverse mortgage, you receive loan proceeds — as a lump-sum payout, an annuity, a line of credit, or a combination of all three — but make no payments as long as you reside in the property. The loan, with any accrued interest, comes due when you move out or pass away. To qualify for a reverse mortgage you need to be 62 or older, own your residence, and generally have significant equity in your home.

As the promotion and pool of potential customers for reverse mortgages continues to grow, so do reports of abuse regarding aggressive and even predatory sales practices. A few things to analyze if you’re thinking about a reverse mortgage include the following:

* Ask yourself if a reverse mortgage makes sense. Evaluate alternatives. Conventional solutions such as a home-equity loan might be a better answer.

* Reverse mortgages can be expensive. Upfront fees are significant. If you stay in your home just a few years, the effective interest rate can be very high.

* Beware of bundled sales pitches. Commission driven salesmen can push life insurance or various annuity products along with a reverse mortgage. You could end up with products you don’t need.

If you are considering a reverse mortgage, call us so we can explain the pros and cons and review your available alternatives.

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Financial Planning, Retirement Planning

Home equity loan, Line of credit, Mortgage loan, Reverse mortgage, tax planning
IRS Ends Two-Year Limit for Spouse Relief

Dec 20th 2011

By: kNOw TAXES

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If you file a joint income tax return with your spouse, you are considered “jointly and severally” liable for the payment of all taxes owed. The IRS can come after either you or your spouse for the entire amount of tax due, plus any penalties and interest due.

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The law has “innocent spouse” rules that may limit an individual’s responsibility for unpaid taxes resulting from filing a joint return. If the “innocent spouse” can establish that he or she did not know, or have reason to know, that there was an understatement of tax when signing the joint return, relief can be requested. Under previous rules, this relief had to be requested within two years after collection proceedings were initiated by the IRS.

In a new 2011 ruling, the IRS has decided to eliminate the two-year time limit for requesting innocent spouse status under the “equitable relief” provision in the law.

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Equitable remedy, Internal Revenue Service, IRS, Joint and several liability, Tax
Five Year-End Tax Tips

Dec 15th 2011

By: kNOw TAXES

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* Early this month check the amount of 2011 tax you have prepaid through withholding and quarterly estimates. If you’ve underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This could prevent your being charged underpayment penalties for 2011.

* Avoid the marriage penalty. If a wedding or divorce is in your plans, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the dates of a year-end event may save taxes. Even though recent tax laws provided some relief from the marriage penalty, they did not eliminate it.

* Plan for losses. Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

* Use this year’s annual gift tax exclusion. If you make annual gifts to family members or others, make sure you complete your gifts for 2011 by December 31.

* Squeeze in planned equipment purchases before December 31. Taxpayers must usually deduct the cost of business property over several years. A special election allows taxpayers to expense up to $500,000 of new and used property purchased and put into service in 2011. Also check into the 100% bonus depreciation allowance for new equipment purchases.

Property such as machinery, equipment, and furnishings qualify. Be careful with special rules that apply to automobiles and personal computers.

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President Obama Signs New Tax Law

Dec 13th 2011

By: kNOw TAXES

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On November 21, 2011, President Obama signed the “Three Percent Withholding Repeal and Job Creation Act” into law. This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the “Vow to Hire Heroes Act” which provides tax credits to employers who hire unemployed veterans.

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The law creates the “Returning Heroes Tax Credit” and the “Wounded Warriors Tax Credit.” Employers may qualify for a credit of up to $5,600 for hiring a veteran who has been looking for employment for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks but less than six months. Employers who hire an unemployed veteran with service-connected disabilities who has been looking for work for more than six months may be eligible for a tax credit of up to $9,600.

The credits apply to new hires after November 21, 2011, through December 31, 2012. For more information about the new law, contact our office.

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Tax Alert, Uncategorized

Barack Obama, Tax credit, Withholding tax
Put Financial Gifts on Your Holiday Shopping List

Dec 6th 2011

By: kNOw TAXES

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When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come. Read more.

Some financial gift options you might consider:

stock certificate

* U.S. savings bonds. Savings bonds are used by many families to introduce children to the savings concept. I bonds are indexed for inflation and can provide relatively attractive rates of return.

* IRAs (regular or Roth). For 2011, you can contribute the lower of $5,000 or the earned income of the child. An early financial start can produce amazing benefits from compounded interest accumulated over several decades.

* Stocks or mutual funds. Equities are a good way to introduce a child to the investment world.

* Collectible stock certificates. Vibrant framed certificates are available for many companies. A Disney, Dream Works, or Coca-Cola stock certificate can provide a colorful reminder of the importance of investing for the future.

* Collectibles. Postage stamps or coin collection kits can provide years of enjoyment and form the basis for some life-long hobbies. An interesting gift idea is an official U.S. mint proof coin set for the year the child was born.

Please call us if you would like to review the tax issues related to any of these financial gift options, especially if you are considering a larger amount.

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When Are Social Security Benefits Taxed?

Dec 1st 2011

By: kNOw TAXES

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Are you considering post-retirement employment? If you’re collecting social security and thinking of returning to the work force, you may have questions about how your earnings will affect the taxability of your social security benefits. Read more.

Are you considering post-retirement employment? If you’re collecting social security and thinking of returning to the work force, you may have questions about the effect of that income on the taxability of your benefits.

The answer: Under current law, part of your social security benefits may be taxable. How much? The basic rule is that up to 85% of your annual benefits can be subject to federal income tax when your “provisional” income exceeds specified thresholds. Generally speaking, provisional income is the sum of your adjusted gross income plus tax-exempt interest and one-half of your social security benefits.

Benefits are not taxed when your provisional income is below the threshold applicable to your filing status. The federal thresholds, called base amounts, range from zero, if you’re married filing separately and live with your spouse all year, to $32,000, if you’re married filing jointly.

A $25,000 base applies when you file as single, head of household, or as a qualifying widow or widower with a dependent child. If you’re married, but file separately and do not live with your spouse during the year, you’ll also use the $25,000 figure.

Illustration: When you’re married, file a joint return, and your provisional income exceeds $32,000, a portion of your benefits will be taxed.

Please call us to discuss how income from a new business venture or job will impact your taxes. We’ll be happy to help with planning moves, such as the timing of retirement account distributions, that can ease the tax bite.

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Retirement Planning

Adjusted Gross Income, Filing Status (federal income tax), Income, Marriage, Retirement, Retirement planning, Social Security, Social Security Administration, Tax
Employee Theft is a Significant Business Problem

Nov 29th 2011

By: kNOw TAXES

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Employee theft happens more frequently than you hear or read about. It’s believed that only a small percentage of cases of employee dishonesty are reported and prosecuted. Too often, the employee is just dismissed and moves on to steal from someone else. In other cases, especially where financial controls are weak, the employee may steal small amounts for years without being detected.

Image by brizzle born and bred via Flickr

There are many things you can do to spot employee theft in your business. Have an inquiring mind, ask lots of questions, and never accept answers that don’t make sense. Spend time each month monitoring your financial results. Look for inconsistencies, such as inventory declining in a slow sales month or excessive customer returns. Listen to customer complaints about late deliveries or missing items, and don’t accept “computer problems” as an excuse. If you know your business, you don’t have to be an accounting expert to sense when something is wrong.

You could also spot-check your accounting records by reviewing one category each month. For example, you might scan the check register to see just what payments are being made. Look for missing check numbers and ask to see any voided checks. Another month you might review the payroll log or look over the records of returned items. Look for multiple entries of similar items or suspicious customer names.

Finally, watch your employees for changes in behavior or spending that seems to be beyond their means. And beware of an employee who insists on doing all the detail work and never takes a vacation. It could be the sign of someone with something to hide.

For assistance with this or any business problem, contact our office.

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