Source: Kiplinger Tax Letter, November 10, 2011
What Small-Business Owners Need to Know about Health Care Benefits
Offering comprehensive benefits to employees can help you attract, hire, and retain the best workers. Yet many small-business owners believe that health care insurance is a luxury they can’t afford. The good news: Thanks to new incentives, tax credits, industry reform, and nontraditional plans, health care insurance may be within reach.
Continue reading at Intuit Small Business Blog
End of Year Tax Planning on Sale
The 
It’s sad, but true, that most Americans spend more time planning their “Black Friday” shopping than they spend planning their taxes. But that can be an expensive mistake!
What if the IRS had a sale? What if the IRS let you discount your taxes by thousands of dollars, this year and every year to come? And what if they let you do it from the comfort of your home or your office, without lining up in the pre-dawn hours of a chilly November morning? Would you give thanks for a sale like that?
You’re probably not holding your breath for the scrooges at the IRS to hold a “sale.” The good news is, you don’t have to wait for that to happen. You just need a plan. Tax planning is the key to paying the legal minimum. And a good tax plan can pay for a holiday season full of gifts and fun.
Call me today at 954.591.8290 or fil out our Contact form, for your free Tax Analysis. We’ll find the mistakes and missed opportunities that may be costing you thousands today, and show you how “Black Friday” tax planning can save thousands more tomorrow. We guarantee you’ll give thanks for the savings, or we’ll donate $50 to your favorite soup kitchen. So call now to schedule your Analysis.
The Dog Ate My Tax Return
Now that you're all grown up, you've got a different set of assignments you have to turn in. Few of them are more important than your annual tax return. Of course, even grownups sometimes forget their homework. But the IRS won't be buying that school kid whine!
Take supermodel Christie Brinkley, for example. Earlier this month, the IRS filed a lien for $531,720 in unpaid taxes against the "Uptown Girl's" $30 million country estate in swanky Bridgehampton, NY. That unpaid balance, of course, is also subject to interest compounded daily and a 0.5% monthly late payment penalty. Brinkley's publicist told E! Online that she "was surprised to hear today that a tax lien has been filed, and has instructed her team to resolve the matter immediately." Brinkley herself stated that "I have been, and remain focused on my whole family as both my parents navigate serious health issues."
At least Brinkley is facing the music willingly. Rapper Bow Wow -- who must not think his "real" name (Shad Gregory Moss) gives him the street cred he wants -- is putting up more of a fight. In November, the IRS filed a $91,105.61 lien against him for taxes dating back to 2006, when he was just 19 years old. But Bow Wow isn't taking this one lying down, declaring "we all know not to believe anything the media writes or blogs." And Bow Wow isn't the only rapper to run afoul of the IRS. In August, Beanie Sigel pleaded guilty to failing to file tax returns for three years in a row. (Prosecutors believe he owes up to $700,000 more in unpaid taxes dating back to the 1990s, but the statute of limitations has run out.) And in July, Ja Rule earned 28 months of federal housing for failing to file returns for tax losses from 2004 through 2008.
Rappers aren't the only musicians who don't always pay their taxes. Back in April, the IRS hit former Black Sabbath frontman and reality star Ozzy Osbourne with liens totaling over $2 million for unpaid taxes from 2007, 2008, and 2009. Ozzy's wife Sharon took to the "twitterverse" to admit her finances had gone off the rails. "You can't rely on anyone but yourself," she tweeted. "You have to be on top of your own business affairs. My fault...lesson learned."
And musicians, in turn, aren't the only celebrities who don't pay taxes. Former Green Bay Packers left guard Frederick "Fuzzy" Thurston dominated the frozen tundra of Lambeau Field from 1959-1967, then opened a chain of restaurants called the Left Guard after retiring. He and his partners withheld taxes from their employees' paychecks -- just like they were supposed to -- but they didn't actually pay the bill. Way back in 1984, the court flagged him with a $190,806 penalty for "roughing the IRS." With interest, that bill has grown to $1.7 million. Federal marshalls even seized his Super Bowl II ring commemorating Green Bay's 33-14 victory over Oakland to help pay!
Of course, our job is to make sure you don't need excuses for not paying your taxes. Proper planning is the key to making that bill affordable, and making sure you don't ever have to tell the IRS that the dog ate your homework!
10 Tips from a Successful Small Business Owner
Small business owners wear a million different hats. From product development to customer service to order fulfillment to basic HR functions, you do it all in the course of a typical day. But how do you ensure the success of your business when you're focused so much on day-to-day survival? We talked to successful small business owners to see what advice they had to share, and we've pulled their best tips together right here.
Read more at the Ink from Chase website.
Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.
The IRS is aware some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so. Some of those taxpayers are now aware of their filing obligations and seek to come into compliance with the law. This fact sheet summarizes information about federal income tax return and FBAR filing requirements, how to file a federal income tax return or FBAR, and potential penalties.
IRS Releases 2012 Standard Mileage Rates
The IRS has released the 2012 optional standard mileage rates that employees, self-employed individuals, and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes.
The 2012 standard mileage rate remains at 55.5 cents per mile for business uses, is reduced to 23 cents per mile for medical and moving uses, and remains at 14 cents per mile for charitable uses. For purposes of computing the allowance under an FAVR plan, the standard automobile cost may not exceed $28,200 ($29,300 for trucks and vans). The updated rates are effective for deductible transportation expenses paid or incurred on or after January 1, 2012, and for mileage allowances or reimbursements paid to, or transportation expenses paid or incurred by, an employee or a charitable volunteer on or after January 1, 2012.
Notice 2010-88, I.R.B. 2010-51, 882, as modified by Announcement 2011-40, I.R.B. 2011-29, 56, is superseded.
Expiring Tax Provisons - Business
Tax planning this year, particularly for businesses, is complicated by a number of expiring tax provisions. While most are timing issues (an immediate deduction versus depreciation over a number of years) some are significant. Some of these expiring provisions may be extended, but based upon what's going on in Congress that's not very likely at this time. Here are some of the more frequently encountered and important changes.
Current law allows for 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements placed in service before January 1, 2012. The same improvements done after the end of 2011 will generally have to be depreciated over 39 years.
The additional first-year depreciation for 100 percent of basis of qualified property is expiring. Until the end of the year you can depreciate the full cost of any equipment purchases (e.g., any tangible personal property and some special purpose property, but not real property such as buildings) in the year placed in service. For example, Madison LLC buys a lathe for $25,000. It can depreciate the entire cost in 2011. If placed in service in 2012, assuming a 7-year life, it could deduct only $3,572; then $6,122 in 2013, etc.
The higher expense election under Section 179 decreases from $500,000 to $139,000 in 2012 and the phaseouts based on total qualifying purchases drops from $2,000,000 to $560,000.
Because of the elimination of the additional first-year depreciation, the maximum first-year writeoff for cars and light trucks will drop from about $11,000 to about $3,000.
Some of these benefits overlap, but depending on your tax situation. In any event, to secure the benefits in 2011, the assets must generally be placed in service before January 1, 2012. That means equipment, leasehold improvements, etc. must be available for use. You can't just order the tractor. It must be ready to go to work. If it still has to be assembled, installed, etc. it's generally not placed in service. (That doesn't mean you have to use the equipment.) Thus, there's not much time left for certain equipment or any remodeling. In the case of construction, you might want to split the project so that, say two rooms can be done by the end of 2011; the other four rooms will have to wait till 2012. Working on the whole project simultaneously may mean nothing is placed in service until 2012. In any event, you don't have much time left to order equipment, etc.
Two points. First, as we said above, even the best deduction doesn't make the purchase free. You're still picking up most of the cost. Second, whether or not you can use the accelerated deduction will depend on your situation. The 15-year recovery of leasehold, restaurant, and retail improvements will benefit all businesses who can qualify. But a 100% first-year recovery of equipment won't provide much in tax benefits if you expect to incur losses for the next few years or expect to be in a low tax bracket for some time. And you don't want to drop into a much lower than normal bracket this year only to be in a higher than normal one later because of the accelerated deduction. In the latter cases there's no need to rush to make a year-end purchase.
The bonus depreciation rule can be particularly worthwhile for autos and light trucks. If you were planning to make a purchase soon, consider accelerating it into 2011.
Unless you're always in the top or near the top bracket, work through the numbers to determine which approach is best. And keep in mind that you might be able to generate a net operating loss that can be carried back to recover taxes paid in an earlier year.
Other expiring provisions include:
- Tax credit for research and experimentation expenses (this one is likely to be renewed),
- New markets tax credit,
- Credit for construction of new energy efficient homes,
- Work opportunity tax credit, and
- Empowerment zone tax incentives.
Save taxes by taking action now, not after the end of the year. If you fail to plan, the IRS has a plan for you, and the IRS plan will undoubtedly result in
more taxes--not less.
Should You File A Tax Return?
Do you ever wonder whether your income is high enough to warrant the filing of a tax return? Because the minimum income level varies depending on filing status, age, and the type of income you receive, it can be a bit complicated. The following guide is based on minimum income requirements from tax year 2011.
Single Taxpayers
If you expect to file a single return, the IRS requires you to file a tax return if your gross income for the year is at least $9,500 if you are under age 65 and $10,950 if you are 65 or older.
Married Filing Jointly
For married persons filing jointly, you are required to file a return if gross income for 2011 is at least $19,000 if both of you are under age 65. If one of you was at least age 65 in 2011, the limit is $20,150 - and if both of you were 65 or over, you must file if you made at least $21,300.
If you are not living with your spouse at the end of the year or you weren't living with them on the day they passed away, the IRS requires you to file a return if your gross income is at least $3,700. This is based on the personal exemptiion, which in tax year 2011 was $3,700.
For married persons filing a separate return, no matter what age, you must file a return if gross income is at least $3,700.
Head of Household
For persons filing as head of household, you must file a return for 2011 if gross income is at least $12,200 if under age 65 and $13,650 if at least age 65.
Qualifying Widow or Widower
For persons filing as a qualifying widow or widower with a dependent child, you must file a return for 2011 if gross income is at least $15,300 if under age 65 and $16,450 if at least age 65.
Other Situations That Require Filing
Even if you don't earn this much income, other situations necessitate filing a tax return. For example, a dependent has to file a return for 2011 if they received more than $950 in unearned income or more than $5,800 in earned income.
Other situations include:
You Owe Certain Taxes. If you owe FICA or Medicare taxes (also called payroll taxes) on unreported tips or other reported income that were not collected, you must file a return. You must also file a tax return if you are liable for any alternative minimum tax. Finally, you must file a return if you owe taxes on individual retirement accounts, Archer MSA accounts, or an employer-sponsored retirement plan.
Advance Earned Income Tax Credit Payments. The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, which may be returned in the form of a refund. If you receive advance payments for the earned income credit from your employer, you must file a return.
Self-Employment Earnings. If your net earnings from self-employment are $400 or more, you must file a return.
Church Income. If you earn employee income of at least $108.28 from either a church or a qualified church-controlled organization that is exempt from employer-paid FICA and Medicare taxes, you must file a return.
Questions?
Call us for more information about filing requirements and your eligibility to receive tax credits.
Filing Status - What You Need To Know
Your federal tax filing status is based on your marital and family situation. It is an important factor in determining your standard deduction and your correct amount of tax, and whether you must file a return.
Your marital status on the last day of the year determines your status for the entire year. If more than one filing status applies to you, you may choose the one that gives you the lowest tax obligation.
There are five filing status options:
- Single. Generally, if you are unmarried, divorced, or legally separated according to your state law, and you do not qualify for another filing status, your filing status is Single.
- Married Filing Jointly. If you are married, you and your spouse may file a joint return. If your spouse died during the year and you did not remarry, you may still file a joint return with that spouse for the year of death. This is the last year for which you may file a joint return with that spouse.
- Married Filing Separately. Married taxpayers may elect to file separate returns.
- Head of Household. Generally, you must be unmarried and paid more than half the cost of maintaining a home for you and a qualifying person for more than half a year.
- Qualifying Widow(er) with Dependent Child. You may be able to file as a qualifying widow or widower for the two years following the year your spouse died. To do this, you must meet all four of the following tests:
- You were entitled to file a joint return with your spouse for the year he or she died. It does not matter whether you actually filed a joint return.
- You did not remarry in the two years following the year your spouse died.
- You have a child, stepchild, or adopted child (a foster child does not meet this requirement) for whom you can claim a dependency exemption.
- You paid more than half the cost of maintaining a household that was the main home for you and that child, for the whole year.
- After the two years following the year in which your spouse died, you may qualify for head of household status.
We can definitely help you determine which filing status is best for your situation. Just call us up or send an email.