Set Up and/or Make Your 2012 Retirement Plan Contribution

Okay ladies & gentleman, it is October and the Holiday season is fast approaching.  We are all about to be even busier in our already busy lives.  So before the holidays are in full swing let’s talk about your Retirement Plan while you still have some space in your brain that doesn’t involve turkeys and wrapping paper.  If your retirement plans aren’t already in place it is time to get busy putting one together.  This way you can obtain a tax deduction for 2012, even if you don’t make that contribution until next year, but before you file your return.

You must have a solo 401k in place by December 31 to obtain a 401k deduction for this year.  If your plan is established by then you can make your 2012 tax deductible contribution in 2013 before your 2012 tax filing deadline (this includes extensions).

So get your plan in place so you can get back to focusing on costumes, turkeys and wrapping paper.  You will enjoy it more knowing you have done everything to impact your 2012 taxes as well as impacting your long term financial planning goals for you and your family.

 

Please stay tuned over the next few weeks for more last minute tax planning tips.  We will discuss other ways you can impact your 2012 taxes ranging from reimbursing Section 105 medical expenses, buying or selling a vehicle, and much more.

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

Offset Capital Gains and Capital Losses

Being and individual taxpayer there are several rules & strategies to keep in mind when planning your capital gains and losses.  1st Short term capital gains & ordinary income are taxed at rates up to 35 percent.  A strategy to offset the gains would be with long term losses, i.e. kill the 35% taxes with 15% losses.  2nd Long term capital gains are taxed at rates of up to 15 percent (0% if you are taxed at a regular rate of 15% or less).  The strategy is to have long term losses create the $3,000 deduction allowed against ordinary income.  You are trying to use the 15% loss to kill the 35% tax or a zero percent loss to kill a 15% tax.  3rd If your capital losses exceed capital gains, you may deduct up to $3,000 and carry forward your unused losses.  The strategy if you have a lot of capital losses and the $3,000 allowance isn’t going to cut it, sell assets to create offsetting gains.  4th Long term gains and losses are offset before application against short term gains and losses.  The strategy as an individual investor is to avoid the wash sale rule.  If you sell stock or other security and then purchase substantially identical stock or securities within 30 days before or after the date of sale, then you many not recognize any loss on that sale.  Therefore if you want to keep the identical stock position but also recognize a loss you will need to roll the dice for more than 30 days.

 

Please stay tuned over the next few weeks for more last minute tax planning tips.  We will discuss other ways you can impact your 2012 taxes ranging from reimbursing Section 105 medical expenses, setting up or making 2012 retirement plan contributions, buying or selling a vehicle, and much more.

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

Give Appreciated Stock to Charity

In a down economy it may be hard to consider donating to charity.  However doing so may have an impact on your taxes.  Assuming you have some appreciated stock left in your portfolio and are going to donate to charity, consider donating appreciated stock rather than cash.  With appreciated stock you avoid paying tax on the gain and get a deduction for the fair market value, this gives you a double benefit.

For example if you bought stock for $1,000 and its now worth $10,000 and you give it to a 501(c)(3) charity you get a tax deduction for the $10,000.  You pay zero taxes on the $9,000 profit you made on the stock!

 

Please stay tuned over the next few weeks for more last minute tax planning tips.  We will discuss other ways you can impact your 2012 taxes ranging from how to offset capital gains/losses, reimbursing Section 105 medical expenses, and even buying or selling a vehicle, and much more.

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

Buying Office Equipment

As a small business owner there is no escaping the expenses associated with running it.  Luckily lawmakers designed Section 179 expensing for the small business.  There is a limit on SUV expensing of $25,000 (We will discuss how buying/selling a vehicle is good for business in more detail in the future).   The overall 2012 limit on Section 179 expensing is $125,000.  Qualifying items include personal property such as equipment, computers, desks & chairs.  If you buy and place in service more than $500,000 of qualifying property during the year you must reduce the $125,000 ceiling by $1 for each dollar in excess of $500,000.  There is no need to worry if you hit the $500,000 ceiling, you won’t suffer too much due to these 2012 assets also qualify for 50% bonus depreciation.  So it is a very good year to buy business assets!

Please stay tuned over the next few weeks for more last minute tax planning tips.  We will discuss other ways you can impact your 2012 taxes ranging from giving to charity, offsetting capital gains/losses, and even buying or selling a vehicle, and much more.

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

Use your Credit Card

Using your credit card is a Good thing!  Yes, you read that correctly.  Using your credit card for your business leads to deductions.  As a sole proprietor when you charge a purchase to your credit card the expense is deductible.  So go ahead and buy office supplies or other business necessities with the plastic.  Your business ran as a corporation using its credit card is the same.  The date of the charge is the date of deduction.  If your business is operated as a corporation and you as the personal owner use your credit card, the corporation must reimburse you to realize the deduction.  So make sure your corporation reimburses before December 31!

 

Please stay tuned over the next few weeks for more last minute tax planning tips.  We will discuss other ways you can impact your 2012 taxes ranging from buying office equipment, giving to charity and even buying or selling a vehicle, and much more.

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

Tips for Students & Parents Paying for College Expenses

We hope that everyone had a wonderful Labor Day weekend!  With summer officially coming to a close and school in full swing there is still time to have an impact on your 2012 taxes.  Last week we discussed taxes pertaining to our business and children.  This week we will share how paying college expenses can impact your taxes.   Some of us are now parents to (gulp) a college student.  This can be an exciting and scary time for both the parents and young adult.  With this new and exciting adventure comes the ever increasing expense for attending college.

Luckily the IRS offers some tips about education tax benefits that can help offset some of the college costs.  There are a few options to choose from.  The first is the American Opportunity Credit; this credit can be up to $2,500 per eligible student and is available for the first 4 years at an eligible institution.  Forty percent of this credit is refundable which means you may be able to receive $1,000 even if you don’t owe taxes.  The second is the Lifetime Learning Credit; this allows you to claim up to $2,000 for qualified expenses paid for a student at an eligible institution.  Unlike the American Opportunity Credit there is no limit to the number of years you can claim this credit for an eligible student.

Qualified expenses include tuition and fees, course related books, supplies and equipment.  Only one type of education credit per student may be claimed in the same tax year.  If you have more than one college student you can claim the American credit on one and the Lifetime credit on the other, if you so choose.

There is also Student loan interest deduction.  Most personal interest we pay is not deductible, however interest paid on a qualified student loan may be deductible.  This can reduce your income subject to tax by up to $2,500, even when you don’t itemize deductions.

Education benefits are subject to income limitations and may be reduced or eliminated depending on your income.  If you are paying college expenses please contact us with any questions & to make sure you are maximizing all possible benefits toward your 2012 taxes.

 

In the weeks to come we will share several last minute tax planning tips you can still do to have an impact on your 2012 taxes.  We will discuss how you can be using your credit card, to buying office equipment, and even buying or selling a vehicle, and much more.

 

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

Paying your Children to help with your Business

Now that Labor Day is upon us and summer is coming to an end we turn our focus forward.  Many of us have children that have just started a new school year.  We are starting to think about the holiday season and how we can save money.  Did you consider that you still can have an impact on your 2012 taxes?  Over the next few weeks we will inform you of some last minute, practical, tax planning tips you can do to have an impact on your return as an individual, business owner or corporation.

In light of the new 2012-2013 class we will focus this week on paying our children for helping with business chores.   Do you have children under 18 helping you with your business?  Paying them for their chores is a plus for the whole family.  Wages paid by the parent to the child for work done in the parent’s business are deductible by the parent and are also exempt from payroll taxes.  If your business is a proprietorship or single member LLC you face no payroll taxes on W-2 wages you pay to your child under 18 years of age.

An example is you pay your child $5,000 in wages for work during the year.  You can deduct the $5,000 and pocket $2,000 since you are in the 40% tax bracket.  Your child can use the 2012 standard deduction to eliminate taxes on up to $5,950 in wages thus your child collects the $5,000 and pays zero taxes.  This leaves your family with $2,000 additional money!

Please stay tuned over the next few weeks for more last minute tax planning tips.  We will discuss other ways you can impact your 2012 taxes ranging from using your credit card, to buying office equipment, and even buying or selling a vehicle, plus tips for college expenses, and much more.

Please feel free to contact Harvey and Caldwell, PA at 913-451-4400 or visit our website http://www.harveyandcaldwell.com/ as a resource for your tax needs.

How to Respond to IRS Notice

All Taxpayer Clients and Friends—

IF YOU HAVE RECEIVED AN IRS NOTICE

We are including here 8 tips that you should consider when responding to an IRS notice..  This is a list provided by the IRS and should be used for keeping your response relevant and timely.  Naturally, if you can’t come up with a knowledgeable answer, or would like assistance communicating with the IRS, please contact us.

Eight Tips for Taxpayers Who Receive an IRS Notice

Thank you.

Gerald E. Harvey, Jr.

Certified Public Accountant

A Recent Tax Court Decision

The Chief Counsel’s Office has advised,in CCA 201228037, dated May I, 2012, that Medicare Parts A and B constitute medical care insurance coverage for deductibility as SE Health Insurance for business owners. This has not been allowed as a deduction in years past.

If you are a self-employed individual, partner, or S corporation shareholder-employee you can get these deducted from your income for both income tax (Federal and State) an Self-Employment tax.

You can also go back to all three prior years and AMEND them for refunds!

For the current year, 2012, and future years, partners and S corporation shareholder employees should get reimbursed for their Medicare payments from their entity.

Please call myself or my partner Noelle Caldwell for any future questions or need to amend past tax returns.  Attached is a full description of this matter by BNA.

Medicare Description by BNA

 

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