Some tax facts from National Taxpayer Advocate Nina Olson’s annual report to Congress:
* Americans spend 6.1 billion hours preparing their taxes every year.
* There have been 4,428 changes to the tax code over the past ten years.
* Nine out of ten Americans have someone prepare their tax return or use tax software.
* The tax code is so long that no one is certain exactly how long it is.
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November 2011 | Tagged: National Taxpayer Advocate, Nina Olson, tax code, tax software | 
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Posted by gillilandcpa
A lifetime gifting program might trim both your estate and income taxes. First, there’s the annual exclusion for gifts. Currently, you can give $13,000 annually to any number of recipients without paying federal gift tax. Married couples can double this amount by gift-splitting; a gift of $26,000 from one spouse is treated as if it came half from each.
Gifts do more than help out children who need the money. They also reduce your estate so your estate will pay less estate tax upon your death. Apart from annual gift giving, you can currently transfer (during your lifetime or through your estate) a total of $5,000,000 with no estate or gift tax liability. On amounts above this threshold, you or your estate will be faced with taxes at the current top rate of $35%. So a consistent program of annual gift giving might create substantial tax savings.
Note that gifts to individuals do not entitle you to an income tax deduction. A gift isn’t a charitable contribution. Conversely, a gift doesn’t constitute taxable income to the recipient. Gifts of income-producing property may, however, reduce your taxable income. Once you’ve given the property away, the recipient, not you, receives the income it produces and pays any income tax due on it.
One advantage to annual gift giving is that it is relatively simple to do, especially if you’re giving away cash. Another advantage is flexibility. You’re not locked into anything; you can see how much you can afford to give away each year. You can give away anything – cash, stock, art, real estate. Valuation is the fair market value on the date of the gift. Subsequent appreciation, if any, belongs to the donee’s estate, not yours.
Before you give away assets, be sure you will not need them yourself to provide income in later years. Consider the impact inflation will have on your resources.
Proper planning is essential in this area; get professional assistance before you do any gift giving. Contact our office if we can help.
Leave a Comment » | November 2011 | Tagged: annual exclusion, estate and income taxes, gifting program | Permalink
Posted by gillilandcpa
Companies that have had worker classification issues are being offered a settlement program by the IRS. The program, labeled the “Voluntary Worker Classification Settlement Program,” will let employers who previously misclassified employees as independent contractors make a minimal payment to settle the tax dispute. The program will give eligible employers substantial relief from federal payroll taxes they may have owed in the past. Employers must pay just over 1% of wages paid to reclassified workers for the past year, and they must agree to treat these workers as employees going forward.
Leave a Comment » | November 2011 | Tagged: Federal Payroll Taxes, independent contractor, Voluntary Worker Classification Settlement Program, worker classification | Permalink
Posted by gillilandcpa
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.
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.
Leave a Comment » | November 2011 | Tagged: dishonesty, employee, multiple entries, spot-check, Theft | Permalink
Posted by gillilandcpa
Previously, the “Small Business Jobs Act of 2010″ eliminated strict substantiation requirements for business use of employer-provided cell phones. Now the IRS has issued new guidance on the tax treatment for employees.
The IRS explains that the value of cell phones, where use may be both business and personal, can be excluded from an employee’s income if there are substantial business reasons for the arrangement. Substantial reasons include requiring the employee to be available at all times for client contact or for work-related emergencies.
Leave a Comment » | November 2011 | Tagged: employer provided cell phones, Small Business Jobs Act, substantiation requirements, tax treatment | Permalink
Posted by gillilandcpa
Sticking to the rules when making charitable contributions can save tax dollars. Here are three tips.
* Recordkeeping is vital if you want to be able to deduct a contribution to charity.
What records do you need? For starters, to claim an itemized deduction, you’re required to have support for all cash contributions, no matter what the amount. A bank statement, a copy of the cancelled check, or a credit card record will usually suffice for donations under $250. For donations of $250 or more, a statement from the charity is required, giving the charity’s name, the date, the amount of your donation, and the value of goods and services received for the donation, if any. In the case of payroll donations, your pay stub or W-2 can back up your deduction.
The substantiation rules for noncash donations such as household items differ depending on the type of property and its value. For instance, you’ll need a contemporaneous written acknowledgment from the charity for donations of $250 or more. As a general rule, “contemporaneous” means you receive the acknowledgment before you file your return or before the due date of your return, whichever is earlier.
* Make a gift from your IRA. The break allowing a transfer of up to $100,000 from your IRA to a qualified charity is available for 2011. To benefit, you must be over age 70½, and the contribution has to be a direct payment from your IRA to the charitable organization.
* Write down your vehicle mileage for charitable driving. Written records rule, whether you claim the standard mileage deduction of 14¢ a mile or actual expenses. Make sure your log or other paperwork includes the name of the charity, the date, and the miles you drove or the total cost you incurred.
Please call for advice on getting the most benefit from your donations, including appreciated property and out-of-pocket expenses.
Leave a Comment » | November 2011 | Tagged: charity, deduct a contribution, IRA, noncash donations, Recordkeeping, substantiation requirements | Permalink
Posted by gillilandcpa
Check into all the tax credits and deductions for which you might qualify this year. Because some of these tax breaks are reduced or eliminated entirely once your income reaches certain limits, you need to be aware of the income phase-out thresholds for those credits and deductions. While it doesn’t make sense to make less income just to qualify for a tax break, shifting income from one year to another may sometimes be a smart thing to do.
Leave a Comment » | November 2011 | Tagged: deductions, income phase-out, qualifying, tax breaks, Tax Credits | Permalink
Posted by gillilandcpa
For the past 76 years, investors had the option of buying U.S. savings bonds at a bank or credit union. After December 31, 2011, that will no longer be the case. Savings bonds can then only be purchased electronically through TreasuryDirect, sponsored on the Internet by the Treasury’s Bureau of Public Debt.
Bonds have been available through TreasuryDirect since 2002, but investors have been slow to purchase bonds electronically. Only 11% of bonds purchased from October 2010 through June 2011 were bought through TreasuryDirect.
Selling bonds exclusively through electronic means will save the government $70 million over five years. The Treasury points out that investors benefit too: electronic bonds are less likely to be misplaced, and they are automatically redeemed when they mature.
The change won’t affect outstanding paper bonds.
Leave a Comment » | November 2011 | Tagged: Bureau of Public Debt, investors, paper, savings bond, Treasury Direct | Permalink
Posted by gillilandcpa
Review your tax deductions for 2011. If you’re close to the cutoff point between itemizing or taking the standard deduction, consider the advantage of bunching your deductible expenses every other year. You can then alternate between itemizing one year and taking the standard deduction the next, saving tax dollars by doing so. For help in your calculations, contact our office.
Leave a Comment » | November 2011 | Tagged: itemizing, itemizing expenses, saving, standard deduction, tax deductions, tax dollars | Permalink
Posted by gillilandcpa
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