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March 13, 2013

* The “No Budget, No Pay Act of 2013,” signed into law on February 4, suspends the federal debt limit through May 18.

* The “No Budget, No Pay Act of 2013″ gives members of Congress until April 15 to pass a budget, or their pay will be suspended.

* The March 1 filing deadline for farmers and fishermen has been extended to April 15 due to the late start in this year’s filing season.

* March 15 is the deadline for calendar-year corporations to file their 2012 tax returns.

* March 15 is the deadline for corporations to elect S corporation status for 2013.

* The IRS reminds those who split the tax payment on a 2010 Roth conversion that the second half is due on 2012 tax returns.

* Now that estate and gift tax rules have become “permanent,” you should review your estate plan for any necessary adjustments.

* The IRS announced the inflation-adjusted alternative minimum tax exemption for 2013: $51,900 for singles and $80,800 for couples.

* Itemized deductions for 2013 will be limited if your adjusted gross income exceeds $250,000 (singles) or $300,000 (couples).

* Check for carryover items from prior years that could reduce your 2012 taxes — such as excess capital losses and gifts to charity.

* Your top tax rate in 2013 will be 39.6% if your taxable income exceeds $400,000 ($450,000 for married couples).

* You’ll pay 20% on long-term capital gains in 2013 if your taxable income exceeds $400,000 for singles or $450,000 for couples.

* If you turned 70½ last year and didn’t take your first required distribution from your IRA, you must take it by April 1, 2013.

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Posted by gillilandcpa

New Medicare taxes take effect in 2013

February 26, 2013

The 2010 health care reform legislation included several provisions that go into effect this year. Among them is the increase in Medicare taxes for taxpayers with incomes above certain levels. Here is an overview of these two new taxes.

FIRST, the payroll Medicare tax will increase from 1.45% of wages to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns. The tax increase will also apply to self-employment income exceeding the threshold amounts.

Employers are required to withhold the additional tax from wages exceeding $200,000, regardless of the individual’s filing status. They are not required to inform the employee when they begin the additional withholding, nor are they required to match the additional withholding.

SECOND, there is a new 3.8% Medicare tax on unearned income for single taxpayers with adjusted gross income over $200,000 and married couples with income over $250,000. The tax will apply to the lesser of (a) net investment income, or (b) the amount by which modified adjusted gross income exceeds the $200,000 / $250,000 thresholds. The tax may require adjustments to the estimated taxes paid by an individual, but it does not have to be withheld from wages.

Examples of unearned income include interest, dividends, capital gains, royalties, and rental income. Social security benefits, alimony, tax-exempt interest, and distributions from most retirement plans are examples of unearned income not subject to this new tax.

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Posted by gillilandcpa

Decide when to pay tax on U.S. savings bonds

November 20, 2012

When you own Series EE or Series I savings bonds, you have a tax decision to make. Both types of bonds earn interest monthly. Usually, you’ll choose to defer paying any taxes on the interest until the bond reaches final maturity or you redeem it, whichever comes first. At that time, you would report and pay taxes on the total interest earned over the life of the bond. (If you meet certain requirements, you might avoid paying any taxes by using the bond proceeds to pay for higher education expenses.)

The alternative method is to report the interest earned each year as part of your taxable income. Most people choose the first method because it lets you delay paying taxes for as long as possible. But sometimes the annual method makes sense — for example, if a young child has been given a savings bond in his or her own name.

The tax rate on investment earnings of a child under age 19 (under age 24 for full-time students) is the parent’s marginal rate when the “kiddie tax” applies. The kiddie tax is intended to stop parents from shifting income to their children. But even under the kiddie tax rules, the first $950 of a child’s investment income in 2012 is tax-free and the next $950 is taxed at your child’s lower tax rates. So if your child expects to earn less than $1,900 from savings bonds and other investments, reporting the interest as income each year could make good tax sense.

For further details on this and other tax-saving strategies, please give us a call.

Leave a Comment » | November 2012 | Tagged: , , , , , , | Permalink
Posted by gillilandcpa

Consider your marital status

October 9, 2012

If you’re planning a wedding or divorce soon, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the date of a year-end or new-year event could save taxes.

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Posted by gillilandcpa

Have you considered a SIMPLE plan for your business?

September 28, 2012

Many sole proprietors and small business owners agree on the following two issues: they pay too much in taxes and they have difficulty attracting and retaining good employees. One way to address both of these issues is to have your business sponsor a retirement savings plan. If you’re self-employed or own a small business and don’t currently have a retirement plan in place, consider setting up a SIMPLE plan.

SIMPLEs (Savings Incentive Match Plans for Employees) are available in two forms – SIMPLE IRAs and SIMPLE 401(k)s. SIMPLE plans are generally available only to small businesses that don’t maintain any other retirement plan. If your business has more than 100 employees, you won’t be eligible for a SIMPLE.

Most businesses will find the IRA version preferable to the 401(k) form of SIMPLE. Here’s how SIMPLE IRAs work. Eligible employees (including yourself) can elect to have a portion of their earnings withheld each pay period, limited to $11,500 in annual deferrals ($14,000 for those aged 50 or older). The employees then direct how the deferrals will be invested within their own SIMPLE IRAs. Amounts withheld for the SIMPLE IRA reduce the employee’s taxable income and grow tax-deferred.

The costs to set up and administer a SIMPLE IRA are minimal. However, as the employer, you’re required to make contributions into your employees’ SIMPLE IRAs on their behalf. You have the option of contributing either 2% of the wages of every eligible employee or making matching contributions up to 3% of the wages of those employees who participate in the plan.

Generally, the deadline for businesses to establish a SIMPLE plan for 2012 is October 1, 2012. To find out more about SIMPLE plans, give us a call.

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Posted by gillilandcpa

Don’t panic if the IRS sends you a letter

September 21, 2012

There are many reasons why the Internal Revenue Service could be contacting you. Some contacts involve very minor corrections; some are for serious changes that could involve a lot of money. Sometimes the IRS is correct in what they are seeking; sometimes they are wrong.

An IRS notice can be something as simple as a correction to a social security number or as significant as a billing for more taxes, plus interest and penalties.

So, what should you do if you get a letter from the IRS?

Here is a list of do’s and don’ts concerning contact from the IRS.

* Don’t panic, but don’t ignore the notice; the problem will not go away.

* Act promptly. A quick response to the IRS may eliminate further, more complicated correspondence.

* Follow the instructions in the IRS notice. Any correspondence you have with the IRS must make reference to the specific notice you are addressing.

* If you agree with the IRS adjustment, you do not need to do anything unless a payment is due.

* If the IRS is requesting more money or a significant amount of new information, be sure to contact your tax preparer immediately.

* Always provide your tax preparer with a copy of any IRS notice, regardless of how minor it appears to be.

* Keep a copy of all the IRS correspondence with your tax return copy for the year in question.

If you would like more information or assistance with any tax matter, please contact our office. We are here to help you.

Leave a Comment » | September 2012 | Tagged: , , , , | Permalink
Posted by gillilandcpa

Swap property to postpone taxes

August 9, 2011

Postpone taxes by swapping real estate instead of selling it. This may enable you to trade up to property with a higher value. A tax-deferred exchange is a great tax-saving strategy, but the rules are complex. For details or planning assistance, give us a call.

Leave a Comment » | August 2011 | Tagged: , , , | Permalink
Posted by gillilandcpa

IRS raises threshold for imposing tax liens

May 10, 2011

The IRS recently announced that it will moderate its use of tax liens to collect back taxes. A federal tax lien gives the IRS a claim on a delinquent taxpayer’s property for unpaid taxes.

This change means the IRS won’t use a tax lien unless at least $10,000 in back taxes is owed; the previous threshold had been $5,000.

In addition, the IRS says it will “withdraw” more tax liens once the back taxes have been paid. A withdrawal removes the lien from the taxpayer’s credit record, whereas a lien “release” as previously used left the lien on the credit record for at least seven years.

Leave a Comment » | May 2011 | Tagged: , , , , | Permalink
Posted by gillilandcpa

“Tax Freedom Day” came later in 2011

May 6, 2011

“Tax Freedom Day” fell on April 12 in 2011, three days later than in 2010. According to the Tax Foundation, all the money earned by taxpayers in the first 102 days of 2011 will go to pay their federal, state, and local taxes.

Another statistic from the Tax Foundation: If the government were to collect enough taxes to fund all spending for 2011 (with no deficit), Tax Freedom Day would be May 23, 2011. That’s

41 more days of work to provide the additional $1.48 trillion of revenue needed.

Leave a Comment » | May 2011 | Tagged: , , , , | Permalink
Posted by gillilandcpa

There is still time to convert your IRA

April 19, 2011

If you procrastinated on converting your regular IRA to a Roth last year, you can still do a conversion in 2011. Although converting your IRA generates taxable income in the year of the transfer, later qualifying withdrawals of contributions and income from the Roth are tax-free. Converting to a Roth while income tax rates remain low could pay off big time. And your conversion opportunities are not limited to just traditional IRAs. You can also convert your 401(k), 403(b), or 457 plan to a Roth.

Leave a Comment » | April 2011 | Tagged: , , , , | Permalink
Posted by gillilandcpa

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