Posts Tagged ‘taxable income’
What To Expect
October 23, 2012 | 
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Big tax changes are on the horizon, do you know what to expect? Whether our new president is Republican or Democratic, there WILL be changes, and your tax liability WILL increase for the 2012 tax year. But, how much?
Tax Forecasting
We try to keep our blog articles informative, not too “preachy” and not overly “pitchy”, but this is one that we just have to tell you is well worth doing! You need the expertise of a tax professional who keeps current on all of the latest tax code changes, as well as changes that are on the horizon. With our help, you can know how much your tax liability will be, and you’ll know early enough that you can make significant financial changes BEFORE the end of 2012 that can have a favorable impact and reduce the amount that you will owe! We call it Tax Forecasting.
What is Tax Forecasting
Tax Forecasting involves estimating your income and expenses for the remainder of the year, applying our knowledge of how to file your taxes to gain the greatest benefits, and making recommendations of actions that you can take that can greatly impact your tax liability.
Don’t Wait!
For Tax Forecasting to be an effective tool to reduce your taxes, you need to get started now! We recommend requesting your Tax Forecast by mid-November so that we can complete it in time for you to react and put our advice to work to save you tax dollars before the end of the year.
Contact Fredrick James Today to learn more about our Tax Forecasting service to help you save money on your taxes.
Visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!
Posted in Feature, What You Should Know | 
Tags: New Tax Issues, tax deductions, tax law, tax return, taxable income | 
No Comments »
Disappearing Dollars
You’ve surely heard of the expiring “Bush Tax Cuts”. It’s big news, and we have blogged about it here. But, what you might not realize is that even if Congress decides to extend those Bush Era tax cuts, there are other changes coming that WILL increase your tax burden for 2013 and the coming years!
It’s true. There are a lot of tax breaks that are going away, and tax rates that are scheduled to increase in 2013. These include everything from increases in Capital Gains taxes (increasing from 15% to 20% in most cases… and up to 39.6% in others!) to decreases in Higher Education credits (decreasing from $2,500 to $1,800), and even changes to Small Business, Payroll and Estate Taxes.
Make no mistake, taxes are going up! There is some hope for you, though! Fredrick James can help you identify potential areas where you can make up for increases in one area with decreases in another area. But, it may take a little advanced planning to be sure that you’re doing everything right throughout this year so that you can qualify for certain deductions and credits on your next tax return. That’s why we recommend taking action now to prepare yourself for what is coming. Schedule a consultation with us as soon as possible. Let’s get started saving you some money!
Visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!
Posted in New Tax Issues | Tags: Hope Tax Credit, New Tax Issues, small business, tax credit, tax deductions, tax law, taxable income | No Comments »
Bush Tax Cuts Set to Expire
Everyone will pay more in taxes if the Bush Tax Cuts are left to expire at the end of 2012. Some changes will be subtle and others will be very dramatic. All of this depends on where you fall into the tax code.
The Bush tax cuts were passed in 2001 as the Economic Growth and Recovery Tax Act. This was in response to a beginning of a recession and 9/11. The cuts increased the child tax credit from $500 per child to $1000, the standard deduction for married couples was increase to eliminate the marriage penalty, contribution limits for savings plans were increased, and tax rates were lowered.
Later in 2003, The Jobs and Growth Tax Relief Act of 2003 added tax cuts to dividends and capital gain. The impact of the Bush Tax Cuts saved the country from a recession and allowed us to work past 9/11.
Tax Rates Before & After Expiration of Tax Cuts
| Single filers | Married filing jointly or qualifying widow/widower | Married filing separately | Head of household | 2011Tax Rate | 2013Tax Rate |
| Up to $8,500 | Up to $17,000 | Up to $8,500 | Up to $12,150 | 10% | 15% |
| $8,501- $34,500 | $17,001- $69,000 | $8,501- $34,500 | $12,151- $46,250 | 15% | 15% |
| $34,501- $83,600 | $69,001- $139,350 | $34,501- $69,675 | $46,251- $119,400 | 25% | 28% |
| $83,601- $174,400 | $139,351- $212,300 | $69,676- $106,150 | $119,401- $193,350 | 28% | 31% |
| $174,401- $379,150 | $212,301- $379,150 | $106,151- $189,575 | $193,351- $379,150 | 33% | 36% |
| $379,151 or more | $379,151 or more | $189,576 or more | $379,151 or more | 35% | 39.6% |
What should you expect for 2013? As you can see from the Tax Bracket Chart above we will be paying more income taxes.
Dividend Tax Rates. Dividend tax rates were also cut, and the current tax rate on dividends is 15%. If Congress makes no additional policy changes this year, dividend rates will revert your ordinary tax rates listed above. Long Term Capital Gains rates are also at 15% now. These will increase to 20%.
What else? The current child tax credit of $1,000 will be reduced to $500; the standard deduction will be lowered for married couples, and limits will be placed on savings plans.
Other increases in your taxes will be derived from the new tax law changes that take affect at the end of the year. Currently medical expenses can be deducted as an itemized deduction. Total medical expenses, doctor visits, co-pays and dental can be deducted if they exceed 7 ½% of adjusted gross income. The new change in 2013 will raise this limit to 10% of adjusted gross income. For example, your adjusted gross income was $100,000 for 2012 this means you would have to exceed $7,500 in medical expenses to add to itemized expenses. After 2012 with the same adjusted income you will now have to exceed $10,000 before you can include any medical expenses as part of your itemized expenses.
Lastly, is alternative minimum tax. More people will fall into AMT if congress does not extend the threshold amounts. Once you fall into AMT everything changes for a tax payer. Itemized deductions, exemptions, and credits become limited.
What actions should you take? Schedule a meeting with Fredrick James Accounting for a tax forecast for 2012. Let us help you to lessen the impact of these expiring tax cuts and other tax changes by planning ahead!
The Bush era Tax Cuts were not designed to last forever, be prepared to pay more in taxes 2013.
Visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!
Posted in New Tax Issues, New Tax Issues | Tags: New Tax Issues, tax deductions, tax law, taxable income | No Comments »
Will YOU Get Audited in 2012?
The probability of being selected by the IRS for a federal income tax audit this year is going up. Overall audit rates for 2010 were 7.4%. This meant 7 out of 100 tax returns were picked for audit. At the recommendation of the Treasury Department the IRS is updating their relationship databases in March 2012. Their current database system has not been updated since 1998. With the update the IRS will be able to profile tax returns with more sophisticated criteria to ensure that the tax returns picked for audit will generate tax dollars. Good news for them, bad news for those who get audited!
What is a “tax audit”, really? Tax audits fall into two categories. The first category being the full scale audit where you meet face to face with an IRS agent, the “real deal” tax audit that everyone dreads. The second category is known as an unreal audit or paper audit. Basically, you get a letter from the IRS that you under reported income, had math errors, or that you did not file a tax return and the IRS has filed a substituted tax return on your behalf.
Who is going to be picked? This depends on the complexity of the tax return and the amount of adjusted gross income. Tax returns with adjusted gross income of $500,000 to $1 Million had a 2.9% chance for a full scale audit and a 9.4% chance for an unreal audit. On the other end of the scale your odds of being selected for an audit decrease with your income. Tax returns with adjusted gross income of $50,000 to $75,000 had just a 0.7% rate of selection for full scale audit vs.7.1% for unreal audit.
What triggers an audit? Some areas of concern that the IRS is looking at are tax returns with Schedule C an E income. On recent audits, the IRS has discovered that taxpayers were trying to take personal expense as deductions for businesses and rental property. This is not allowed. The NAICS number that is entered on Schedule C, 1120 forms, and 1065’s are tracked by the IRS. Through database analysis the IRS can gauge what your income and deduction ratios should be compared to industry averages.
Who is preparing your taxes? Another part of the database analysis that is rumored to be looked at is your tax preparer. The IRS can see how many tax returns have been completed by the preparer and how they break out by category. For example, if your tax preparer suddenly starts preparing a large number of low income tax returns with all large tax refunds this may be an area of concern.
What can you do? For the most part, audit risk can be reduced by simply verifying financial documentation. Check to make sure the correct social security numbers are reported, all income has been reported, and the math is correct. Of course, also ensuring that all of the correct forms are filed and properly completed is a requirement. It can be complex! From 2000 until 2010 tax law have seen over 4,000 changes. This, on average, is over 400 changes per year that taxpayers have to navigate to prepare tax returns!
The bottom line: the best way to lower your chances of being audited is to have your tax returned prepared by professionals at Fredrick James. We keep up with all of the tax code changes and will ensure that your tax return is accurate and properly filed to keep you out of trouble with the IRS!
You can visit us at FredrickJames.com. We serve clients throughout the world through our virtual office. Read more about our virtual office. If you have any questions or need assistance with your accounting, payroll or taxes please Contact us Today!
Posted in New Tax Issues, New Tax Issues, What You Should Know | Tags: Fredrick James, New Tax Issues, tax law, tax return, taxable income | No Comments »
Tax Deadlines…A Few Reminders
Tis the season of taxes and deadlines. Since this week’s blog post marks the end of the 2010 Tax Season, I wanted to go over the deadlines and give a few helpful reminders for the folks that are still rounding up their tax documents and scrambling to get their taxes done.
Personal Taxes:
Monday, April 18, 2011 at midnight is the official deadline for the taxes to be postmarked or e-filed since Friday, April 15, 2011 is Emancipation Day a national holiday.
Florida Business Taxes:
If you have not yet filed your Florida Tangible Tax return because you extended the return for 30 days, it will be due on May 1, 2011. It is very important to file this return timely to make sure that you qualify for the $25,000 Tangible Property Florida Exemption.
Florida Annual Reports are due on May 1, 2011 for Corporations and LLC’s. It is extremely important that the Florida Annual Report is filed timely to avoid the $400 penalty and the possibility of your corporation being administratively dissolved.
1st Quarter Payroll Taxes are due on April 30, 2011. Florida Business’s need to remit Form 941 to the IRS and Form UCT-6 to the Florida Department of Revenue.
As you can see there are a lot of deadlines over the upcoming days. I wish everybody a happy tax day!
Posted in New Tax Issues | Tags: 1099-C, accounting, American Opportunity Tax Credit, bookkeeping, business communication, economic crisis, tax law, taxable income | No Comments »
Tax cuts to soothe the angry mob: quick fix or good planning?
Ignorance Is Not Bliss: What Tax Records Businesses Need to Keep
5 Ways Tax Planning Can Help the Average Joe
Small Business to be Hit Hard by New SECA Rules
Posted in Business Know How, Business Tax, New Tax Issues, Self Employment | Tags: American Rcovery and Reinvestment Act of 2009, audits, capital gains, H.R. 4213, Health Care and Education Reconciliation Act, House Ways and Means Committee, IRS, Medicare, personal services income, S Corporations, SECA, self employment tax, small business, sole proprietorship, tax, tax law, tax loop hole, tax loophole, taxable income | 6 Comments »
Bad Debts Gone Wild: Part III, Business Debt
Business failure can leave you feeling totally de-railed
In the last part of this series, we covered the consumer side of bad debt charge-offs and how the IRS handles that from a tax perspective. Today I want to delve into the business side of bad debt charge-offs. This side of things is usually quite complex and hard to generalize but I will attempt to keep my “tax guru” side in check and you on board.
Business Not What It Used To Be?
Let’s assume that we’re talking about a business (Corporation or LLC that is treated as an S-Corp for tax purposes) that has been hit hard by the recession and has run out of money to pay its creditors. Typically in cases like this the business will notify creditors who will then turn around and liquidate the business assets in order to attempt to recoup at least part of the debt owed. Once that happens the business is faced with a balance plus late fees and interest to cover.
Many times business owners will be able to negotiate a settlement far under the remaining balance owed and once that agreed upon price has been paid, the business owner will generally feel they have taken care of everything and their ordeal is over. Hooray!
But Wait! There’s More!
It’s not exactly time to celebrate yet. Come tax season the, now former, business owner receives a 1099-C for the canceled debt and interest. Now what to do? At this point the business owner would be wise to contact their accounting professional who will review the situation and offer advice on how much of that total will actually be taxable.
Their accounting professional will be able to determine this number by assessing the net worth of the business (a negative number at this point), the fair market value of any remaining business assets, and the amount of the canceled debt among other factors. Whatever the balance is, if any, is the amount of taxable income the business owner would be liable for paying taxes on.
The business owner may also be entitled to an ordinary business loss equal to the difference between the fair market value of business assets that were auctioned off (or the canceled debt, if less) and the cost of the assets to the owner.
Call Now And Save
As always there are a hundred different variables that will affect the outcome of a scenario like this; this example is a highly simplified version used to provide a general understanding of the concept and should not be taken as de facto for all situations.
My goal is to provide fair warning to business owners with a loss that they WILL have to deal with charged off debts when it comes time to handle their taxes. I also want to point out that it isn’t nearly as awful as it might first seem and, with the help of a professional, your tax liability may be significantly reduced or even eliminated. So don’t ignore those 1099-Cs, if you do it will create an even bigger and more expensive mess to straighten out.