Tips on getting organized.

http://youtu.be/POzs1ahQr7M

Many clients see their CPAs at tax time, when the main focus is on completing and filing their tax return.
As a result, they may not take the opportunity to ask questions about long-term tax planning or about
other important financial concerns. The good news is that we are available to you all year. We have a fulltime,
year-round staff of experts with extensive expertise in a broad range of financial areas. We’re ready
when you are to take some time reviewing your financial situation, helping you understand your options
and make the best decisions. We’re also here in an emergency to help address unexpected financial
concerns.  So, give us a call to discuss your important financial issues whenever they arise.

Here are five steps to make the most of charitable giving.

1 Do a background check

There are a number of sites, including Charity Navigator and GuideStar, that give details on how individual charities spend their money. To evaluate the financials of a charity, compare the overhead/administrative costs to the direct service costs (the costs of the actual charitable work). It is normal for organizations to spend about 20- 30% of the overall cost to run the organization on the administrative costs that are related to the services provided, says Durham.

But neither Charity Navigator nor GuideStar lists every single charity on its site. So, for smaller organizations, ask for the Form 990 which will detail expenses. Then, check out this guide for more information on how to read those statements.

You should look for organizations with independent boards, whistle-blower protections and policies to avoid conflicts of interest. “These help prevent scandal,” she says, such as misuse of funding or improper use of assets. Dependability is also important; some organizations like the Salvation Army have clear, historical reputations. Barring that, ask your network of peers who they give to and why.

2 Check the tax implications

In return for a charitable gift, the giver gets a nice tax deduction if they itemize their deductions. But there are a number of rules one should follow. It’s usually only worth itemizing if all deductions, including charitable donations, are above the standard deduction amount, which is $5,800 for singles and $11,600 for married people filing jointly. Itemizing can lower the total amount of income one is taxed on.

Secondly you should request a receipt from the charity for donations of $250 or more. The IRS typically requires receipts for these transactions. (Note that donations to political parties, labor unions, for-profit school and hospitals are not tax deductible.) The form a gift takes is important too. For example, cash donations are usually fully-deductible, whereas you may only be able to deduct your cost basis on property unrelated to a charity’s mission.

3 Ask the charity how it prefers to be paid

Charities often must pay between 2% to 5% of the total transaction fee when gifts are made by credit card. That fee can eat into the gift. On the other hand, it costs money to pay someone to open the mail and deposit checks. So ask the charity for its preferred method of payment.

4 Give appreciated stock

This is one of the most cost-effective ways to give. The reason: It helps givers avoid the capital gains tax. Let’s say one bought a stock for $500 and it has appreciated and is now worth $1,000. By donating the $1,000 stock to a charity, the giver won’t pay taxes on the $500 worth of gains. By selling the stock, one has to pay taxes even if the proceeds are then given to charity.

5 Consider donating time

Those who would like to give back but have tight budgets may consider volunteering. You’ll feel great, and although time spent volunteering isn’t deductible, transportation and related expenses are.

If you would like any further information on charitable contributions, please feel
free to contact us.

IR 2011-116; Notice 2012-1, 2012-1 IRB

IRS has announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) will remain at 55.5¢ per mile for business travel after 2011—that is, unchanged from the July 1, 2011 mid-year adjustment. This rate can also be used by employers to reimburse tax-free under an accountable plan for employees who supply their own autos for business use, and to value personal use of certain low-cost employer-provided vehicles. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense will decrease by .5¢ from the July 1, 2011 mid-year adjustment to 23¢ per mile.

A separate rate applies for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction. (Rev Proc 2010-51) The mileage rate for driving an auto for charitable use (14¢ per mile) is a statutory rate that’s not adjusted for inflation. (Code Sec. 170(i))

Notice 2012-1 provides that the standard mileage rate for transportation or travel expenses is 55.5¢ per mile for all miles of business use (business standard mileage rate). The standard mileage rate is 23¢ per mile for use of an auto (1) for medical care described in Code Sec. 213; or (2) as part of a move for which the expenses are deductible under Code Sec. 217. The standard mileage rate is 14¢ per mile for use of an auto in rendering gratuitous services to a charitable organization under Code Sec. 170. (Notice 2012-1,
Sec. 2)

You may not have asked yourself that question in so many words, but you may have wondered what sets CPAs apart from other financial professionals. The answer in short: A lot. We typically begin our careers with years of college education. To become licensed, we must take the demanding Uniform CPA Examination, which tests our knowledge on a wide range of business topics over a total period of 14 hours. In addition, we have to meet an experience requirement and then be licensed by a State Board of Accountancy to practice. But it doesn’t stop there. Once we become CPAs, we also must meet continuing
education requirements to update our knowledge of new business developments as well as commit to a strict code of ethical standards. Armed with this rigorous training, we’re on the job year round, ready to help individuals and businesses address their own unique challenges.
If you want more information about our firm and how we can help you resolve all your financial issues, don’t hesitate to contact us.

And how we can help you leverage what you learn from your tax return.

What does your tax return say about your financial situation? The fact is, the paperwork you file each year
offers excellent information about how you are managing your money—and about areas where it might be
wise to make changes in your financial habits. If you have questions about your financial situation,
remember that we can help. Our firm is made up of highly qualified and educated professionals who work
with clients like you all year long, serving as trusted business advisers. So whether you are concerned
about budgeting; saving for college, retirement or another goal; understanding your investments; cutting
your tax bite; starting a business; or managing your debt, you can turn to us for objective answers to all
your tax and financial questions.

The window of opportunity for many tax-saving moves closes on December 31. So set aside some time to evaluate your tax situation now, while there’s still time to affect your bottom line for the current tax year. With that in mind, here are 10 things to consider as the curtain closes on 2011.

1. Deferring income to 2012 means postponing taxes

Consider opportunities you might have to defer income to 2012. You might be able to delay a year-end bonus, for example.  If you’re able to push what would have been 2011 income into 2012, you may be able to put off paying income tax on the deferred dollars until next year.

2. Paying deductible expenses sooner may help you in 2011

Does it make sense for you to accelerate deductions into 2011? If you itemize deductions, it might help your 2011 bottom line to pay deductible expenses like medical costs, qualifying interest, and state and local taxes before the end of the year, instead of waiting until 2012.

3. Income tax rates to remain the same in 2012

The same six federal income tax rates that apply in 2011 will apply in 2012. So, depending upon your income, you’ll fall into either the 10%, 15%, 25%, 28%, 33%, or 35% rate bracket. And, as in 2011, long-term capital gains and qualifying dividends will continue to be taxed at a maximum rate of 15% in 2012; and if you’re in the 10% or 15% tax rate brackets, a special 0% tax rate will generally continue to apply.

4. Is AMT a factor?

If you’re subject to the alternative minimum tax (AMT), special rules apply. For example, the AMT rules can effectively disallow a number of itemized deductions, making it a potentially significant consideration when it comes to year-end planning. You’re more likely to be subject to AMT if you claim a large number of personal exemptions, deductible medical expenses, state and local taxes, and miscellaneous itemized deductions. If you’ve been subject to the AMT in the past, or think that you might be for 2011, you’ll want to make sure that you understand how the AMT rules might affect you.

5. IRA and retirement plan contributions

Employer-sponsored retirement plans like 401(k) plans and traditional IRAs (if you qualify to make deductible contributions) present an opportunity to contribute funds on a pre-tax basis, reducing your 2011 taxable income. Contributions that you make to a Roth IRA (assuming you meet the income requirements) aren’t deductible, so there’s no tax benefit for 2011–they’re still worth considering, though, because qualified distributions are free from federal income tax. The window to make 2011 contributions to your employer plan closes at the end of the year, but you can generally make 2011 contributions to your IRA up to April 17, 2012.

6. Special distribution requirements at age 70½

Once you reach age 70½, you’re generally required to start taking required minimum distributions (RMDs) from any traditional IRAs or employer-sponsored retirement plans you own. It’s important to make withdrawals by the date required–the end of the year for most individuals. The penalty is steep for failing to do so: 50% of the amount that should have been distributed. Barring additional legislation, 2011 will be the last year to take advantage of a popular provision allowing individuals age 70½ or older to make qualified charitable distributions of up to $100,000 from an
IRA directly to a qualified charity (these charitable distributions are excluded from your income, and count toward satisfying any RMDs that you would otherwise have to take from your IRA for 2011).

7. Depreciation and expense limits to drop for business owners and the self-employed

If you’re a small business owner or a self-employed individual, you’re allowed a first-year depreciation deduction of 100% of the cost of qualifying property acquired and placed in service during 2011; this “bonus” first-year additional depreciation deduction will drop to 50% for property acquired and placed in service during 2012. For 2011, the maximum amount that can be expensed under IRC Section 179 is $500,000, but in 2012 the limit will drop to $139,000.

8. Last chance to deduct energy-efficient home improvements

This is the last year you’ll be able to claim a credit for energy-efficient improvements you make to your home (up to 10% of the cost of qualifying property). Improvements can include a qualifying roof, windows, skylights, exterior doors, and insulation materials. Specific credit amounts may also be available for the purchase of energy-efficient furnaces and hot water boilers. However, there’s a lifetime credit cap of $500 ($200 for windows). So, if you’ve claimed the credit in the past–in one or more years since 2005–you’re only entitled to the difference between the current cap and the amount you’ve claimed in the past.

9. Other expiring provisions

Barring additional legislation, this is the last year that you’ll be able to elect to deduct state and local general sales tax in lieu of state and local income tax, if you itemize deductions. This also will be the last year for both the above-the-line deduction for qualified higher education expenses, and the above-the-line deduction for up to $250 of out-of-pocket classroom expenses paid by education professionals.

10. Get help

Making effective year-end moves requires a solid understanding of the rules that are in effect for both 2011 and 2012. It also requires a comprehensive grasp of your overall financial situation. A financial professional can help you evaluate potential opportunities, and can keep you apprised of any last-minute legislative changes.

With record unemployment you may not be aware of how the tax code can be used to reduce the cost of a job search.  Some job search expenses are deducted as a miscellaneous itemized deduction.  These deductions are limited, so some of the benefit may be lost.  However, by being self-employed during your job hunt, you can convert limited deductions in to fully deductible ones.

Getting tax help is a wise move for job hunters. “Even a little goes a long way, and a quick phone call could save you a lot of money,” says Melissa Labant of the American Institute of CPAs.

The first place many job-hunters look for write-offs is the miscellaneous deduction, which includes unreimbursed employee expenses and applies to the recently unemployed as well. It is the go-to slot for deducting travel, entertainment, subscriptions, business cards and other costs.

There is a problem, however. Permitted expenses are deductible only to the extent that they exceed 2% of a taxpayer’s “adjusted gross income,” which is income minus a few items. On a $100,000 income, that’s $2,000.  This can be difficult if you have a working spouse, severance or other income.

There’s another limit, too. Job-hunting expenses can count as miscellaneous deductions only if a taxpayer is looking for work in the same occupation. That rules out write-offs for students looking for a first job, or a machinist who wants to become a screenwriter.

The rule’s boundaries are vague. For instance, if an engineer who managed a couple of people is looking for a pure management job, she could reasonably claim that she was and will remain a manager. But sometimes the IRS takes a hard line on such claims.

Fortunately, there’s a better route for job-seekers who can earn some income: set up a sole-proprietorship business reported on Schedule C of the tax return. Here taxpayers may fully deduct many “ordinary and necessary” costs of doing business.

As a result, deductions for home-office, business-card, travel or résumé-preparation expenses that otherwise would be limited are fully allowed now—as long as the costs are matched against income you’ll claim on Schedule C. And there isn’t a requirement to stick with your former occupation.

For example, if a lawyer wants to become a chef, he can’t claim job-search costs as a miscellaneous deduction. But if he sets up a Schedule C business as a chef and finds a temp job or two, he can deduct his knives and business cards while also looking for a full-time job.

The biggest problem with this strategy is that you need income. The IRS frowns on losses from businesses unless they show a profit in at least three years out of five. This is known as the hobby loss rule.  But even a small profit opens the door to many deductions.

Business owners must pay both the employer and employee share of payroll taxes on net income—currently 13.3%—and file quarterly tax returns. “People used to getting a paycheck where taxes are withheld are often shocked by this,” says Ms. Labant of the American Institute of CPAs.

What if you find a full-time job? Nothing prevents a taxpayer from being both an employee and the owner of a Schedule-C business. Many employees have consulting businesses on the side.

One more caveat for job-seekers, and any other taxpayer, for that matter; who plan to take deductions of any type: Get serious about record-keeping. The IRS is a stickler about this.

Now for more specifics on the tax treatment of everything from severance pay to home-office expenses.

Severance pay is taxable, as is accumulated vacation or sick pay, but the former employer is supposed to withhold federal and state taxes. Unemployment pay also is taxable.

Withholding for unemployment isn’t automatic, however, and many taxpayers forget this fact. To avoid getting caught short at tax time, file IRS form W-4V with your state. Tax will be withheld at a flat 10% rate.

Those whose income drops significantly also may be newly eligible for “refundable” credits such as the Earned Income Credit or the Additional Child Credit, which provide a refund even if tax isn’t owed.

If your former employer pays employment- and outplacement-agency fees, they don’t count as income to you. If you pay these expenses, they count as miscellaneous deductions.

There’s good news for people who are between jobs and tap investment funds. Those with taxable incomes of less than $34,500 for single filers or $69,000 for joint filers pay no tax on long-term capital gains or qualified dividends. So if you must tap your accounts, at least you don’t have to pay Uncle Sam.

Many ex-employees make tax-free rollovers of their 401(k) plans into an individual retirement account after they leave a company.  But some tuition payments; medical insurance premiums for some unemployed workers; and medical expenses if they are greater than 7.5% of adjusted gross income are exempt from the 10% penalty.

With a Roth IRA, the account owner may withdraw his or her own contribution free of income tax. But the 10% penalty (and exceptions) mentioned earlier applies if the account was converted from a regular IRA within the previous five years. And if you withdraw Roth earnings—as opposed to principal—before age 59½, both income tax and the 10% penalty may apply. Again, keep good records

Unreimbursed medical expenses (which include insurance premiums) are deductible only for those who itemize, and only to the extent that they exceed 7.5% of adjusted gross income (or 10% if you are subject to alternative minimum tax). With income low, it may be easier than usual to get over this limit. For taxpayers who are self-employed, health-insurance premiums may be fully deductible.

Deductions for a home office, including supplies and equipment such as a computer, may get a better break if taken on Schedule C, whereas they will be limited if they qualify as miscellaneous expenses.

To be deductible, a home office usually must be used exclusively and regularly as a principal place of business. (No weekend football-game watching or kids doing homework.) Appropriate services and supplies—business cards, resume preparation, cell phone, professional fees—for the business or the job hunt are often deductible as well.

Equipment, such as a computer, may need to be depreciated over time. If there is personal as well as business use, expenses may have to be allocated between the two.

Finding work, permanent or part-time, often requires prospecting near and far. As with home offices, qualified travel and entertainment deductions often get a better break on Schedule C.

The rules are fuzzy, but job seekers who want to deduct travel would do well to spend more than half their time looking for work while they are traveling. (Travel time also counts as work.) Thus for many, evenings or weekends aren’t part of the equation.

For drivers, the IRS allows 55.5 cents per business mile, or else actual costs such as depreciation, gasoline and maintenance. Taxpayers who want to go the latter route should probably seek expert help, because this quickly gets complicated, especially if there is personal use involved.

What about meals and entertainment? The allowed deduction starts with 50% of their cost, and you should keep excellent records—say, a short note as to what was discussed—in case IRS agents come calling.

Would more education help a job search? For those without a college degree, the most useful tax break is likely to be the American Opportunity Tax Credit, which can be claimed even if you don’t have income.

What about graduate or professional-enrichment courses? At least nine benefits exist, all with different requirements and income limits.

Two of the most commonly used are the Lifetime Learning Credit and the so-called Tuition and Fees Deduction.

Unreimbursed moving expenses may be written off even if a taxpayer doesn’t itemize deductions. But the new job usually has to be at least 50 miles away from the old one.

A taxpayer also must hold a new job for a certain period after a move, which differs depending on whether he or she is an employee or self-employed.

The IRS issued a notice on Wednesday providing guidance on the tax treatment of employer-provided cell phones now that they have been removed from the definition of listed property (Notice 2011-72). The notice discusses the treatment of employer-provided cell phones as an excludible (from the employee’s income) fringe benefit.

The IRS says it has received questions about the tax treatment of employer-provided cell phones and similar telecommunications equipment in the wake of changes enacted by the Small Business Jobs Act of 2010 (PL 110-240). Prior to the act, cell phones were included under the section 280F definition of “listed property” and, for employers to deduct the cost of cell phones they provided to employees, the strict substantiation requirements of section 274(d) had to be met.  I call the section 274(d) requirements the “who, what, when, where, how and why” requirements or “journalism” requirements.

The Small Business Jobs Act removed cell phones from the definition of listed property for tax years beginning after Dec. 31, 2009. However, the IRS points out that the act did not otherwise alter the requirement that an employer-provided cell phone be treated as a fringe benefit, the value of which must be included in the employee’s gross income, unless an exclusion applies. The act also did not affect the potential treatment of an employer-provided cell phone as an excludible fringe benefit.

The IRS says that the value of the business use of an employer-provided cell phone is excludible from an employee’s income as a working condition fringe to the extent that, if the employee paid for the use of the cell phone, the employee would be able to deduct such payment as a trade or business expense (under
section 162).

For such treatment to apply, the cell phone must be provided to the employee for noncompensatory business reasons, for example, to speak with clients when away from the office. The notice says a cell phone provided to promote employee morale or goodwill is not provided primarily for a noncompensatory business
reason.

The notice says that, if an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the IRS will treat the employee’s use of the cell phone for reasons related to the employer’s trade or business as a working condition fringe benefit, the value of which is excludible from the employee’s income. The IRS will also treat any personal use of such a cell phone as a de minimis fringe benefit, excludible from the employee’s income.

The rules in Notice 2011-72 apply to any use of an employer-provided cell phone occurring after Dec. 31, 2009.

In a recent article the Wall Street Journal discussed some of the tax breaks that are in jeopardy of being repealed.  The top 10 individual tax breaks will cost more than $3 trillion in forgone tax revenues between 2010 and 2014, according to estimates by Congress’s Joint Tax Committee. By contrast, the top 10 corporate tax breaks will cost only $350 billion over the same period. (This disparity isn’t surprising: the individual income tax long has raised far more revenue than the corporate income tax; it currently brings in more than four times as much.)

Here is a rundown of the Joint Tax Committee’s top 10 tax breaks, along with their 2010-14 revenue cost. Medicare doesn’t appear on the list because Parts A, B, and D are counted separately. Added together, they would be in fourth place.

Health insurance: Employer payments for health care, health insurance premiums, and long-term-care insurance premiums aren’t taxed, costing $659 billion.

Mortgage interest: Homeowners may deduct mortgage interest on up to $1.1 million of debt for up to two homes, costing $484 billion for deductions on 34 million tax returns a year.

Capital gains and dividends: Long-term gains and qualified dividends are taxed at a maximum rate of 15%. Total tab: $403 billion.

Pensions: Defined-benefit pension contributions and earnings aren’t taxed (although payouts are), for a total of $303 billion.

Earned-Income Tax Credit: Some 26 million low-income taxpayers a year are expected to claim $269 billion.

Donations:  Charitable contributions are largely deductible, costing $241 billion for 36 million claims a year.

State taxes:  Deductions for state and local income, sales and property taxes will cost $237 billion for 41 million claims a year.

401(k):  Contributions and earnings aren’t taxed (although payouts may be), for a total of $212 billion.

Capital gains at death: Assets held at death aren’t subject to capital gains tax. Total tab:  $194 billion.

Social Security benefits: The portion of Social Security and railroad retirement payments that isn’t taxed comes to $173 billion from 28 million tax returns a year.