Articles
Year-End Planning Provides Tax Savings Opportunities: IRA Conversion
Convert your traditional IRA into a Roth IRA if doing so is expected to produce better long-term tax results for you and your beneficiaries. Distributions from a Roth IRA can be tax-free but the conversion will increase your adjusted gross income for 2010. However, you will have the choice of when to pay the tax on the conversion. You can either (1) pay the tax on the conversion when you file your 2010 return in 2011, or (2) pay half the tax on the conversion when you file your 2011 return in 2012, and the other half when you file your 2012 return in 2013. Your CPA can help you determine which option is right for you.
Year-End Planning Provides Tax Savings Opportunities: Take RMDs from Retirement Accounts
If you have reached age 70 1/2, , another way to reduce your federal tax bill is to take required minimum distributions (RMD) from your IRA or 401(k) plan (or other employer-sponsored retired plan). Failure to take a required withdrawal can result in a penalty of 50% of the amount not withdrawn. A temporary tax law change waived the RMD requirement for 2009 only, but the usual withdrawal rules apply full force for 2010. So individuals age 70 1/2 or older generally must take the required distribution amount out of their retirement account before the end of 2010 to avoid the penalty. If you turned age 70 1/2 in 2010, you can delay the required distribution to 2011, but if you do, you will have to take a double distribution in 2011—the amount required for 2010 plus the amount required for 2011. Think twice before delaying 2010 distributions to 2011—bunching income into 2011 might push you into a higher tax bracket or have a detrimental impact on various income tax deductions that are reduced at higher income levels. Contact our office for more information.
Year-End Business Planning Provides Tax Savings: Hire Now
Hire a worker who has been unemployed for at least 60 days before year end if you are thinking of adding to payroll soon. Your business will be exempt from paying the employer’s 6.2% share of the Social Security payroll tax on the formerly unemployed new-hire for the remainder of 2010. Plus, if you keep that formerly unemployed new-hire on the payroll for a continuous 52 weeks, your business will be eligible for a nonrefundable tax credit of up-to-$1,000 after the 52-week threshold is reached. This credit will be taken on the business’s 2011 tax return. In order to be eligible, the formerly unemployed new-hire’s pay in the second 26-week period must be at least 80% of the pay in the first 26-week period. Contact our office for more information on how this tax savings could benefit your company.
Year-End Business Planning Provides Tax Savings: Buy New Office Equipment
Thinking of buying new office equipment? Put new business equipment and machinery in service before year-end to qualify for 50% bonus first-year depreciation allowance. Unless Congress acts, this bonus depreciation allowance won’t be available for property placed in service after 2010. Contact your CPA for more information.
Year-End Business Planning Provides Tax Savings: Business Property Expensing
To help reduce your tax liability, you can make expenses qualifying for the $500,000 business property expensing option. The maximum amount you can expense for a tax year beginning in 2010 is $500,000 of the cost of qualifying property placed in service for that tax year. The $500,000 amount is reduced by the amount by which the cost of qualifying property placed in service during 2010 exceeds $2 million. Also, within the overall $500,000 expensing limit, you can expense up to $250,000 of qualified real property (certain qualifying leasehold improvements, restaurant property, and retail improvements). Note that at tax return time, you can choose not to use expensing (or bonus depreciation) for 2010 assets. This is something to consider if tax rates go up for 2011 and future years, and you’d rather have more deductions after 2010 than for 2010. Our office can help you work through this decision-making process.
Tax Changes: Cell Phones no Longer Property and Limited Penalty for Disclosing Transactions
New classifications for business property and limitations of reporting penalties can simplify and encourage record keeping. Cell phones no longer listed property. This means that cell phones can be deducted or depreciated like other business property, without onerous...
Year-End Business Planning Provides Tax Savings: Set Up a Retirement Plan
A great way to help ease your tax burden is to set up a self-employed retirement plan if you are self-employed and haven't done so yet. Our CPAs would be happy to assist you.
Year End Tax Tips
As the year is winding down, it is time to start doing a bit of tax planning . Small business owners who spend a little time on tax planning now, may see significant savings when tax preparation time rolls around in January. In this podcast interview with Roundpeg...
Tax Changes: S Corporation Holding Period Shortened
When starting a business or changing your business structure, a key aspect to consider is the Small Business Job Act and how it shortens the holding period of assets. S corporation holding period for appreciated assets shortened to five years. Generally, a C...
Tax Changes: Tax Breaks Comes At A Cost
The small business jobs act has tax breaks that comes at a cost. Penalties may be imposed so understand the new regulation to maximize tax benefits.
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