Year-End Tax Planning

Posted on November 30, 2011 by taxblogger

Tax and Money Tip of the Week
Year-End Tax Planning
November 30, 2011 | No. 70

A year-end tax planning meeting with your CPA can keep you informed of your year-end tax situation for cash flow purposes.  Know how to not overpay your taxes.  You can also avoid potential penalties.  Year-end tax planning recommendations can frequently pay for itself. 

For the business owner, one of the largest expenses can be taxes.  For this reason alone, this expenditure requires planning and monitoring as any other major expense.  A year end planning meeting with your accountant should include a discussion of:

  • any assets purchased during the year
  • anticipated year-end revenues and expenses
  • plans for current year retirement funding
  • any refinancing of debt that occurred in the current year
  • any changes to your business structure

This planning meeting should prepare the business owner to anticipate the amount of taxes that will be owed on March 15th (or April 15th if the tax burden flows through to the personal return).  To be effective, tax planning needs to be done prior to New Year’s Eve. 

We can provide knowledge and experience to help you understand and fully utilize your tax plan.  Use our experience in year-end tax planning to enhance your bottom line.  Give us a call if you would like to discuss your personal tax situation and if we might be of assistance to you.
 

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Education Tax Deductions, Part II

Posted on November 28, 2011 by taxblogger

Tax and Money Tip of the Week
Education Tax Deductions, Part II
November 23, 2011 | No. 69

With the current weak economic conditions, many people are considering additional education to refresh skills or acquire new ones.  This week we have more to discuss on tax breaks that may be available to you if you are going back to school or sending a child off to college. 

Here is a brief overview of two deductions and how they can be a real benefit to help ease the burden of higher education costs.

Student Loan Interest Deduction – This deduction could allow for up to $2,500 reduction in taxable income if the following apply.

  • Loan must have been taken out solely to pay for qualified education expenses
  • The student must be you, your spouse, or your dependent at the time that the loan was taken out
  • Enrolled at least half-time in a degree program
  • Deduction is limited on couples with modified adjusted gross income (MAGI) of $150,000 if married filing jointly and $75,000 if single, head of household or qualifying widow(er)

One great benefit of this deduction is that you can deduct interest paid during the remaining period of your student loan.

Tuition and Fees Deduction – This is a deduction for education tuition and fees, those that are required for enrollment or attendance at an eligible postsecondary educational institution.  Personal living or family expenses, such as room and board do not qualify.  You can reduce your income subject to tax by up to $4,000.  This deduction can be claimed even if you do not itemize and may be beneficial to you if you do not qualify for the American opportunity or lifetime learning credits, subject to income limits of $160,000 if married filing jointly and $80,000 if single, head of household or qualifying widow(er).

Call us if we can help you determine if you qualify.
 

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Education Tax Deductions, Part I

Posted on November 16, 2011 by taxblogger

Tax and Money Tip of the Week
Education Tax Deductions, Part I
November 16, 2011 | No. 68

With the current weak economic conditions, many people are considering additional education to refresh skills or acquire new ones.  This week we have more to discuss on tax breaks that may be available to you if you are going back to school.

Here is a brief overview of two deductions and how they can be a real benefit to help ease the burden of higher education costs.

Business Deduction for Work-Related Education – One of the benefits of this deduction is that there is no dollar limit on the size of the deduction or any income phase-out.
To claim this deduction you must:

  • be working
  • itemize your deductions on Schedule A of your 1040 if you are an employee
  • file a Schedule C if you are self-employed AND
  • have expenses for education that qualify

To qualify as an expense the cost must be either required by your employer or the law to keep your job or improves skills needed in your present work.  The education does not qualify if it is for a new trade or skill.

Employer-Provided Educational Assistance – If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits from tax each year for payments for education.  This exclusion applies to undergraduate and graduate tuition and there is no income phase out.  The payments may be made for tuition, books, supplies and equipment.

Call us if we can help you determine if you qualify.  More on Education tax deductions next week.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Education Tax Credits, Part II

Posted on November 9, 2011 by taxblogger

Tax and Money Tip of the Week
Education Tax Credits, Part II
November 9, 2011 | No. 67

The Lifetime Learning Credit

With the current weak economic conditions, many people are considering additional education to refresh skills or acquire new ones.  This week we have more to discuss on tax breaks that may be available to you if you are going back to school or sending a child off to college.

Here is a brief overview of the Lifetime Learning Credit and how it can be a real benefit to help ease the burden of higher education costs.

  • Maximum credit of $2,000 per return
  • No portion is refundable – credit is limited to the amount of tax you must pay on your taxable income
  • Credit is limited to couples with modified adjusted gross income (MAGI) and phases out completely at $122,000 if married filing jointly, $61,000 if filing single, head of household or qualified widow(er)
  • Available for all years of postsecondary education and for courses to acquire or improve job skills
  • Available for an unlimited number of years
  • Student does not need to be pursuing a degree or other recognized education credential
  • Qualified expenses are tuition and fees required for enrollment, including amounts paid to the institution for course related books, supplies and equipment
  • Payments include those made in 2011 for academic periods beginning in 2011 and in the first three months of 2012

Call us if we can help you determine if you qualify.  More on Education Credits next week.
Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Education Tax Credits, Part I

Posted on November 2, 2011 by taxblogger

Tax and Money Tip of the Week
Education Tax Credits, Part I
November 2, 2011 | No. 66

The American Opportunity Tax Credit

With the current weak economic conditions, many people are considering additional education to refresh skills or acquire new ones.  In the next several weeks, we will discuss several tax breaks that may be available to you if you are going back to school or sending a child off to college. 

Here is a brief overview of the American Opportunity Tax Credit and how it can be a real benefit to help ease the burden of higher education costs.

  • Maximum credit of $2,500 per eligible student
  • Up to $1,000 of the credit is “refundable” if no tax is due
  • Credit is limited to couples with modified adjusted gross income (MAGI) and phases out completely at $180,000 if married filing jointly, $ 90,000 if filing single, head of household or qualified widow(er)
  • Available only for the first 4 years of postsecondary education
  • Available only for 4 tax years per eligible student (including any year(s) the Hope Credit was claimed)
  • An eligible student is defined as one that is pursuing an undergraduate degree or recognized education credential and is enrolled at least half time
  • Qualified expenses are tuition and fees required for enrollment, course related books, supplies and equipment
  • Payments include those made in 2011 for academic periods beginning in 2011 and in the first three months of 2012.

Call us if we can help you determine if you qualify.  More on Education Credits next week.
 

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Money Tip – Investing 101 #4

Posted on October 26, 2011 by taxblogger

Tax and Money Tip of the Week
Money Tip – Investing 101
October 26, 2011 | No. 65

This week we have a more tips on investing concepts.

This series is not intended as investment advice, but only a general discussion of investing in the new millennium and in the age of the Internet, High Frequency Trading, and Machines.

Considering all the volatility over the last few weeks, here are some thoughts to consider investing today, that our parents may not have taught us.

KEY LESSONS/considerations in Managing Your Money in the new environment:

  1. It’s OK not to play.
  2. Have a goal and an exit plan.
  3. Never fall in love with a stock/mutual fund.
  4. Always have a sell stop loss, mental or actual,  decided.
  5. In trendless, indecisive markets, be agile and nimble. Take gains quickly.

If you need help navigating your financial direction, feel free to contact us.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Clarification of Qualified Medical Deductions

Posted on October 19, 2011 by taxblogger

Tax and Money Tip of the Week
October 19, 2011 | No. 64
Clarification of Qualified Medical Deductions

Tax Court Clarifies Qualified Medical Deductions

Up until now, it has been unclear what medical expenses are eligible for a tax deduction.  A strict reading of the prior rules seemed to indicate only expenses incurred to pay for “skilled” caregivers was a qualified expense.

In a recent case (Est. of Baral, 137 TC No. 1) the Tax Court ruled that costs of a caregiver for a dementia patient qualifies as a medical expense.  In this case, a mother was diagnosed with the disease and her doctors determined she needed 24-hour supervision.  Her son hired caregivers to assist her.  Although the caregivers were not licensed health care providers, the payments were deemed as medical expenses.  Her doctor certified that her dementia endangered her health because she otherwise would not take her medications.

Furthermore, the Court ruled that such deductions are not limited to dementia patients.  The cost of personal care services qualifies for a medical expense for any patient unable to perform at least two of the six activities of daily living—eating, toileting, transferring, bathing, dressing and continence.  The certifying professional can be a doctor, registered nurse or licensed social worker.

If you know of anyone in this situation, please let them know.  These patients definitely need every break they can get.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Don’t Miss the October 17 Deadline

Posted on October 5, 2011 by taxblogger

Tax and Money Tip of the Week
October 5, 2011 | No. 63
Don’t Miss the October 17 Deadline

If you need to file a Form 1040 (individual return), the deadline to file is October 17, 2011.  This assumes you had filed for an extension prior to April 18, 2011.  You also have until October 17, 2011 to fund a SEP-IRA for tax year 2010.

As a reminder, putting your tax returns on extension can be a good thing – but penalties to miss the extension deadline can be steep, up to 25% penalty of taxes owed, so make sure that you make the October 17th deadline.

Give us a call if you need help meeting your deadline.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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Money Tip – Investing 101 #3

Posted on September 28, 2011 by taxblogger

Tax and Money Tip of the Week
Money Tip – Investing 101
September 28, 2011 | No. 62

This week we have a very important tip on investing concepts.

This series is not intended as investment advice, but only a general discussion of investing in the new millennium and in the age of the Internet, High Frequency Trading, and Machines.

Considering all the volatility over the last few weeks, here are some thoughts to consider investing today, that our parents may not have taught us.

Here’s a lesson that the 2008-2009 Great Recession taught a lot of people:

KEY LESSON:
Learn what Liquidity (or have a lot of cash or money markets available) means.  And know where this money exists and have access to it: to pay your bills, meet obligations, and the unexpected.

RECOMMENDED:
Classic certified financial planning advice says you should have 9 months of your monthly obligations of cash at a minimum in safe places, easily accessible.  We like to see 12 months of cash reserves.

More on investing next week.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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IRA Terms You Sould Know

Posted on September 21, 2011 by taxblogger

Tax and Money Tip of the Week
September 21, 2011 | No. 61
IRA Terms You Sould Know

Three Terms Regarding Roth Conversions

There were a lot of discussions this recent tax season regarding the tax law changes on Roth conversions.  Those conversations will likely continue this year, as some changes to your new Roth can be made through October 2011.
 
Here are three terms you should know:
 
Conversion:  A conversion is the act of moving your retirement account assets from one type of IRA to another.
 
You can convert all or part of a traditional IRA to a Roth IRA.  Just remember the amount you convert is taxable, assuming you have no basis in your traditional IRA.
 
Note:  Only conversions made in 2010 allowed you the option to pay one half the tax liability in 2011 and the other half in 2012.  Any conversions made in 2011, and the subsequent taxes, will need to be paid on your 2011 tax return.
 
Recharacterization:  After making a Roth conversion, you can choose to transfer the assets back to your traditional IRA.  Recharacterizing cancels the initial conversion as if it never happened.  This could be good tax planning if the value of the assets decline after you converted.  While the loss is not deductible, you’ll avoid paying tax on the full amount of the initial conversion.
 
For a 2010 conversion, you have until October 17, 2011 to do a recharacterization.
 
Reconversion:  A reconversion is what happens after you convert a traditional IRA to a Roth, later recharacterize, and then decide to make another conversion.
 
A waiting period applies that limits you to one reconversion per year.
 
Give us a call to see if any of these tax planning tips could help you.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
mark@markvitekcpa.com

…until next week.

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