|
Dear Clients and Friends:
As 2010 draws to a close, the nation’s tax situation has been addressed by Congress. The Bush-era tax cuts will remain in place for everyone, at least for the next two years. Thus, planning strategies are no different than in previous years-taxpayers generally should try to accelerate deductions to this year and defer income until later years.
Following are a few things to consider as year end approaches. |
| Important ROTH Conversion Decisions |
Every situation is different, and whether to convert or not depends on many factors. With the ability to “recharacterize” (a fancy word for “undo”) a 2010 Roth conversion until 10/15/11 (the extended due date of your return), you can have 20/20 hindsight on the decision. What if you don’t convert by year end? All is not lost. You’ll still be able to convert after 2010. But 2010 has a bonus feature allowing you to recognize the Roth conversion income over two years (2011 and 2012) rather than in 2010.
Our suggestion: if you are still considering the conversion in 2010, call us immediately. We can help you through this complex decision. |
|
Tax Brackets Matter on Capital Gains
|
| You may qualify for the special 0% rate on long term capital gains and qualified dividends. If you’re in the 10% or 15% federal income tax bracket, long-term capital gains and qualified dividends are tax-free until they push you into the 25% tax bracket. That bracket begins at $68,000 of taxable income on joint returns and $34,000 for singles. If you own appreciated stocks, this is an opportunity to sell them, pay no federal income tax on the gain, and even re-acquire the stocks with a higher basis. |
|
Businesses Must Attend to This Important New 1099 Requirement
|
|
One provision of Health Care Reform is expanded 1099 reporting beginning in 2011. This new requirement can affect businesses in two ways:
- First, 1099s will have to be issued to all vendors paid $600 or more for goods or services during the calendar year, including corporations. The only exceptions are payments to non-profit organizations and payments made via business credit cards (the credit card companies will handle that reporting).
- Second, if you are a business that accepts credit card payments, your credit card processor is probably hounding you for your taxpayer ID number. Without it, they will be required to collect “backup withholding” on payments to you. Be sure you communicate with your credit card processor before year end.
Expanded 1099 reporting also applies to landlords, who will be required to issue 1099′s if they pay $600 or more a year for goods or services.
QuickBooks has features to help track vendor payments and prepare 1099s. Call us if you need assistance using this feature, or for general questions about 1099 reporting.
|
|
Federal Tax Payments for Businesses Now ALL Electronic
Form 8109 Discontinued
|
| Generally, the IRS will no longer permit taxpayers to deposit federal taxes at their bank using a coupon. Instead, you must register for the electronic federal tax payment system (EFTPS). Registration can be done here. Call us if you need help or have questions. |
|
Reduce Your Estate and Save
|
| Gifting is an effective way of reducing one’s estate. If you normally make annual gifts, be sure to make your 2010 gifts before year end. The annual exclusion amount remains at $13,000 per donee for 2010. Specific gifts of more than this amount need to be reported on a gift tax return. Call us if you have any questions. |
|
Those Special Tax-Free Medical
Savings Accounts? They’re Changing
|
| Changes are coming to Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). Be aware that beginning in 2011, the cost of non-prescription drugs can no longer be paid using FSAs or HSAs. With a physician’s note, certain non-prescription drugs used long term can be reimbursed. Call us for specifics. |
|
|
|
Give Generously, And Keep the Receipt
|
| Remember that you need proof for all charitable gifts. For gifts of $250 or more, the charity should provide you with an acknowledgement. For lesser amounts, a cancelled check will suffice. |
|
New Mileage Rates for 2011
|
The IRS has published 2011 mileage reimbursement rates:
Business – $.51
Medical and moving – $.19
Charitable – $.14 |
|
ESL News
|
| We are pleased to welcome Courtney Bishop to our staff. Courtney, who lives in Wells, Vermont with her husband and two children, has 7 years experience providing tax and accounting services to individuals and small businesses. We look forward to introducing her to you.
As most of you know, Dick Engel, this firm’s founder, is retiring at the end of December. Over the past nearly 30 years, Dick has grown the firm from a solo practice to a firm with nine members. He has established a tradition of excellence in providing you, our clients, with sound tax planning, compliance and financial advice. As Dick retires, those of us remaining will strive to continue the tradition of excellence that Dick established and the firm embodies. Dick will not have full use of his ski pass or golf clubs just yet. He will continue his role with Wealth Management Partners, LLC and provide consulting services on a limited basis for our tax practice.
We appreciate your continued business and referrals.
Have a safe and joyous holiday season!
Sincerely,
Engel Spivey Lemonik, PC |
|
|
|
