Recent Developments – That May Affect Your Tax Situation

The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable. [Read more…]

Education Credits Available

There are some tax credits to keep in mind if you are paying for college tuition:

 

Take a look at our recent blog post on this, and give us a call if you have any questions!

 

 

 

Last Minute Tax Saving Moves for Corporations

Here are some last minute ideas for corporations to save taxes for 2011.

 

–Make sure that you avoid penalties by paying enough in estimated tax this year.  You can avoid being penalized for underpaying your 2011 tax if you pay 100% of the 2010 tax liability in estimates for 2011.  Otherwise, the IRS goes by 100% of the 2011 tax.  This 100%-of-last-year’s-tax only works if your tax return showed a tax liability for the previous year. [Read more…]

Accept Credit Cards? Sell on eBay? Get Ready for the 1099-K!

In an effort to close the tax gap (the difference between what people pay in taxes and what they are supposed to pay in taxes) the IRS has instituted a new regulation.

 

If, during the course of your business (which includes selling online on sites like eBay) you:

–received more than $20,000 in credit card payments

–had more than 200 credit card transactions

then you can expect to receive a 1099-K from your credit card processing company (this includes PayPal) [Read more…]

Tax Credits & Deductions for Education

The IRS reminds students or parents of students paying for tuition and other fees to keep good receipts and be aware of some of the tax benefits to help offset those costs.  Typically these benefits apply to you the taxpayer, your spouse or any dependent you can claim as an exemption on your tax return.  The professionals at Loggins & Associates can help you determine which educational credit or deduction will work best for your individual situation.  Take a look at this list and give us a call today!

 

  1. American Opportunity Credit – This credit, originally created under the American Recovery and Reinvestment Act, has been extended for an additional two years – 2011 and 2012.  The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education.  Forty percent (40%) of this credit [Read more…]

Lets Talk Capital Gains and Losses

My goal with this post is to give a short primer on the tax treatment of capital gains and losses.  You’ll notice quite a few “generallys” and “usuallys” in my post because there are lots of exceptions and gotchas in the tax law.  But, I do think that information and learning is a good thing, especially in regards to your own money, so I hope this post will help you.  Our CPAs know all the ins and outs of the tax law, so if we can help you with the tax implications of your investments, please give our office a call at 770-478-7424.

 

In the tax world, there are all sorts of different types ways that you can get or lose money.

There’s ordinary income, which would be things like the money that you earn from a job or most interest that you would receive from a bank.  Ordinary income is usually taxed at one of 6 tax brackets ranging from 10% to 35%.

There’s dividends — which is when a company distributes its earnings to its stock holders.

And then there’s capital gains, which would be (generally) the amount that you made on a sale of a capital asset such as a stock or mutual fund  minus the purchase price.  If you sell your capital asset for less than what you bought it for (generally) then that is a capital loss.  There are special rules for selling of collectibles like antiques or art. [Read more…]

Tax-Saving Ways to Plan for College

Paying for college is one of the greatest financial worries most parents endure.  Aside from your own retirement, college tuition is probably the biggest expenses you will ever face.  It takes planning, research and belt tightening (and maybe some debt) to provide a college education for your children.  Funds will likely come from three sources:  savings, financial aid and tax relief.  Most importantly, you should not save for college at the expense of your retirement savings.  Many organizations, including the federal government, are willing to help your child pay for college.  However, no one is likely to give you a hand-out if your retirement fund comes up short.  Also a qualified retirement fund will not count against you when applying for financial aid.

Investments & Savings – It pays to start early and compound interest.
Allocate your assets based on the age of your children to make sure the money is available when you need it.  If your children are very young (under 11), invest for long-term growth with a large portion in the stock market.  Despite market fluxations, stocks provide the best results over the long-haul if started early enough.  Before your children reach their teens, you may [Read more…]

Tax planning for 2011 – a primer

OK, so what do I mean when I talk about “tax planning”?  Well, that means putting a little bit of purpose into your financial life.  You can absolutely (and legally!) affect the amount of tax that you owe with just a bit of forethought.  But, like most things, scrambling at the last minute will not work!  Most of the strategies that I will present over the next few weeks must be done in 2011 in order to affect your 2011 taxes.

There are many many goodies offered by the IRS in the form of various deductions and credits.  But, and this is a big but…many of those goodies start to fade away as your income gets higher.  So, one area of tax planning is income deferral, which just means shifting your income from 2011 to 2012.  This will make your income in 2011 lower, which may allow you to qualify for some of these goodies.

By the way — these aren’t obscure goodies* either — these are good ones like credits and deductions for tuition, IRA contributions, and the child tax credit.

So, how can you shift income?  Well, there are a few methods, and all of them need to be examined from all sides to make sure that it is the best option.  One popular option for shifting income is to take capital losses in 2011.  This isn’t really shifting income as much as it is reducing your AGI.  If you have an unrecognized capital loss, you may want to go ahead and take it in 2011, which will offset any capital gains and $3,000 of ordinary income (if the capital losses exceed the capital gains by at least that amount).

Another possibility would be to defer the receipt of a year end bonus.  If receiving the bonus would make you lose a tax credit, then you may just have wiped out all of the gain from the bonus!  But, this one you need to be careful with…if the bonus is already due and payable and you just haven’t gotten the check yet, then it is too late.  Also, if the deferral extends beyond 2 1/2 months after the close of the tax year, the bonus will be treated as nonqualified deferred compensation.  There’s also FICA tax to be careful with.

As you can see, there are a few landmines to watch out for if you are trying to reduce your tax for 2011.  Please give our office a call — we’re very experienced with helping our clients paying the lowest possible tax through the most efficient tax plan for their specific situation!

 

 

 

*The most obscure tax deduction I could find was for body oil!  A tax court ruled that body oil, which is used to highlight a bodybuilder’s muscles during competition is considered a legitimate business expense, and therefore deductible.  If you don’t meet those qualifications, don’t worry, I’m sure we can find some tax deductions that fit your situation!

6 Money Saving Tips for College Freshmen

While there are a variety of tax-saving ways to save for college, tuition is only part of the financial burden.  Parents of Freshmen are often caught off-guard by costs that are above and beyond standard tuition.  Most Freshmen are required to live in college dormitories their first year; if you’re in a dorm, you have to purchase a meal plan.  You’ll need to decorate your dorm room, equip it with appliances and electronics.  Your Freshman will need a computer, most likely a laptop or tablet, books and supplies for classes, plus a college-friendly wardrobe.  Before you know it, you’ve racked up thousands of additional expenses you hadn’t thought of.  Here are some tips to cut expenses not only during the first year, but throughout the college experience.  Remember every cent you save is worth the effort!

Home or Close to Home
The easiest (and probably least popular) option is to live at home.  In most cases, this eliminates the need for many Freshman purchases since there will be no need for dorm furnishings and a meal plan.  The next best option is to choose a college or university that is close to home.  Staying close to home (at least in the same state) means no out-of-state tuition and reduced travel costs to come home for a visit.

Don’t Come Home Too Often
Most Freshmen feel that their college experience has to include transportation.  For some that may mean adding a new or used vehicle.  Some students may already have a car, [Read more…]

An easy-to-get tax credit for EVERYONE!

Hi, everyone —

I wanted to let you know about a tax credit that is super easy to get and is available to almost everyone.

This is a credit, not a deduction.   Don’t know the difference?  Check out this article.  Also, this credit (as of now) is only good for 2011 — you have to do this THIS year…not next year when you are working on your taxes.

Of the many energy-saving provisions in the Code, few are more accessible to ordinary taxpayers than the $500 credit for nonbusiness energy property. The Code Sec. 25C credit can apply to relatively inexpensive, easy-to-do (perhaps even do-it-yourself) items—the installation of insulation (e.g., exterior caulking and weather-stripping), doors, and windows—as well as slightly more expensive but standard items such as central air conditioning and heat pumps. However, currently this credit only applies through 2011, and the prospects for an extension are uncertain. As a result, homeowners should consider accelerating energy-saving home improvements into this year if doing so will generate a credit.

The nonbusiness energy property credit, as most recently extended, applies only through Dec. 31, 2011. A taxpayer can claim a credit on Form 5695 equal to 10% of the cost of: (1) qualified energy efficiency improvements, and (2) residential energy property expenditures.  There is a lifetime credit limit of $500 (with no more than $200 due to windows and skylights) over the total credits allowed to the taxpayer for all earlier tax years ending after 2005. The expenses must be for property originally placed in service by the taxpayer and made on or in connection with a dwelling unit located in the U.S., and owned and used by taxpayer as his principal residence at the time of installation.

Qualified energy efficiency improvements are energy efficient building envelope components, such as (a) insulation materials or systems specifically and primarily designed to reduce heat loss/gain that meet criteria set by the International Energy Conservation Code (IECC); or (b) exterior windows, skylights or doors, or any metal roof with pigmented coating or asphalt roof with cooling granules specifically designed to reduce heat gain, installed on a dwelling unit that meet Energy Star program requirements. The component must be expected to last for at least five years.  This requirement is met if the manufacturer offers a two-year warranty to repair or replace at no extra charge.

Residential energy property expenses are expenses for qualified energy property (including labor costs for onsite preparation, assembly, or original installation) that meets specific standards set out in Code Sec. 25C(d) . The credit allowed for energy property expenditures can’t exceed:

… $300 for any energy-efficient building property (electric heat pump water heater, electric heat pump; central air conditioner; natural gas, propane or oil water heater; or a stove burning biomass fuel to heat or provide hot water to a taxpayer’s residence in the U.S.) that meets specific energy efficiency standards;

… $150 for a qualified natural gas, propane, or oil furnace; or qualified natural gas, propane, or oil hot water boiler; or

… $50 for an advanced main air circulating fan.

There’s no credit for expenditures made from subsidized energy financing.

Extension history. The nonbusiness energy property credit, as added by the Energy Tax Incentives Act of 2005 (Energy Act, P.L. 109-58, 8/8/2005), originally applied for property placed in service after 2005 and before 2008. Thus, it only applied for 2006 and 2007. Like many credits, it was extended (with certain modifications), but only after 2008 had come and gone. The credit, as extended by the Emergency Economic Stabilization Act of 2008 (EESA, P.L. 110-343, 10/3/2008), skipped 2008 and was available for property placed in service after 2008 and before 2010. The credit was once more extended (through 2010), as well as increased, broadened, and liberalized by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5, 2/17/2009). The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act, P.L. 111-312, 12/17/2010) provided the most recent extension of this credit—a one-year extension until the end of 2011.

Arguably, such a long history of extensions might indicate the likelihood of further extensions. But while still a valuable credit for homeowners, the final extension through 2011 demonstrated a more parsimonious attitude by Congress towards the credit. Thus, the nonbusiness energy property credit available in 2011 consists of a 10% credit, instead of what had previously been a 30% credit. In addition, a taxpayer’s lifetime maximum nonbusiness energy property credit is no longer the previous $1,500. Instead, it is now $500 (of which no more than $200 may be for expenditures on windows). Further, the credit is no longer available for expenditures from subsidized energy financing.