Monday, April 29, 2013

mid Tax Review: Fix Now, Save Later

Taxes, now?

Yes, right now.

April 15 is too late to make changes that can improve your tax situation. But now? Timing is perfect.

"The main reason to think about taxes now than at the time it is now possible to do tax planning strategies that could reduce the tax when deadlines are not coming," said Michael Maye, a certified financial planner and certified public accountant MJM Financial Advisers in Berkeley Heights, NJ

Here's what you should pay attention now, while there is still time to take action and reduce your tax bill.

Look Income Business

It's time for some simple math. Add up the year-to-date earnings. If you pay estimated taxes, you pay too much, or too little, to the IRS.

If your business is down because of the economy, the IRS gives you an interest-free loan by paying too much estimated tax, says Sally HERIGSTAD, a certified public accountant and the author of Help! I can not Pay My Bills. Instead, you can invest that money in your business.

"Pay too little, and penalties and interest can be brutal. These difficulties will need to watch and make adjustments throughout the year, "said HERIGSTAD.

Mid-year review is very important to make sure you have a good understanding of the financial situation of your company.

Now is a good time to think continue in 2011.

If the current tax laws remain unchanged, the 2011 tax rate is scheduled to increase, said Becky Krieger, a certified financial planner and certified public accountant with a recognized investor in Edina, Minn.

"It will negatively affect business owners interested in selling their business and transition next year," said Krieger. "Knowing that the tax rate is likely to increase, consider accelerating income cut this year or defer until 2011, when you pay a tax rate increase."

You have to formulate strategies to improve collection efforts before the end of the year, Krieger suggests. Your client may receive if they are looking for more cut this year.

Organize your deductions

Apr. 15 months later, and even the brightest minds in the business are likely to forget the little things. But the little things add up.

You have to monitor closely the amount of deductible you throughout the year, and if you keep the deductible receipt in the pile, it is a good time to sort through them - as before the memory. If you can not remember why you keep your receipt, you will not be able to use it as a cost deduced.

"Do you remember buying books related to work next April? Not a chance, "said HERIGSTAD.

"Nor are most of us remember the business lunch and justification for deducting such organizations in small pieces as you go along makes more sense than trying to recreate it all for a year and a half later .. "

If you do not have a system to track the amount of deductible, consider implementing one. Establish a file folder into categories like "food and entertainment," and "The Office." Or better yet, start scanning immediately all receipts and add them to the back- up folders on your computer. Organization today, and as you go through the rest of this year, save lots of time during the tax.

While you're at it, buy a small notebook to keep in your car to record mileage for business travel.

For 2010, the deductible rate for mileage decreased from $ 0.54 in 2009 $ 0.50 in 2010, according to Krieger.

Make a contribution Retirement Plan

Sources pensions are offering business owners a significant tax break.

If you wait until the end of the year your contribution, you could be faced with a shortage of cash if you need to come up with a lump sum to invest, Maye says, and you will also lose the benefit of potential stock market by waiting .

If you have not started a retirement plan, read more about the options for small businesses. Some require a contribution before the year is out, while the other allows you to wait until the tax filing deadline.

"Some plans, such as Simplified Employee Pension (SEP) plans, allowing you to make a contribution to wait until you file your tax return, which could be by the end of October 15 of the calendar year following the revenue generated, "said Krieger. "It provides an opportunity to assess the resources and cash available to meet the objectives defined contribution pension plan."

Krieger said period also allows you to decide whether the contributions and associated tax savings gained in the current year, or if the contribution is deferred until next year.

Another consideration for this year: small business owners find themselves in the lower tax bracket in 2010 to evaluate the benefits of the pension plan assets to convert to a Roth IRA or contribute to A Roth IRA instead of making a deductible contribution to a traditional IRA, Krieger said.

Talk to your tax advisor about whether a conversion sense for your situation.

Operating Expenses Today

If a business needs to undertake major expenditure in the coming months, a review of the overall revenue now will help you decide if the purchase should be done this year or next.

Your business may qualify for a reduction in Section 179.

"Reducing essentially allows qualified businesses to cut capital goods by treating it as a burden rather than using and depreciating it over several years," said Maye. "Does it make sense to do this depends on whether the business is likely to receive more extensive benefits by charging now with the current tax rate than depreciation from time to time in the rate of tax in the future. "

Qualified business continues to cost up to $ 250,000 of section 179 property for tax year 2010, and experts predict will reduce the significant reductions in 2011. Again, this is something to cope with your tax expert.

Making Charitable Contributions

Unless your business is a corporation, the business itself will not get a tax deduction for charitable contributions. But if you have an LLC or S Corp - flow-through what is called entity - you can take deductions on your personal income tax return.

HERIGSTAD says you can do better with your charitable contribution by delivering continuous throughout the year.

"Not only is it easier to give more like it, but the charity has the opportunity to plan their cash flow," he said. "Donations will not affect cash is very intelligent, but they are not as easy as picking up the phone and make a donation by credit card. Find a charity to receive or make use of your old business equipment, for example, takes time. "

If you have items you want to donate, start your research now. Waiting until the end of the calendar year may mean running time.

And Do not Forget:

Work Opportunity Tax Credit: If you need a few employees, think about taking advantage of the Work Opportunity Tax Credit (WOTC). Is a federal tax credit provided to the private sector implements business people from certain groups, such as unemployed veterans or those who have received some kind of federal aid.

"Work Opportunity Tax Credit was increased on August 31, 2011," Maye said. "Credit is available once associated with each member of the target groups and are based on wages paid for the period of one year from the date the individual begins work for the employer."

The maximum qualifying first-year wages are limited to $ 6,000, or $ 3,000 for employees youth summer.

Learn more about credits on the website of the Department of Labor.

The increase in Capital gains and dividend Tax: your investment may have an impact on your tax situation forward.

In 2011, the dividend return is taxed as ordinary income, so the tax rate can be as high as 39 percent, compared to 2010 levels of 15 percent. And capital gets taxed at 20 percent, up from 15 percent this year, said HERIGSTAD.

"It makes dividend-earning stocks suddenly less attractive," said HERIGSTAD. "If you have to undergo an investment value, think about selling them and taking profits in 2010."

Watch Out for AMT: Although many on-again, off-again debate in Washington, DC, does not look like we'll see a patch for the Alternative Minimum Tax (AMT) this year.

"This means that more taxpayers will depend on the extra layer of taxes other than income tax permanent," said Krieger.

The AMT exemption falls to $ 45,000 for couples and $ 33,750 for individual taxpayers in 2010 unless Congress acts to raise the exemption approach 2009 levels to around $ 71,000 for students Couples and $ 47,000 for individuals, he said.

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