Engelman Accountancy Corporation News Blog

Use adjusted tax numbers for your 2012 tax planning

RRWeb — Tue, 31 Jan 2012 14:22:04 +0000

Each year the IRS adjusts certain tax numbers for inflation and tax law changes. Here are some of the adjusted numbers you’ll need for your 2012 tax planning.

Standard mileage rate for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
Section 179 maximum first-year expensing deduction decreases to $139,000, with a phase-out threshold of $560,000.
Transportation fringe benefit limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
Social security taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.
Kiddie tax threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).
Nanny tax threshold increases to $1,800.
Health savings account (HSA) contribution limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.
401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).
SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
Estate tax top rate remains at 35%, and the exemption amount increases to $5,120,000.
The annual gift tax exclusion remains at $13,000.
Adoption tax credit decreases to $12,650 for adoption of an eligible child.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION
520 So. El Camino Real, Suite 410
San Mateo, CA 94402

2012 Tax Deadlines

RRWeb — Tue, 31 Jan 2012 14:12:41 +0000

Note the following 2012 tax deadlines:

February 15 – Deadline for providing 2011 Forms 1099-B and 1099-S to recipients.
February 28 – Payers must file 2011 information returns (such as 1099s) with the IRS. (Electronic filers have until April 2 to file.)
February 29 – Employers must send 2011 W-2 copies to the Social Security Administration. (Electronic filers have until April 2 to file.)
March 1 – Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.
March 15 – 2011 calendar-year corporation income tax returns are due.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

Watch out for scams when selling your business

RRWeb — Mon, 23 Jan 2012 19:19:10 +0000

You’ve spent years developing your business, building its value, enhancing its reputation. Now you’re ready to move on. You place a “Business for Sale” advertisement in the Internet classifieds, and the next day an eager – overly eager – buyer approaches you with a deal that seems too good to be true. The buyer offers full price and wants to structure the deal as a stock sale. A stock sale means the buyer will get the entire business, including all its assets (cash, checking accounts, receivables, inventory, and so on) at closing. The buyer doesn’t ask tough questions about the firm and seems in a hurry to close the sale. He or she offers a 10% down payment and says the full balance will be paid off within a year.

Seller beware! Business owners and regulators have found that scam artists use these types of transactions to strip value from companies, pulling out cash, and leaving the seller with a fistful of worthless stock. Within days of closing the sale, the buyer factors (sells) the receivables for cash, runs up company credit cards, sells off inventory, and empties cash accounts. The firm’s creditors don’t get paid. Your formerly prosperous business becomes an empty shell.

How can you avoid these types of scams when selling your business? Here are a few suggestions.

Perform an extensive background check on any potential buyer, including a review of the person’s credit reports, litigation history, tax liens, and so forth. A skilled attorney can often help with this research.
Beware of sales that go too smoothly. Legitimate buyers will perform due diligence, asking tough questions, inspecting financial records, and calling customers and vendors. If the buyer wants to close the sale in a hurry and doesn’t seem interested in the firm’s ongoing prospects, beware!
The buyer must meet deadlines and supply all requested data in a reasonable time. If he or she is always late, move on. Find a buyer who’s serious about the transaction.
Before turning over ownership, require a substantial percentage of the purchase price up front. Some advisors suggest 50% in cash at closing. Serious buyers, who want to continue growing the firm, will put their money on the line.

If you need help navigating the sale of your business, give us a call.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

IRS expands innocent spouse relief

RRWeb — Sun, 15 Jan 2012 19:10:25 +0000

If you file a joint income tax return with your spouse, you are considered "jointly and severally" liable for the payment of all taxes owed. The IRS can come after either you or your spouse for the entire amount of tax due, plus any penalties and interest due.

The law has “innocent spouse” rules that may limit an individual’s responsibility for unpaid taxes resulting from filing a joint return. If the “innocent spouse” can establish that he or she did not know, or have reason to know, that there was an understatement of tax when signing the joint return, relief can be requested. Under previous rules, this relief had to be requested within two years after collection proceedings were initiated by the IRS.

In a recent ruling, the IRS has decided to eliminate the two-year time limit for requesting innocent spouse status under the “equitable relief” provision in the law.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

Last-minute 2011 deal reached on payroll tax cut

RRWeb — Fri, 06 Jan 2012 23:06:59 +0000

On December 23, 2011, Congress finally approved a two-month extension of the payroll tax cut for American workers. The agreement was reached after weeks of partisan bickering. Though both Democrats and Republicans wanted a one-year extension of the tax cut, they could not agree on how to pay for a year-long extension and settled on a paid-for two-month extension.

The new law extends the 4.2% social security tax on wages through February 29, 2012. Without this extension, the tax rate would have gone to 6.2% on the first $110,100 of wages earned in 2012.

The law also extends benefits for the long-term unemployed for two months and prevents a scheduled cut in fees paid to Medicare providers from taking effect January 1, 2012.

These extensions will be paid for by an increase in fees charged by government-backed mortgage companies (Fannie Mae and Freddie Mac) for new home loans.

Included in the agreement is a requirement that President Obama make a decision within 60 days on the construction of the 1,700 mile Keystone oil pipeline.

Finally, the agreement calls for a House-Senate conference committee to negotiate an agreement that would extend the payroll tax cut through the end of 2012, extend unemployment benefits, and prevent cuts in payments to Medicare doctors.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

It's tax time again

RRWeb — Fri, 06 Jan 2012 23:01:35 +0000

It’s time to file various tax returns once again. If any of the following tax deadlines will apply to you, circle the dates on your 2012 calendar.

January 17 – Due date for the fourth quarterly installment of 2011 estimated taxes for individuals unless you file your tax return and pay any taxes due by January 31.
January 31 – Employers must furnish 2011 W-2 statements to employees. Payers must furnish payees with Form 1099s for various payments made. The deadline for providing Form 1099-B and consolidated statements to customers is February 15.
January 31 – Employers must generally file annual federal unemployment tax returns.
February 28 – Payers must file information returns, such as Form 1099s, with the IRS. This deadline is extended to April 2 for electronic filing.
February 29 – Employers must send Form W-2 copies to the Social Security Administration. This deadline is extended to April 2 for electronic filing.
March 1 – Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.
April 17 – Individual income tax returns for 2011 are due.

Questions?
Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

Face the alternative minimum tax (AMT) head-on

RRWeb — Tue, 29 Nov 2011 21:19:52 +0000

The alternative minimum tax (AMT) – often called a “stealth tax” – snares unsuspecting or uninformed taxpayers each year. With a better understanding of the rules, you may be able to avoid or reduce adverse tax consequences.

Overview: The AMT is a separate tax system that runs parallel to the regular income tax system. This complex calculation includes additions for “tax preference items” and reductions for personal exemptions and certain tax deductions. There are five basic steps to computing the AMT.

Determine your taxable income for regular income tax purposes.
Make the technical AMT adjustments required by law.
Subtract a special “exemption amount” based on tax filing status ($48,450 for single filers, $74,450 for joint filers, and $37,225 for marrieds filing separately). These exemption amounts are reduced for high-income taxpayers.
Apply the AMT rate to the result. The rate is 26% on the first $175,000 of AMT income and 28% for amounts above $175,000.
Compare your AMT liability to your regular tax liability. You pay whichever tax is greater.
Best approach: Estimate your AMT exposure before year-end. Depending on your situation, it may make sense to avoid tax preference items or postpone certain deductions.

Caution: This is a complex area of the tax law, so contact our office if you need more information or planning guidance.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

Tax tips for year-end charitable giving

RRWeb — Tue, 29 Nov 2011 21:13:15 +0000

As the year draws to a close, you may decide to donate cash or property to one or more worthy causes. Besides the satisfaction of helping others, there’s another reward for your benevolence: a tax deduction on your 2011 return. But keep the following points in mind:

For starters, you may only deduct contributions made to a legitimate tax-exempt charitable organization. Note that a qualified charity cannot be established to benefit a specific individual or family.
Generally, your deduction is limited to 50% of adjusted gross income (AGI) for the year (30% of AGI for contributions to certain charities and private foundations). Any excess may be carried over for up to five years. The deduction for gifts of property have other AGI limits.
The tax law imposes strict substantiation requirements. No deduction is allowed for monetary gifts unless you maintain a bank record or written communication from the charity indicating your name and the amount and date of donation. For contributions of $250 or more, you must obtain a contemporaneous written acknowledgement from the charity. If you donate property valued above $500, you must provide a written description with your return. Independent appraisals are required for property donations above $5,000.
Typically, you may deduct the fair market value of gifts of property owned longer than one year. Any appreciation in value remains untaxed. For instance, if you donate property valued at $5,000 that you acquired five years ago for $1,000, you can deduct $5,000. But the property must be used by the charity to further its tax-exempt purpose.
For 2011, individuals age 70½ or older can transfer up to $100,000 from an IRA directly to a charity without paying any tax on the distribution. The downside is that the transfer doesn’t qualify for the charitable deduction.
Finally, you can secure deductions late in the year by donating to charity by credit card. As long as the charge is posted in December, you can deduct it on your 2011 return, even if you don’t pay the credit card until 2012.

If you have any questions concerning year-end charitable donations, contact our office.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

New worker classification program offered by the IRS

RRWeb — Tue, 29 Nov 2011 21:08:10 +0000

Companies that have had worker classification issues are being offered a settlement program by the IRS. The program, labeled the “Voluntary Worker Classification Settlement Program,” will let employers who previously misclassified employees as independent contractors make a minimal payment to settle the tax dispute.

The program will give eligible employers substantial relief from federal payroll taxes they may have owed for past periods. Employers must agree to pay just over 1% of wages paid to reclassified workers for the past year and to treat these workers as employees going forward.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402

New law signed by President Obama on November 21, 2011

RRWeb — Tue, 29 Nov 2011 21:02:58 +0000

On November 21, 2011, President Obama signed the Three Percent Withholding Repeal and Job Creation Act into law. This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the Vow to Hire Heroes Act which provides tax credits to employers who hire unemployed veterans.

The law creates the “Returning Heroes Tax Credit” and the “Wounded Warriors Tax Credit.” Employers may qualify for a credit of up to $5,600 for hiring a veteran who has been looking for employment for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks but less than six months. Employers who hire an unemployed veteran with service-connected disabilities who has been looking for work for more than six months may be eligible for a tax credit of up to $9,600.

The credits apply to new hires after November 21, 2011, through December 31, 2012. For more information about the new law, contact our office.

Questions?

Contact us or call: 650-344-6525 today.

ENGELMAN ACCOUNTANCY CORPORATION

520 So. El Camino Real, Suite 410

San Mateo, CA 94402