“IT’S LATER!”

We’ve been telling you since the start of the year that tax planning is the key to paying the minimum tax possible. We’ve urged you to come in for your free tax analysis, but we’ve been disappointed that you haven’t accepted our offer.

Most of you agree that tax planning is a good idea that can save you money. But you’ve procrastinated, and made excuses to avoid taking advantage of the opportunity. You told yourself “I’ll wait ‘til later, after April 15.” Then after April 15, you said “I’ll wait ‘til later, when it’s closer to the end of the year.” Then, as the year drew to a close, you said “I’ll wait ‘til later, after the election results are in.”

Well, guess what. It’s later.

December 31 is just a few short weeks away. If you we don’t sit down to talk before then, your best planning opportunities will vanish, just like Cinderella’s carriage turning back to a pumpkin. And trust us here — you do not want to be left without a ride home that night!

December 31 is even more important this year than usual, because there’s so much uncertainty in the air. Will the Bush tax cuts be extended? How much will the new Obamacare taxes cost you? What opportunities are you missing to save? We can’t give you the answers if we don’t sit down to plan.

Do it before it’s too late. We’ll find the mistakes and missed opportunities that may be costing you thousands today, and show you how smart planning can save thousands more tomorrow. So call now to schedule your Analysis!

TAXPAYER RUNS HER CAT HOBBY THROUGH HER CORPORATION AND GETS SKINNED

You don't want to run your hobby through your corporation. 

Financing a hobby through a corporation comes with a double tax whammy.  The firm can’t write off the losses. And the owner has a taxable dividend equal to the amount of out-of-pocket costs that the corporation paid for the activity.

A cat breeder and fancier found this out when she had her profitable consulting firm operate her cattery. The cattery won championships, but it was extremely unprofitable.  An Appeals Court held that the cattery wasn’t a trade or business of the corporation, but was instead the personal hobby of the shareholder (DKD Enterprises, 8th Cir.).

BOOTH RENTER PUTTING MONEY FOR TAXES ASIDE

Q: In the last year I decided I would finally use my nail license and start working in a salon. I started out as a booth renter, and am happy I did, even with little to no clientele in the beginning. I am now working full time in the salon, paying rent and buying my own supplies. I have tried to do some research but can’t figure out a percentage that I should be putting aside for taxes. I live in Colorado if that matters. I have been setting aside 20% so far since I worked another full time job in the beginning of this year. So I’m not worried about owing this year, but I want to know what percentage I need to be saving from now on!

A: Without knowing the clients tax situation as a whole, it is almost impossible to answer this questions.  There are so many variables involved such as, Income, deductions, number of dependents, withholdings from another job just to say the least.

Just know that the taxpayer will have to pay income tax on all their taxable income (Adjusted Gross income – Exemptions - Standard Deduction or Itemized Deductions =  Taxable Income) Depending on what that amount is, the taxpayer can start anywhere from 15% Federal tax up to 35% Federal tax plus the applicable state tax.  Also, the taxable income earned from the booth rental will also have an additional 13.3% self employment tax.  For 2013, this will increase to 15.3%.  For example, in 2012 a single taxpayer in Colorado who makes $40,000 net income from booth rental with no other source of income and take the standard deduction would have total tax of $9,862 of federal and state tax or right under 25% of total income.

It is highly recommended that the taxpayer speak with their tax advisor prior to the end of the year and have some pretax planning done.  This way all the taxpayers income and deductions can be projected out to see what tax bracket the client is in as well as estimate the tax liability so there are no surprises on April 15^th.

HERE IS WHAT EXPERTS ARE SAYING ABOUT THE FUTURE OF THE AFFORDABLE CARE ACT

I just spent 2 days attending the National Tax Conference.  One of the speakers was a specialist in health care reform.  The more I learn about the act the more confusing it is.  Here are a few of his comments of the unexpected outcome of the act that he thinks will come about as employers and taxpayers become more aware of the act. 

·         Many owners may consider transferring enough ownership to prevent combination of entities into one “employer” for tax purposes.  This will help keep the employee number under 50 to avoid providing expensive insurance for full time employees. 

·         Many employers will increase  the amount of self coverage that they pay for, but may eliminate or substantially reduce family coverage.

·         Because employers will be encouraged to keep employees under 30 hours, lower income workers will most likely need to work at least two jobs to make a living.   Therefore, these employees will need two jobs to have a chance at making a living.

·         Many employers may eliminate health insurance coverage completely.  This will place these employees into the “public” exchange plan.  Employers will consider this since it may be substantially cheaper to simply pay the penalty and adjust pay for upper level employees.

·         It is cheaper for employers to have younger employees to keep their average premiums downs, so there will be an advantage to reduce the number of older employees.

 

“BLACK FRIDAY” TAX PLANNING PUTS TAXES ON SALE

The holidays are here, and millions of Americans kicked off the season with “Black Friday” shopping. Braving the crowds and the cold, facing scorn from family they’ve left behind, they line up at obscenely early hours (or duck out of Thanksgiving dinner before the pumpkin pie is even served) to save $20 on a DVD player or $40 on a flat-screen television.

It’s sad, but true, that most Americans spend more time planning their “Black Friday” shopping than they spend planning their taxes. But that can be an expensive mistake!

What if the IRS had a sale? What if the IRS let you discount your taxes by thousands of dollars, this year and every year to come? And what if they let you do it from the comfort of your home or your office, without lining up in the pre-dawn hours of a chilly November morning? Would you give thanks for a sale like that?

You’re probably not holding your breath for the scrooges at the IRS to hold a “sale.” The good news is, you don’t have to wait for that to happen. You just need a plan. Tax planning is the key to paying the legal minimum, especially with the “fiscal cliff” looming on the horizon. And a good tax plan can pay for a holiday season full of gifts and fun.

Have we showed you how “Black Friday” tax planning can save thousands?

SALON AND SPA INDUSTRY HITS LOWEST LEVEL IN FOUR QUARTERS

Salontoday.com reports: After experiencing a modest increase in second quarter 2012, the Professional Beauty Association’s (PBA) Salon/Spa Performance Index (SSPI) fell to its lowest level in four quarters. The SSPI registered 101.9 in the third quarter of 2012, a 1 percent decline from second quarter 2012 and the same as third quarter 2011. Furthermore, the Current Situation Index fell 1.8 percent and the Expectations Index declined .2 percent versus second quarter 2012 respectively.

To read the article in full: CLICK HERE

BE CAREFUL - CANCELLATION OF A LIFE INSURANCE POLICY MAY BE A TAXABLE EVENT

I have seen this happen to unsuspecting clients a few times in my career. Payments are made on a life insurance policy. After a few good years, the policy builds up a cash value. This build up of cash value is not taxable. The policy holder quits making payment. In actuality what happens is the cash value of the policy makes the payments. This is not really a taxable event; what this is is the policyholder borrowing money from the policy. Still no tax.

But here comes the tax. If the policyholder cancels the policy, then this is treated as forgiveness of the loan and, as the case below shows, it is taxable.

The Tax Court has concluded that a taxpayer had taxable income when his life insurance policy lapsed with a loan outstanding. This constructive distribution was effectively a payment of the policy proceeds that was gross income to the taxpayer to the extent that it exceeded his investment in the contract.

 

White, TC Summary Opinion 2012-108