Jeff Haywood, CPA

Posts Tagged ‘Credit’

The Gifter (Generous Aunt)

If your aunt is gifting you and your brother some land there should be no immediate tax consequences other than the requirement that your aunt file a gift tax return. She should not owe any taxes as a result of making the gift as long as she has not made gifts totaling over $5 million (the current unified credit amount = current value of estate that is not taxable). The way it works is if the property gifted is worth say $350,000 and your aunt gifts it to you and your brother she gets an annual exclusion of $13,000 (this year) for each of you. So she would report the $350,000 less the $26,000 in annual exclusions which would be subtracted from her unified credit of $5 million. The difference would be the remaining amount of her estate that would not be subject to estate tax given the current exclusion amount of $5 million. Anything over the $5 million less the used unified credit used would be subject to the estate tax when she passes away.

The Giftee (You)

Now for you the gift recipients, you and your brother, you would receive the gifted property with a basis equal to your aunt’s basis, either her cost less expenses or the value when she inherited the property. When you sell the property the amount it sells for less your basis and cost of the sale would be subject to capital gains tax. When you inherit a property you get a basis equal to the current market value at the time of death. So if the value of the property was much less when your aunt obtained the property than it is now you would be better off waiting until she dies to inherit the property.

Capital Gains Tax Rates

The other thing to consider are the capital gains tax rates. The capital gains tax rates are due to increase in 2013. If your plans are to sell the property you should take the capital gains rates into consideration/tax planning.

By the way, when your aunt makes the gift, I can prepare the gift tax return for you.

Jeff Haywood, CPA
CPA Tax Superhero
972-439-1955
jeff.jhtaxes@gmail.com

This article was written by Jeff Haywood, CPA.
Jeff is a licensed CPA in Texas
He has prepared income tax returns for the public for over 10 years.
He also has an MBA in Finance from Loyola University in Chicago and he has 24 years experience in Corporate Finance and Business Analysis.

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I prepare the following types of tax returns:

Personal
Business
Estate/Gift
Trusts
Federal and State Returns

I especially value discussions about you, your business, your dreams and goals.

Click Here to Follow Jeff Haywood, CPA on Twitter
Also, Click Here to Follow My Twitter Account: Taxesforxpats

In addition here are links to a few of my articles about income taxes for expatriates:

Income Tax Returns for Expatriates
US Income Tax Help for Expatriates
Foreign Earned Income Exclusion
Are You Required to Report Foreign Bank and Financial Accounts?

Click Here to Follow My Twitter Account: Taxesforxpats

For a full list of prior posts see the CPA Tax Blog.

Standard Disclaimer:

As always keep in mind that the content provided on this site is general in nature and may or may not apply to your particular case. It is best to check with a tax professional about your circumstances and what is best for you personally. Also, IRS regulations and tax laws are constantly changing and the information on this site is not constantly updated. Again please check with me about your particular circumstances and what will be best in your situation at the given time and law.

Comments:

If you have a comment to share about this post or for me, please email me at jeff.jhtaxes@gmail.com.

The biggest problem new businesses encounter is paying unexpected taxes when you file your first income tax return after starting your new business.  The result can be a serious cash flow/debt problem.  How does this happen and how can you avoid it?

Starting a New Business: Plan Ahead and Prepare Yourself:

Joe starts selling widgets or his wife starts doing shows and they are shocked at how much they owe when do their income tax return.   When you operate a business on your own, without forming a corporation, your profits are subject to income tax plus self-employment tax.  Self-Employment Tax is basically the equivalent of medicare and social security taxes but both the half that was deducted from your paycheck plus the half paid by your employer that you never saw.  Yes, the self-employed pay both halves of these taxes because you are the both the employee and the employer.  While the income tax on your profit should be expected what surprises people is the self-employment tax.  The self-employment tax, in the past has been 15.3%, now is 13.3% but you can probably expect it to return to 15.3% eventually.  So if you are in a 25% tax bracket you could be paying about 38.3% in income and self employment taxes on the profit of your business.  So if your profit is $100,000 you will be paying about $38,300 of that back to Uncle Sam.  You could be expecting to pay about $25,000 and so you saved that amount during the year, OK maybe you didn’t, and now where is the $13,300 going to come from?  You have spent it already and you are investing in your growing business so now you are also going to be making payments to the IRS trying to catch up for last year.  In the meantime now your taxes for the current year are going to be more than you expected.  This is a big reason why many new businesses fail and why you should have a conversation with your CPA before you start your business.

Preparation and Actions to Take to Minimize Your Taxes:

An unexpected tax bill can be a real ‘kick in the gut’ and if you’re not careful it can cripple your business financially and it can steal your enthusiasm for your business.  It helps so much as a business person to be positive and to be one who gives energy to others.  If your tax bill hurts you emotionally you it can adversely affect your relationships with others.  So first, know upfront, before you start the business, what to expect in regard to taxes and everything associated with your business.  The successful are prepared for what is coming.  By being prepared for how much tax you will pay you can save during the year and make estimated quarterly payments to the IRS to avoid having a large unexpected tax bill at the end of the year.

There are other things you can do as well, like timing expenses to minimize your profit for the year.  You should always have conversations with your CPA during the year so you can be planning for the success of your business.  You especially want to have a conversation about a month before the end of your tax year to have a strategy for timing expenses and investment decisions.  To reduce your profit and hence taxes for the year you can pay for business expenses or invest in assets before the year-end.  You may even be able to put them on a credit card and deduct the full purchase amount even though you do not pay the credit card until the following year.  You will want to discuss this with your CPA, and I would be happy to serve you in this regard, but you also need to know that while moving up expenses or investments in assets into the current year could lower your profits and taxes for this year it probably also means higher profits and taxes in subsequent years.  You also want to be careful to avoid spending dollars just to save pennies.  This is why you need a good CPA who you regularly have business discussions with.

One more action to consider is forming a different entity type to use to reduce taxes.  If you are my client and you tell me you expect to have a profit of $100,000 we are going to discuss forming an S-Corporation to lower your taxes as well as to provide some protection for your personal assets.  This will be the subject of coming blog post.

Here are some other business related posts you should read:
6 Things You Should Know About Business Expenses – What Can You Deduct?
6 IRS Tax Tips About the Home Office Deduction
6 IRS Tax Tips for Self-Employed Individuals
IRS Top Six: Tax Tips For Making Estimated Payments + 1 free bonus

I am happy to take on new clients and help you prepare for success.  Feel free to contact me using my information below.

Jeff Haywood, CPA
972-439-1955
jeff.jhtaxes@gmail.com

This article was written by Jeff Haywood, CPA.
Jeff is a licensed CPA in both Texas and Illinois.
He has prepared income tax returns for the public for over 10 years.
He also has an MBA in Finance from Loyola University in Chicago and he has 24 years experience in Corporate Finance and Business Analysis.

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I prepare the following types of tax returns:

Personal
Business
Estates
Trusts
Federal and State Returns

I especially enjoy discussions about you, your business, your dreams and goals.

Click Here to Follow Jeff Haywood, CPA on Twitter
Also, Click Here to Follow My Twitter Account: Taxesforxpats

In addition here are links to a few of my articles about income taxes for expatriates:

Income Tax Returns for Expatriates
US Income Tax Help for Expatriates
Foreign Earned Income Exclusion
Are You Required to Report Foreign Bank and Financial Accounts?

Click Here to Follow My Twitter Account: Taxesforxpats

For a full list of prior posts see the CPA Tax Blog.

Standard Disclaimer:

As always keep in mind that the content provided on this site is general in nature and may or may not apply to your particular case. It is best to check with a tax professional about your circumstances and what is best for you personally. Also, IRS regulations and tax laws are constantly changing and the information on this site is not constantly updated. Again please check with me about your particular circumstances and what will be best in your situation at the given time and law.

Comments:

If you have a comment to share about this post or for me, please email me at jeff.jhtaxes@gmail.com.

Year End Tax Moves

Mr. CPA, What can I do to help with my tax situation for 2011?

Before the end of the year you want to look at your tax situation and make decisions and take actions to help with your taxes and your cash-flow.  Hopefully your business is doing well in 2011 and you want to minimize your income taxes for the year.  So first of all take a look at your income and expenses to get an idea how much profit you will have for the year.  You may to add into your calculation business miles and home office expenses.  If you have profits that you want to reduce to so as not to pay taxes on them for 2011 there are a few actions you can consider taking.

First, you can control when you receive and report income.  So if you are working on a job or finishing a job for a client you can wait to bill them in January.  If you are a cash basis taxpayer and you have already billed a client and you want that income in 2012 you can ask the client to wait to pay you until after the end of the year.  That is a call they will love to receive.

Second, you can pay bills before the end of the year.  As a cash basis taxpayer that wants to reduce 2011 income pay all outstanding bills before the end of the year.  You may even want to prepay expenses like rent.  For your personal return you can make sure you have paid your property taxes on your home.  In some cases, especially where you have no or a very small mortgage balance and hence very little interest expense to deduct, then you may want to plan your property tax payments so every other year you pay two years of real estate taxes so as to be able to itemize your deductions on your tax return.  How do you do this?  It is simple.  As an example you would pay your 2010 taxes on January 1, 2011 and then pay your 2011 taxes before December 31, 2011.  By doing this you take two years of real estate taxes in one year.  You can do this because the real estate taxes are deductible on your income tax return in the year you make the payment.

Now you also want to consider purchasing equipment for your business before the end of the year.  If you need equipment you may be able deduct the full purchase price of the equipment this year if you purchase the equipment before the end of the year.  Know that equipment you purchase using a credit card is potentially deductible when you charge it even though you do not payoff the credit card before the end of the year.  So you may be able to by equipment in December that you can deduct on your income tax return for this year and with some retail credit cards not pay for it for six months or so without paying any interest.  Keep in mind that your interest on your business credit card is also deductible.  Finally, know that there are limits as to how much you can deduct in a year for equipment purchases.  Check with your CPA or call me to discuss your situation.

Many taxpayers are not aware of these strategies.  Your CPA should bring these to your attention and you should be having a year-end discussion every year.  These discussions help you to get an idea or an expectation of what your taxes will be when you file your tax returns.  A big tax bill is difficult enough but it is worse when you are not expecting it.  So let’s have a conversation today about your situation.  Feel free to use my contact information below to set an appointment for that discussion.

Know too that you may be able to reduce your taxable income by making a contribution to your retirement account.  If you use an IRA you have until April 15th to make that contribution and use it to reduce your taxable income this year.

Please do not keep me as a secret.  Please tell others about me and this site.  I keep my practice at a manageable size so all my clients get the attention they need for their business and their personal income tax situations.  I specialize in helping business owners and investors and also expatriates living out of the country.  I also do individual tax returns.  Please contact me today using the contact information below to make an appointment to discuss your situation.

Jeff Haywood, CPA
972-439-1955
jeff.jhtaxes@gmail.com

I prepare the following types of tax returns:

Personal
Business
Estates
Trusts
Federal and State Returns

I especially enjoy discussions about you, your business, your dreams and goals.

Take a look at these related posts:

Let’s Accomplish Great Things Together
How to Profit From Your CPA
A Most Valuable Resource For Entrepreneurs
Forming a New Business – Please Consult With Your CPA First

Click Here to Follow Jeff Haywood, CPA on Twitter
Also, Click Here to Follow My Twitter Account: Taxesforxpats

In addition here are links to a few of my articles about income taxes for expatriates:

Income Tax Returns for Expatriates
US Income Tax Help for Expatriates
Foreign Earned Income Exclusion
Are You Required to Report Foreign Bank and Financial Accounts?

Click Here to Follow My Twitter Account: Taxesforxpats

 For recent US income tax content see the following links:

Sometimes Money Costs Too Much
Let’s Accomplish Great Things Together
Can I Use My Loss To Get Money Back From Prior Year Taxes Paid?
IRS Top Ten: Tax Tips for Individuals Who Are Moving This Summer
IRS Top Ten: Tax Tips for Individuals Selling Their Home
IRS Tax Tips: Do You Owe the IRS Money? What You Need to Know.
IRS Tax Tips: Do You Owe the IRS Money? What You Need to Know.
Does the IRS Have Money Waiting For You
Ideas: How Young People Can Become Entrepreneurs and Find a Home
IRS Top Ten: Facts about Amending Your Tax Return
Are You Ready To Get Your First Apartment/Home?
How to Succeed in Business: Pricing
Credit for Education Expenses: American Opportunity Credit – Extended Through 2012
How to Prepare Before a Disaster Strikes
IRS: Summer Day Camp Expenses May Qualify for a Tax Credit
IRS Tax Tips for Students Starting a Summer Job
IRS Tax Tips for Deducting Charitable Contributions
Tax Planning Tips
Tax Tips – Tip Income
Stratospheric Success
Are You Ready to Purchase a Home? Factors to Consider.
Foreign Earned Income Exclusion
A Most Valuable Resource for Entrepreneurs
How to Profit From Your CPA
Begin With The End In Mind
If the band you are in starts playing different tunes
Where Is It? Tax Refund
Deadline for 2010 Personal Tax Returns Moved
Now is the time to file those late tax returns for previous years
IRS: 8 Things to Know if You Receive an IRS Notice
IRS: Nine Fact on Filing an Amended Return
IRS: Eight Facts on Penalties
IRS Top Ten: Making Federal Tax Payments
Forming a New Business – Please Consult With Your CPA First
Questions After I Have Filed My Return

For a full list of prior posts see the CPA Tax Blog.

Standard Disclaimer:

As always keep in mind that the content provided on this site is general in nature and may or may not apply to your particular case. It is best to check with a tax professional about your circumstances and what is best for you personally. Also, IRS regulations and tax laws are constantly changing and the information on this site is not constantly updated. Again please check with me about your particular circumstances and what will be best in your situation at the given time and law.

Comments:

If you have a comment to share about this post or for me, please email me at jeff.jhtaxes@gmail.com.

This article was written by Jeff Haywood, CPA.
Jeff is a licensed CPA in both Texas and Illinois.
He has prepared income tax returns for the public for over 10 years.
He also has an MBA in Finance from Loyola University in Chicago and he has 24 years experience in Corporate Finance and Business Analysis.

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Mr. CPA, will I still be able to take the American Opportunity Credit for my child’s college education expenses in 2011?  Initially this was only available for 2009 and 2010.

The good news is this credit was extended through December 31, 2012.  Below are Questions and Answers regarding this credit published by  the IRS:

More good news, up to $1,000 of this credit is refundable.  In other words $1,000 of this credit can be used to generate a refund even if you payed no income tax for the year.  Tax issues can always get complicated depending on your situation.  To discuss this and other tax issues feel free to contact me using my information below.

Jeff Haywood, CPA
972-439-1955
jeff.jhtaxes@gmail.com

I prepare the following types of tax returns:

Personal
Business
Estates
Trusts
Federal and State Returns

I especially enjoy discussions about you, your business, your dreams and goals.

Click Here to Follow Jeff Haywood, CPA on Twitter

For recent US income tax content see the following links:
IRS Tax Tips for Students Starting a Summer Job
IRS Tax Tips for Deducting Charitable Contributions
Tax Planning Tips
Tax Tips – Tip Income
Stratospheric Success
Are You Ready to Purchase a Home? Factors to Consider.
Foreign Earned Income Exclusion
A Most Valuable Resource for Entrepreneurs
How to Profit From Your CPA
Begin With The End In Mind
If the band you are in starts playing different tunes
Where Is It? Tax Refund
Deadline for 2010 Personal Tax Returns Moved
Now is the time to file those late tax returns for previous years
IRS: 8 Things to Know if You Receive an IRS Notice
IRS: Nine Fact on Filing an Amended Return
IRS: Eight Facts on Penalties
IRS Top Ten: Making Federal Tax Payments
Forming a New Business – Please Consult With Your CPA First
Questions After I Have Filed My Return

For a full list of prior posts see the CPA Tax Blog.

Standard Disclaimer:

As always keep in mind that the content provided on this site is general in nature and may or may not apply to your particular case. It is best to check with a tax professional about your circumstances and what is best for you personally. Also, IRS regulations and tax laws are constantly changing and the information on this site is not constantly updated. Again please check with me about your particular circumstances and what will be best in your situation at the given time and law.

Comments:

If you have a comment to share about this post or for me, please email me at jeff.jhtaxes@gmail.com.

This article was written by Jeff Haywood, CPA.
Jeff is a licensed CPA in both Texas and Illinois.
He has prepared income tax returns for the public for over 10 years.
He also has an MBA in Finance from Loyola University in Chicago and he has 24 years experience in Corporate Finance and Business Analysis.

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Child and Dependent Care Credit:

Mr. CPA, these little rug rats are driving me crazy.  What kind of tax breaks can I get?  Below are 10 tips from the IRS about the Child and Dependent Care Credit:

To have an experienced CPA help you prepare your tax returns and help you reach your goals contact me at the phone number below.

Jeff Haywood, CPA
972-439-1955
jeff.jhtaxes@gmail.com

I prepare the following types of tax returns:

Personal
Business
Estates
Trusts
Federal and State Returns

Also, I am available for tax planning and discussions about business, retirement planning and life goals.

For recent US income tax content see the following links:

Now is the time to file those late tax returns for previous years
IRS: 8 Things to Know if You Receive an IRS Notice
IRS: Nine Fact on Filing an Amended Return
IRS: Eight Facts on Penalties
IRS Top Ten: Making Federal Tax Payments
Forming a New Business – Please Consult With Your CPA First
Questions After I Have Filed My Return

For a full list of prior post see the CPA Tax Blog.

Standard Disclaimer:

As always keep in mind that the content provided on this site is general in nature and may or may not apply to your particular case. It is best to check with a tax professional about your circumstances and what is best for you personally. Also, IRS regulations and tax laws are constantly changing and the information on this site is not constantly updated. Again please check with me about your particular circumstances and what will be best in your situation at the given time and law.

This article was written by Jeff Haywood, CPA.
Jeff is a licensed CPA in both Texas and Illinois.
He has prepared income tax returns for the public for over 10 years.
He also has an MBA in Finance from Loyola University in Chicago and he has 24 years experience in Corporate Finance and Business Analysis.

Comments:

Comments posted below will be considered for approval if they relate to the subject of the post and the poster has a verifiable email address. It may help if you picked up on and referenced typos, quotes, or just plain silliness. Of course a reference to something written in the article always helps. “I am just saying.”

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