Tax Tips that Might Surprise You

Doing your taxes is one of the most important things that you can do in terms of finance throughout the year. AS a result, it pays to be careful when it comes to doing your filing and in terms of finding every way to reduce what you owe as possible. You may be able to find many extra tips in places like your favorite accounting blog, or with a accounting firm, but here are a few to get you started.

Pay Attention to Timing

It might seem strange, but looking carefully at the calendar will increase your chances of getting the best tax return. For example, you can pay the mortgage before the end of the year and the added interest will reduce your liability even more than what would happen otherwise. You can also schedule treatments and exams that are related to your health towards the end of the year so that you can get a much bigger deduction for medical expenses.

Check for Tax Credits

It turns out that 20 percent of eligible Americans don’t take tax credits that they could take, such as the Earned income tax credit. A lot of people might just think that they’re not eligible and disregard it. But even if you’re single and don’t have any children, as long as you worked this year you can be eligible for the credit. Your taxes go down on a straight one to one basis when it comes to credits, so this often makes them much better than deductions when it comes down to a dollar to dollar basis. As a result, you end up with a much lower amount of money that you owe.

Use Programs to Help

One great way to make sure that you don’t miss out on many possible deductions or credits is to try out a program like TurboTax. It’s usually not that expensive and it will make sure that you’re completely covered in terms of what you could possibly get off for a particular year. They will list all of the changes from year to year, and take you through each part of the filing step by step so that you don’t miss anything and so that everything is in order at the end of the day. This is a good way to be sure that you’re doing the best possible job.

Even in Gifts and Deaths, Taxes Apply

If you live in the United States, you already know the truth behind the modern-day adage that the only certain things in life are debts, taxes and death. It’s a fact of life that the best Rochester accounting firm - Rizzo, DiGiacco, Hern&Baniewicz are well aware of because of their dealings with clients involved in these things.

One of the trickier matters that accountants must deal with as part of their job is combining taxes and death. Combining two of the inevitabilities of life results in debts that the concerned individual must pay in full lest the taxman cometh and enforces the law’s long arm into your affairs.

Here then are a few must-know things in relation to death and taxes as well as the debts that arise from their combination. Ask for the professional opinion of a reliable Rochester accounting professional in case a few things require clarifications.

One Combo Tax

The good news for would-be heirs and gift-givers: Most estates will not be required to pay for federal estate or gift tax. Why? Because you can leave or give away considerable amounts of property on a tax-free basis!

Under the present laws covering the unified gift and estate tax, individuals can give away to their recipients or leave to their heirs up to $5.25 million in cash and non-cash assets before paying for applicable taxes.

The bottom line: You can stop worrying about the unified gift and estate tax when you fall under the non-wealthy (i.e., multimillionaire and billionaire) set. You are, nonetheless, well-advised to ask for the professional advice of a reliable Rochester accountant to maximize your generosity to your heirs and recipients while minimizing your taxes.

Personal Exemption

Since gift and estate taxes change from one year to the next, you are well-advised to always seek the expert guidance of an experienced Rochester accounting and tax professional on these matters. This includes the issue of personal exemption, which permits for non-taxable transfer of assets as gifts or inheritances within set dollar amounts.

Keep in mind that the set amounts are indexed for inflation so increases in future years are always a possibility; ask your Rochester accountant for any possible changes. For deaths in the following years, the personal exemptions are:

• 2011 - $5 million
• 2012 - $5.10 million
• 2013 - $5.25 million

If your estate is worth less than the above amounts at the time of your death, then you and your heirs will not owe federal taxes. If you have made taxable gifts while you were alive, on the other hand, the amount of your individual exemption will be reduced by the amount of taxable gifts made.

If you belong to the non-super wealthy set, as are 99% of the population in the United States, then you can leave your estate to your heirs without the IRS dipping their hands into it. Well, at least at first but by then you have become wiser about the ways of the taxman, thanks to the expert assistance of the best Rochester accounting and tax professionals.

But as always there are exemptions to the rule so ask us for further information. This is especially true in the State of New York where the state government collects on estate taxes even when the federal government cannot.

Tax Planning: A Way You Can Reduce Your Burden

Costs can drain the life out of a company. For those who live on a month to month basis with their business, not a lot of effort goes into such things as tax planning. Either those in charge of the business are not well aware of what is required to effectively engage in tax planning or they simply do not prioritize it. The former is somewhat understandable, but the latter is really nothing more than a path to getting into serious fiscal woes. Businesses do need liquidity in order to survive if not thrive. Cash flow and cash in reserve accounts allow a business to immediately access funds. Yes, it is true that a line of credit can do so as well. However, borrowing from a line of credit is exactly that: borrowing. When money is saved in reserve, it contributes to the overall net assets of the business. Also, the funds can be placed in a conservative investment where it can draw interest. Interest, of course, increases the value of the money saved in it.

This is where effective tax planning comes into play. There can be quite a number of misunderstandings about what tax planning entails. On the simplest of levels, tax planning refers to putting the proper effort through the year to be sure the lowest amount of taxes is paid. This is not as easy as some assume. Most do realize that taking deductions will greatly cut down on the amount of taxable income a business presents. A good accountant can definitely maximize the amount of deductions that a business can employ. Being able to do so would be the sign of a truly excellent and helpful accountant. However, there is far more to tax planning which can be done here.

One other effective component of tax planning would be to take advantage of tax credits. Tax credits are simply bonus deductions offered as incentives. One example of a tax credit could be taking a certain percentage of the costs to purchase alternative, green energy systems in an business. In some instances, a business might already have invested in making such purchases but does not take the tax credit because management simply does not know the credits are available. Professional who work in tax planning can invest a huge amount of time in research so they can locate the tax credits which could prove hugely helpful to a business.

There is also a strategy of replanning which a tax consultant can put effort into. For example, a business may be interested in starting down path A, but scores of tax credits could be gained by traveling down path B. Qualified tax planners and accountants just might be able to help devise more logical and business friendly paths for those interested in saving money and doing better with the operation of their business.

The Affordable Care Act: You May Need to Work with a Rochester Accounting Firm

The Affordable Care Act has been a topic in the news for well over three years. As the law begins its implementation, there are rules and requirements that must be adhered to in order to remain in compliance with the act. While some business owners may wish to try and figure things out on their own, they likely would be making a huge mistake. Granted, the employer mandate has been recently waived buying businesses more time to learn how to comply with the law, there is only so much a novice will be able to figure out. As such, it is absolutely necessary than anyone running a small business speak with a tax professional discuss matters with an qualified Rochester accounting tax specialist who is able to offer the proper guidance and advice. Anything less runs the risk of turning into a major problem for a business owner.

Most are likely aware that the law requires businesses with 50 full-time employees to offer health coverage or pay a penalty. Those who have heard this might not have looked closer at the wording of the law or read any of its related statutes. There is likely a good reason why they would not think to do so. The owner of a business is not involved with accounting and does not follow such matters closely. Be that as it may, the law is the law and there will be requirements which must be followed.

For one, the 50 employees refers to the total amount of employees among all the businesses owned by someone. In other words, if you owned 5 businesses with 10 employees, providing healthcare is required. As skilled Rochester accounting professional will be able to advise you about matters such as these.

Also, the delineation of 50 full-time employees could mean the equivalent of the total of the hours worked by 50 full-time employees. If a host of part-time employees end up equating with the number of full-time hours, requirements to cover benefits or pay fines kicks in. Timelines also exist for a business to comply with the law. Has your business down what is required to stay on top of its timeline? If not, then there could be a number of troubles coming down the road.

Once again, since the law is new and business owners are not versed on how to deal with it, hiring a professional accountant is a much better plan than filing messed up tax returns. If you do that, the risk of an audit increases exponentially. Even if you do not get audited, the tax return will have to be changed. How could it not be? The figures on it were wrong. When a tax return has been adjusted, you will usually find a bill showing up in the mail not too long after you have filed it. Rather than deal with such unexpected and annoying financial woes, it would be much better to have a Rochester accounting tax professional handle your business' ability to implement the program the right way.

Obamacare and Your Taxes for 2013

All Rochester accounting firms including Rizzo & DiGiacco have been well prepared for the implementation of the Affordable Care Act, also known as Obamacare, as soon as it was signed into law on 23 March 2010; it’s their job, after all. But it is also the job of taxpayers such as yourself to anticipate Obamacare’s impact on your taxes for 2013.
 
Here then are the most important aspects of Obamacare as its provisions apply to tax planning goals. If you have any questions, concerns and issues about the law’s impact on your taxes, you should get it right from the horse’s mouth, so to speak – obviously the best Rochester accountant from our company! (Note: We also offer CFO outsourcing services for businesses)

Medicare Payroll Tax

 

In case it has escaped your attention, Medicare has faced and continues to face major financial concerns brought by several factors including the budget crisis and the national recession. The Obamacare provision regarding the payment of the 2.5% Medicare payroll tax on earnings above the stated thresholds - $200,000 for single taxpayers and $250,000 for married couples annually – is designed as part of the plan to keep the Medicare program running as well as it should be.

Obviously, the tax will affect high-income earning households. If you belong to the category, you can expect your Rochester taxes to have substantial differences in 2013 than in 2012 because of it.
Note: Your Rochester CPA will fill in the tax under its official name of Medical Hospital Insurance (Part A) Tax for the Medicare Hospital Insurance (HI) Trust Fund. Look for it for your enlightenment’s sake.

Unearned Income Tax

Yet another way that Obamacare will affect taxes in 2013 is the unearned income tax. Keep in mind that the tax will apply to a wide range of investments and their income including but not limited to dividends on stocks, interests on deposits, and rent revenue.

Individuals with several investments in their portfolios are then well advised to get on board the best Rochester consulting firm’s roster of clients so as not to overlook items wherein unearned income tax may be levied. The more accurate your tax returns in this regard, the better your chances for staying on the right side of the law - and the accountants and tax planners of Rizzo & DiGiacco will be of valuable assistance on this matter.

As with the Medicare payroll tax, the unearned income tax will affect high-income households. Single taxpayers earning more than $200,000 and married couples earning more than $250,000 per year will be subject to a surtax of 3.8% prior to deductions.

Cadillac Health Insurance Plan Tax

Although the tax will be imposed in 2018, Americans are well advised to start looking for affordable health insurance plans before the tax takes effect. The Cadillac health insurance plan tax refers to the steep 40% penalty for individuals enrolled in health insurance policies costing $10,200 or higher and for families with health insurance plans costing $27,500 or higher.

The bottom line: Be proactive by discussing the impact of Obamacare on your healthcare plans and your tax plans with your accountant and/or tax planner.

Your Accountant Can Do More than Taxes and Crunching Numbers

When most people walk into any Rochester accounting firm, they are only interested in having their books done. This can be just basic bookkeeping, or tracking assets for several companies. In some cases, the Rochester accountant may even be hired to do a simple audit for a company.

But there is so much more that this professional can do for you. You might not realize this, but beyond your basic finances and tax planning, this professional will be able to help you with more areas of your business.

Most professionals working in a Rochester accounting firm will have a great deal of knowledge and expertise in the world of business. Since the industry standard is a Master’s in Business Management Accounting, they are going to know more than just how to run the book. In fact, the time that they have spent in colleges learning this information usually gives them a good eye that can help you through some of the other situations your business is going through.

In fact, business plans and even a business succession plan can be handled by your Rochester accountant. They can even help you to go through the process of forming partnerships, trusts, estates and other legal elements that you might not be able to do on your own. Thanks to their understanding of business and tax law, you can have some peace of mind in knowing this is being done properly.

Even when your company is face is a bankruptcy, this team of professionals is going to be able to guide you through the steps, to ensure that your best interests are kept and that your company is left with options that could result in it eventually being saved. This comes from understanding and deciphering the details of the local and federal laws and knowing what your options are. While you could do this on your own, the accountant is going to end up being your best choice.

No matter what Rochester accounting firm you choose to handle your tax planning, audits or even business assistance, it will be important that you do ensure that they are certified to help you. An example would be a Rochester CPA, as they have the right knowledge and tools available to them, to help ensure that they are giving you the best guidance possible.

Remember, this is your business and your life that is going to be impacted. Make sure you take a moment to ensure that you are hiring the best. What you will find is that the area offers a variety of professionals who have different levels of experience you can choose from. It is important you choose the most qualified individual that you feel comfortable around as there is a good chance you will be seeing a lot of each other.

Inherent Characteristics of A SIMPLE IRA Plan

Tax planning is a long drawn process. However, this does not mean that it has to run throughout the year. In fact, in order to avail most tax benefits, a business needs to ensure that it has everything pertinent in place well in advance. This is exactly what we, as your chosen Rochester CPA, look to do for your business. There are various instruments that we try to use to get you the maximum Rochester taxes benefits. However, which ones fit your business depends entirely on the key nature of your business.



One of the instruments that we recommend for businesses looking for tax planning is the SIMPLE IRA plan. Here are some key characteristics of the SIMPLE IRA plan that should be of use to you.

1. Size of the business matters:

The first thing you need to know about the SIMPLE IRA plan if you are in the midst of tax planning is what any Rochester CPA would tell you. This is that the SIMPLE IRA is only limited to those companies whose employee strength does not exceed 100. This means that you can only avail the SIMPLE IRA plan if your business employs 100 or less than 100 employees.

2. Adopting the SIMPLE IRA plan:

If you know that your business meets the prerequisites then all you need to do is contact a Rochester CPA like us and ask them to set everything up for you.

We would ensure that you get the Rochester taxes benefits by choosing whether a Form 5304-SIMPLE, 5305-SIMPLE or a SIMPLE IRA prototype suits your organization the best. Subsequently, we would help you establish it.

3. Two forms of contributions:

There are two ways through which you can contribute in a SIMPLE IRA plan. You should note, however, that your benefits in terms of Rochester taxes would remain the same, regardless of your choice. Your choices would be between a matching contribution of up to 3 percent of the employee’s salary and a 2 percent contribution for each employee which would be non elective.

4. Mandatory exclusivity:

Establishing a SIMPLE IRA plan means, however, that you cannot partake in any other retirement plan. Effectively, this is something that needs to be assessed. This is also a stage of tax planning where you need our help as your Rochester CPA.

Basically, in our capacity as your Rochester CPA, we would assess whether the Rochester taxes benefits you would get from a SIMPLE IRA plan would be enough for your organization by themselves or not.
If we find during the tax planning procedure that you need more Rochester taxes deductions and exemptions then we would not recommend the SIMPLE IRA for you. In either case, expert guidance from an experienced Rochester CPA is something you should look for.




 

Tax Planning Is for Everybody

Not everybody considers taxes as something to be planned for - either you pay it in full, pay it less than what you owe the government, or skip it altogether and face the consequences later. Tax planning then seems like a waste of time and hiring the best Rochester accountant for it seems like a waste of good money.

The reality, however, is significantly different than the above mentioned unplanned payment of taxes. Every taxpayer from individuals to for-profit and non-profit organizations must engage in effective planning for taxation purposes. The reasons are many including:

• Taxes are expenses that lessen the net income earned by individuals and businesses. Planning to minimize the amount of taxes paid will maximize the net income earned; for example, you will defer income declaration for the next year in order to lessen your tax burden in the current year.

• Non-payment of taxes has surcharges and penalties that, more often than not, exceed the amount of taxes that should have been paid in the first place. The possible sanctions also make it necessary - nay, crucial - to engage in effective tax planning to avoid these regulatory penalties.

• Tax credits should be taken advantage of every year. These represent substantial savings since the items are non-taxable. Businesses use tax credits to their advantage such as the case with the Marriott Hotel with its alternative fuel plants and Bank of America with its affordable housing tax credits.

Tax planning is not just a one-time, year-end deal, far from it. The best Rochester accountant will strongly encourage his clients to engage in planning for taxation purposes on a year-round basis. This is to ensure that any new legislation, policy and rules affecting the remittance of taxes can be considered and changes can be made. For example, the so-called Obamacare - a health care reform law under the Obama administration - will increase taxes in the coming years. Your company should take these changes into account in, say, planning your employee benefits program.

Again, it must be emphasized that the main purpose of tax planning is to maximize income and minimize expenses. It must then be an integral part of the overall planning process for your business (i.e., marketing plan, sales plan, and business strategy plan). Taxes, after all, affect every facet of your operation from the sales taxes to the investment taxes.

It must also be noted that tax planning should be undertaken under the guidance of an experienced Rochester accountant. Said professional has the right set of knowledge, skills and aptitude to undertake the complex processes and papers involved. Think of the money paid for his professional fees as money well spent in order to gain greater amounts of tax savings. There is also the fact that there is no one-size-fits-all taxation plan since every business is unique in every way. Hiring an experienced accountant for the job means a tailored taxation plan that will, indeed, answer the goals of tax savings for the entity - yours, for example.

So, don't wait for the tax season before starting on the first steps of tax planning. Do it now! Read more about tax planning click here.