Tag Tax Relief Act

2011-2012 Tax Savings Planning Guide is Here!

0 comments By TRMoore Filed in General, Tax Tagged with , , , August 25th, 2011 @ 3:08 pm

Download our 2011-2012 Tax Planning Guide

The Tax Relief Act of 2010 extended some expiring tax breaks and expanded others. Perhaps most notably, it extended the lower income and capital gains tax rates. So, you’ll owe less tax this year than if the law hadn’t been passed.

But some provisions of the law are set to expire at the end of 2011, while others will expire after 2012 unless Congress extends them again. In light of this uncertainty, minimizing your taxes over the next few years will require careful planning and timely action, as well as a thorough understanding of tax-saving strategies both new and old.

To help, our 2011 – 2012 Tax Planning Guide offers an overview of ways to reduce your burden for the upcoming tax season. Read more about what the guide offers below, and access it from our complimentary downloads here.

  • Business Tax Breaks – This year offers some new tax breaks, such as 100 percent bonus depreciation and the retained worker credit. It also offers another chance to take advantage of some breaks that have been extended through 2011.
  • Deductions & the AMT – Deductions can be powerful tax-saving tools because they reduce the amount of your income that’s taxed. And through 2012, the income-based phaseouts that limited the benefit of many deductions have been lifted.
  • Estate Planning – There’s good news and bad news this year when it comes to estate planning. On the positive side, the 2010 Tax Relief act prevents pre-2001 tax act law (lower exemptions and higher rates) from going into effect in 2011 as originally scheduled. But, on the negative side, these provisions apply only through 2012. Thus, much uncertainty remains, making estate planning an ongoing challenge.
  • Family & Education – Whether you’re the parent of a newborn or a college student — or your children are somewhere in between —there are numerous tax breaks you and your family may benefit from.
  • Investing – Last year, the biggest tax planning concern related to your investments likely was the return of higher long-term capital gains and dividend rates scheduled for 2011. Fortunately, in December Congress extended the 15 percent rate — but only through 2012. You may want to take steps this year and next to lock in lower rates while they’re still available.
  • Retirement – Tax-advantaged retirement plans offer valuable opportunities to save taxes now (or later, in the case of Roth accounts) and build up significant funds to help ensure you can live the lifestyle you desire during retirement.

At TR Moore & Company, we conduct tax savings planning for our clients on an annual basis. Start by downloading our 2011 – 2012 Tax Planning Guide, and contact Melinda Genitempo or Geoff Gallo via email or at 713.789.7077 to schedule your tax planning evaluation today.

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What You Need to Know About Estate Taxes

0 comments By TRMoore Filed in General, Tax Tagged with , , February 14th, 2011 @ 2:48 pm

If you are handling the disposition of an estate, you are probably already aware that there was an unexpected reprieve from taxes on the estates of those who died in 2010. But the estate tax is back in force this year, with estates greater than $5 million set to be taxed at the 35 percent rate.

While taxpayers surely are relieved there was no rate increase, they aren’t feeling the love for the tax-free threshold, with more than 60 percent of respondents in a recent CNBC poll voting for a threshold increase to $10 million or more. With the terms only temporary, the matter will be up for debate – and potential tax rate increases – again in two years.

Here is a rundown on some of the complexities related to the tax from the Texas Society of CPAs: 

1-Year Hiatus

Congress allowed the federal estate tax law to expire for 2010, meaning no taxes were due on the estates of anyone who died in 2010. That was good news for the families of numerous wealthy people—but it also meant many families at the more modest end of the income scale did not have to deal with estate taxes. In addition, the executors of estates of those who died last year did not have to file a tax return for the decedent’s estate with the Internal Revenue Service.

The Tax Burden Returns

On Dec. 17, 2010, President Obama signed into law the Tax Relief Act of 2010. In this bill, Congress reinstated the estate tax for decedents dying after Dec. 31, 2009. The new rules are only temporary and will sunset on Dec. 31, 2012.  Executors of deceased taxpayers must pay taxes on an estate greater than $5 million (there are considerations for surviving spouses, which should be discussed with your CPA). The estate tax will be based on the new 35 percent top rate.

In light of the rules that were in effect prior to the act, Congress afforded executors of decedents dying after Dec. 31, 2009, and before Jan. 1, 2011—such as the Steinbrenner Estate—the option to elect to not come under this newly revived estate tax. In this case, the estate would pay no estate tax as originally described above, but beneficiaries would be subject to the modified carryover basis rules.

Be Aware of All the Assets in Your Estate

Many don’t understand what kinds of assets make up their estates. There is a misconception that an estate consists solely of cash in the bank. You may be in for an unpleasant surprise, however, if you don’t consider the current value of all the assets in your estate. A parent who did not have a lot of cash on hand may have owned a home that has increased substantially in value over the years, especially if it’s located in an area with high or rising property values. Add in the value of a retirement account savings or other assets and the total may quickly jump to more than $5 million. That may also be the case with a small business that family members built from scratch into a thriving enterprise, especially if the company owns valuable property or equipment.  

In addition, while an estate may not be subject to a federal estate tax, the estate’s executor may still have to pay an estate tax at the state level, depending upon the appropriate state’s laws. Your CPA can help you in the accounting and valuation of your estate to determine whether your situation calls for undertaking some tax-savvy estate planning for both federal and state purposes. 

Estate taxes are complicated, so it’s wise to consult with a CPA about long-term estate plans. Contact us for more information.

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Key Form 1040 Revisions for 2010 Tax Filing Season

0 comments By TRMoore Filed in General, Tax Tagged with , , February 8th, 2011 @ 6:44 pm

Despite calls for simplifying the tax laws, they have actually been made much more complicated in the last few years. This filing season is no different. The 2010 Form 1040 reflects a number of new tax breaks. Some are straightforward, while others are more complex. Some present choices, but they all provide tax savings planning opportunities.

In addition to the full provisions of the Tax Relief Act of 2010 available on our Web site, we’ve put together a list of the key changes for this filing season:

  1. Roth IRA rollovers no longer restricted. You can now make a qualified rollover contribution to a Roth IRA, regardless of the amount of your modified adjusted gross income.
  2. Income from Roth rollover can be spread out. Half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010.
  3. Self-employed health insurance deduction. Effective March 30, 2010, a self-employed person who paid for health insurance may be able to include in the self-employed health insurance deduction any premiums paid to cover a child who was under age 27 at the end of 2010, even if the child was not a dependent. Also, health insurance costs for a taxpayer and family are deductible in computing 2010 self-employment tax.
  4. Small business health insurance credit. There’s a new tax credit for an eligible small employer who makes qualifying contributions to buy health insurance for employees. This credit is very complex, but it can yield substantial tax savings. In general, the credit is 35 percent of premiums paid and can be taken against regular and alternative minimum tax.
  5. Limits on personal exemptions and itemized deductions ended. You no longer lose part of your deduction for personal exemptions and itemized deductions, regardless of the amount of your adjusted gross income.
  6. Personal casualty and theft loss limit reduced. Each personal casualty or theft loss is limited to the excess of the loss greater than $100 (instead of the $500 limit that applied for 2009). This yields larger deductions and thus greater tax savings for affected individuals.
  7. Corrosive drywall damage. Taxpayers who paid for repairs to their personal residence or household appliances because of corrosive drywall that was installed between 2001 and 2008 may be able to deduct those amounts as casualty losses under a special safe harbor crafted by the IRS.
  8. Homebuyer credit. An eligible first-time homebuyer (and a long-term resident treated as a first-time homebuyer) may be able to claim a first-time homebuyer credit for a home that was purchased in 2010. To qualify, the home must have cost $800,000 or less. You generally cannot claim the credit for a home you bought after April 30, 2010. However, you may be able to claim the credit if you entered into a written binding contract before May 1, 2010, to buy the home before July 1, 2010, and actually bought the home before Oct. 1, 2010.
  9. Adoption credit. The maximum adoption credit is $13,170 per eligible child for both non-special needs adoptions and special needs adoptions. In addition, the adoption credit is refundable, i.e., you get the credit even if it exceeds your taxes.
  10. Gifts to charity. The provision that excludes up to $100,000 of qualified charitable distributions (distributions to a charity from an IRA) has been extended. If you elect, a qualified charitable distribution made in January of 2011 will be treated as made in 2010.
  11. Enhanced small business expensing (Section 179 expensing). To help small businesses quickly recover the cost of capital outlays, small business taxpayers can elect to write off these expenditures in the year they are made instead of recovering them through depreciation. For 2010, you generally may expense up to $500,000 of qualifying property placed in service during the tax year. This annual limit is reduced by the amount by which the cost of property placed in service exceeds $2,000,000.
  12. Special depreciation allowance. Businesses that acquire and place qualified property into service after Sept. 8, 2010, can now claim a depreciation allowance in the placed-in-service year equal to 100 percent of the cost of the property. Businesses that acquired qualified property from Jan. 1, 2010, through Sept. 8, 2010, can claim a bonus first-year depreciation allowance of 50 percent of the cost of the property.
  13. Cellular telephones. Cell phones and other similar telecommunications equipment have been removed from the categories of “listed property.” This means that cell phones can be deducted or depreciated like other business property, without onerous record keeping requirements.
  14. Carryback of general business credits. Generally, unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities. However, for 2010, eligible small businesses can carry back unused general business credits for five years instead of just one.
  15. Luxury auto limits. First-year luxury auto limits for vehicles first placed in service in 2010 are $11,060 for autos and $11,160 for light trucks or vans (for vehicles ineligible for bonus depreciation, or if the taxpayer elects out, $3,060 and $3,160, respectively).

As you can see, there are many new rules for this filing season. Read full provisions of the Tax Relief Act of 2010 on our Web site, and contact us to review your complete tax picture.

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R&D Tax Credit Potential? 8 Questions to Ask Yourself

0 comments By TRMoore Filed in General, Tax Tagged with , , , January 13th, 2011 @ 6:24 pm

Although the Research & Development Tax Credit (R&D) expired at the end of 2009, the recently enacted Tax Relief Act of 2010 renewed the credit for two years, through Dec. 31, 2011, and is effective for amounts paid or incurred after Dec. 31, 2009.

Earlier in 2010, President Obama urged Congress to make the credit permanent (it has been regularly extended since its creation in 1981). The act reflects a temporary two-year extension of the credit that alone carries a $13 billion tax cost. Consideration of an expensive, permanent extension is left to another Congress. 

With the future of the credit uncertain, it is a great time for businesses that are most likely to benefit to consider an R&D tax credit study. Here are eight questions to ask yourself – a positive answer to one or more may mean you have R&D potential to explore:

  1. Are you a manufacturer or software developer?
  2. Are you unsure whether you are claiming all eligible R&D credits?
  3. Do you have an insufficient infrastructure to maximize the amount of R&D credit claimed?
  4. Have you significantly increased expenditures for R&D over the last few years? 
  5. Are you currently under IRS audit for R&D tax credits claimed? 
  6. Are you in a capital- or technology-intensive industry?
  7. Are you uncertain of what constitutes “qualifying research expenditures”? 
  8. Are you unsure of what constitutes “non-traditional” qualified research expenditures or how they should be included in your R&D computation?

Read more about the benefits of the credit on our Web site, and feel free to contact us with any additional questions.

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2011 Tax Deadline Extension, Delayed Filing for Some

1 comment By TRMoore Filed in General, Tax Tagged with , , January 4th, 2011 @ 3:11 pm

The Internal Revenue Service today opened the 2011 tax filing season by announcing that taxpayers have until April 18 to file their tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization & Job Creation Act of 2010 enacted Dec. 17. Those who need to wait to file include:

  • Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
  • Taxpayers claiming the higher education tuition and fees deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
  • Taxpayers claiming the educator expense deduction. This deduction is for educators of grades kindergarten through 12th with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

In addition to extending those tax deductions for 2010, the act also extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012 such as the American Opportunity Tax Credit and the modified Child Tax Credit, which help families pay for college and other child-related expenses.  The act also provides various job creation and investment incentives including 100 percent expensing and a two-percent payroll tax reduction for 2011.  Those changes have no effect on the 2011 filing season.

Read full provisions impacting individuals, businesses and estates on our Web site.

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