When President Obama won office in 2008, he ran on a platform of bringing change to Washington. Whether you believe his changes are for the better or for the worse, you have to admit that he has certainly made some changes during his first year in office.
You can count on there being changes to our tax laws as well. What can we expect to see happen to our tax system in 2010? Here are a few things to look for:
Deductions that will expire on 12/31/2009:
· Sales tax deduction for individuals that live in states without a state income tax
· Sales tax deduction for the purchase of a new motor vehicle
· Out of pocket expenses for educators
These changes affect people in states like Texas the most since there is no state income tax to deduct instead of the sales tax. Each of these deductions were originally set to expire in past years, but were extended. Look for potential last-minute extensions of these deductions as Congress gets set to leave for the holiday recess.
Other law changes for 2010:
· The income limit for people who want to convert traditional IRA accounts to Roth IRA accounts will be removed.
· AMT exemptions are dropping to $33,750 (single filers) and $45,000 (joint filers)
· The mileage rate for business miles will decrease to 50 cents per mile.
· Itemized deductions and personal exemptions are no longer subject to phase out for higher-income taxpayers.
· There will be a $2,400 exemption from taxable income for anyone who received unemployment benefits.
· Charitable donations paid directly from an IRA will no longer be excludable from income.
· The 2009 version of the first time homebuyer credit expires on May 1, 2010.
· Also, anyone who took the first time homebuyer credit in 2008 will be required to begin repaying it in 2010.
· For 2010, the estate tax will not exist.
Though each of these items could be neatly summarized in a bullet point, some of them could have huge implications.
· The AMT law is flawed and if it isn’t fixed soon, many middle-class families will find themselves on the receiving end of an AMT tax bill in 2010.
· Removal of the phase outs could mean dramatically lower tax bills for higher-earning families.
· The first-time homebuyer credit has been a big part of the partial rebound of our housing market. People will want to be sure to time any purchases before the deadline to take advantage of the deal before it expires.
· The removal of the estate tax could be the most important item on the list, though. Currently, the top estate tax bracket is almost 50%. That means when someone dies and they have assets in excess of $3 million, the government could end up receiving a large percentage of their net worth instead of their heirs. The one-year repeal of this tax is all the more significant when you consider that in 2011, the tax comes back with even higher rates and lower exemptions than before. Because of this, many tax advisors are (jokingly, I’m sure) advising their wealthy clients to plan to die in 2010 and save a ton of tax. Here, I would not be surprised to see the government pull a ‘bait and switch’ and repeal the repeal.
In addition to the tax law changes listed above – all of which are already on the books – I am sure that there will be other changes to come. Government spending has reached record highs already and if the health care reform package passes, our government will need a significant boost in its revenues to keep up. Since government revenues are generated by tax dollars, it’s a safe bet to say that taxes will be going up in the near future.
The government has also increased compliance requirements for paid tax preparers, including more strenuous oversight and the requirement to electronically file returns. So not only will taxes be going up, but taxpayers should expect to see fees for tax preparation increase as well.
There is no easy way to predict what the government will do with our taxes from year to year. However, knowing what we know will still allow us to plan with our clients to minimize their burden – whatever the government throws at us.
--Dan Musick is the Tax Services Partner at Cook & Associates, a public accounting firm serving clients from offices in San Marcos and San Antonio, TX
Monday, December 28, 2009
Monday, December 21, 2009
End of Year Tax Tips
Although there are only ten days left in the year, there are still some things you can do to save big on your 2009 taxes:
Compare Standard vs. Itemized Deductions – Put the amount of your standard deduction next to your itemized deduction. If your itemized deductions are slightly lower than your standard deduction and you won’t be able to itemize next year, try shifting some of next year’s payments to this year. For example, pay your 2010 real estate taxes in 2009. If you can’t itemize in 2009 but may be able to in 2010, postpone expenses. Pay your 2009 property taxes and make your charitable donations in January rather than at the end of the year...then you can "double up" next year.
Medical Deductions – These expenses are deductible if they exceed 7.5% of your adjusted gross income. If you think you may be close to this threshold, consider getting any necessary procedures done before the end of the year. You can save losing expenses to the 7.5% floor twice and make more of them deductible.
Retirement Contributions – You can lower taxable income by contributing to a retirement plan. You can make contributions to 401(k) and 403(b) plans up to December 31, 2009. Contributions to IRAs can be made as late as April 15, 2010.
Charitable Donations – If you plan on itemizing this year, donating to charities is a good way to increase your deduction. Donations can include cash, clothes, household items, toys, and even contributions made by credit card. Remember, if the value of the donations is over $500, you must have an itemized list.
Miscellaneous Itemized Deductions – Employee business expenses, investment expenses, and tax preparation fees are miscellaneous deductions subject to a floor of 2% of your adjusted gross income. If the sum of these is close to or more than 2% of your AGI, consider whether there are other items in this category that you could purchase before year end. If they’re not close, postpone the purchase until 2010.
Cash Gifts – Up to $13,000 per person can be given away without having to file a gift tax return. If you’re married, you and your spouse can give $26,000 tax-free to an individual. The number of individuals you can give this to is unlimited. Keep in mind, however, that the individual needs to cash or deposit the amount prior to year-end. These types of gifts can reduce a taxable estate and potential estate tax upon the death of the giver.
Self-employment Tips – If you use the cash method of accounting, you can decrease your 2009 taxable income by postponing your December billings or collection efforts until January. You can also purchase supplies and equipment at year-end to accelerate your deductions.
Happy Holidays and Happy Tax Planning!
--LeAnn Carlson is the Audit Manager for Cook & Associates, a full-service public accounting firm with offices in San Marcos and San Antonio, TX
Compare Standard vs. Itemized Deductions – Put the amount of your standard deduction next to your itemized deduction. If your itemized deductions are slightly lower than your standard deduction and you won’t be able to itemize next year, try shifting some of next year’s payments to this year. For example, pay your 2010 real estate taxes in 2009. If you can’t itemize in 2009 but may be able to in 2010, postpone expenses. Pay your 2009 property taxes and make your charitable donations in January rather than at the end of the year...then you can "double up" next year.
Medical Deductions – These expenses are deductible if they exceed 7.5% of your adjusted gross income. If you think you may be close to this threshold, consider getting any necessary procedures done before the end of the year. You can save losing expenses to the 7.5% floor twice and make more of them deductible.
Retirement Contributions – You can lower taxable income by contributing to a retirement plan. You can make contributions to 401(k) and 403(b) plans up to December 31, 2009. Contributions to IRAs can be made as late as April 15, 2010.
Charitable Donations – If you plan on itemizing this year, donating to charities is a good way to increase your deduction. Donations can include cash, clothes, household items, toys, and even contributions made by credit card. Remember, if the value of the donations is over $500, you must have an itemized list.
Miscellaneous Itemized Deductions – Employee business expenses, investment expenses, and tax preparation fees are miscellaneous deductions subject to a floor of 2% of your adjusted gross income. If the sum of these is close to or more than 2% of your AGI, consider whether there are other items in this category that you could purchase before year end. If they’re not close, postpone the purchase until 2010.
Cash Gifts – Up to $13,000 per person can be given away without having to file a gift tax return. If you’re married, you and your spouse can give $26,000 tax-free to an individual. The number of individuals you can give this to is unlimited. Keep in mind, however, that the individual needs to cash or deposit the amount prior to year-end. These types of gifts can reduce a taxable estate and potential estate tax upon the death of the giver.
Self-employment Tips – If you use the cash method of accounting, you can decrease your 2009 taxable income by postponing your December billings or collection efforts until January. You can also purchase supplies and equipment at year-end to accelerate your deductions.
Happy Holidays and Happy Tax Planning!
--LeAnn Carlson is the Audit Manager for Cook & Associates, a full-service public accounting firm with offices in San Marcos and San Antonio, TX
Thursday, December 17, 2009
The Party Season Primer
For some, December means the end of football season and/or the beginning of basketball season. For everyone, however, it is the party season! If you are like me, then you have already attended a few holiday events. To use a sports metaphor, the real season begins this weekend and runs through January 3, 2010.
So for those of you that are “party hard” types, I have done some research and identified some items to help guide you through this short, yet intense season.
Pre-Game:
Filter that alcohol to eliminate as many toxins as possible. This helps your liver-the body’s filter. Finally there is a practical use for that Brita filter setting in the cabinet. Just run your vodka, gin, etc. through the filter a few times and you can reduce the amount of toxins entering your body.
Like all good athletes, you want to hydrate properly. Alcohol dehydrates the body. It also depletes trace elements. So start getting in game condition by grabbing that gallon of Gatorade and chugging.
No athlete performs their best when they are tired. Get a good nights rest before the event. A quick nap may also come in handy if the event is a marathon.
And of course, let’s not forget the pregame meal. All athletes have their favorite pregame meal. Marathoners are famous for “carbing up” before the race. Football players prefer something more long term. Personally, I have found a burger provides a good foundation in my tummy for the night.
Post-Game:
A post game drink (next morning), may not be the answer. Of course, it will deaden the pain so this is possible option.
Firing up the coffee pot and drowning yourself in coffee also may not be the best path. Coffee is simply going to wake you up so you can feel that head pounding. Actually, coffee is a diuretic. Diuretics are used in weight loss programs. They flush your system, dehydrating the body. In effect, they do the same thing that alcohol does. More coffee may not be the answer.
My research indicates that the big, greasy jalapeño cheeseburger and fries isn’t a good choice. This one really bums me out because I have used this method on a number of occasions. Sadly, I can’t remember if it worked. At any rate, researchers say that fatty, hard to digest foods take the body away from its main job which is ridding the body of alcohol toxins.
Instead, this year I am going to try eggs, bananas, water (lots), and orange juice. Apparently these foods are rich in the nutrients and trace elements that alcohol destroys. I am not sure how all of this will taste together, but I can do a breakfast taco with no meat and wash it down with OJ.
Once you stabilize your tummy, a regimen of vitamins is always good for the long haul. This is important because, like any highly trained professional, you need to get ready for the next game.
Conclusion:
Have a wonderful holiday season. Put Yellow Cab on your speed dial. Focus on what you have. It really is a wonderful life....especially when you have family and friends to celebrate with.
Steve Cook, CPA, is the managing shareholder of Cook and Associates, PLLC- certified public accountants. The firm has offices in San Antonio and San Marcos, Texas.
So for those of you that are “party hard” types, I have done some research and identified some items to help guide you through this short, yet intense season.
Pre-Game:
Filter that alcohol to eliminate as many toxins as possible. This helps your liver-the body’s filter. Finally there is a practical use for that Brita filter setting in the cabinet. Just run your vodka, gin, etc. through the filter a few times and you can reduce the amount of toxins entering your body.
Like all good athletes, you want to hydrate properly. Alcohol dehydrates the body. It also depletes trace elements. So start getting in game condition by grabbing that gallon of Gatorade and chugging.
No athlete performs their best when they are tired. Get a good nights rest before the event. A quick nap may also come in handy if the event is a marathon.
And of course, let’s not forget the pregame meal. All athletes have their favorite pregame meal. Marathoners are famous for “carbing up” before the race. Football players prefer something more long term. Personally, I have found a burger provides a good foundation in my tummy for the night.
Post-Game:
A post game drink (next morning), may not be the answer. Of course, it will deaden the pain so this is possible option.
Firing up the coffee pot and drowning yourself in coffee also may not be the best path. Coffee is simply going to wake you up so you can feel that head pounding. Actually, coffee is a diuretic. Diuretics are used in weight loss programs. They flush your system, dehydrating the body. In effect, they do the same thing that alcohol does. More coffee may not be the answer.
My research indicates that the big, greasy jalapeño cheeseburger and fries isn’t a good choice. This one really bums me out because I have used this method on a number of occasions. Sadly, I can’t remember if it worked. At any rate, researchers say that fatty, hard to digest foods take the body away from its main job which is ridding the body of alcohol toxins.
Instead, this year I am going to try eggs, bananas, water (lots), and orange juice. Apparently these foods are rich in the nutrients and trace elements that alcohol destroys. I am not sure how all of this will taste together, but I can do a breakfast taco with no meat and wash it down with OJ.
Once you stabilize your tummy, a regimen of vitamins is always good for the long haul. This is important because, like any highly trained professional, you need to get ready for the next game.
Conclusion:
Have a wonderful holiday season. Put Yellow Cab on your speed dial. Focus on what you have. It really is a wonderful life....especially when you have family and friends to celebrate with.
Steve Cook, CPA, is the managing shareholder of Cook and Associates, PLLC- certified public accountants. The firm has offices in San Antonio and San Marcos, Texas.
Thursday, December 10, 2009
Checklist To Help Businesses Bounce Back
I like the quote "Success always comes when preparation meets opportunity". The key to this quote is that the preparation must come before the opportunity. In the wake of the recession, many businesses are not considering preparing for future opportunities. Instead, they are struggling to stay afloat, concentrating on the here and now. Treading water gets you nowhere.
Now is the time to analyze your business. Now is the time to plan and prepare for economic recovery. Robert Half, an accounting and finance staffing company, has some good tips on how to prepare:
1. Keep reassessing budgets. It's important to continually modify budgets to reflect progress or setbacks. Those companies that fully leverage the expertise of financial, budget, treasury or cost analysts will be better positioned to capitalize on improving conditions.
2. Evaluate your bench strength. Have you cut a significant amount of staff? Is it time to do some re-hiring? This can be an ideal time for a "talent upgrade" as many highly skilled financial professionals are in the job market. If you're reluctant to add employees, you can still prepare for the future by engaging temporary professionals to fill potential skills gaps.
3. Revisit compliance requirements. Companies should be prepared to evaluate financial reporting competencies, information technology controls, risk assessment procedures and documentation.
4. Anticipate next-generation financial reporting. The U.S. Securities and Exchange Commission has mandated that public companies report their financials using Extensible Business Reporting Language, or XBRL, an interactive data format, by 2011. In addition, while the timetable for convergence between International Financial Reporting Standards and U.S. GAAP is uncertain, proactive firms are already offering education and training to help staff better understand these initiatives and plan for eventual implementation.
5. Invest in your people. It may be time to consider reinstituting training and development programs. Firms that invest in staff training better prepare their teams for new business opportunities. Professional development also boosts employee job satisfaction.
6. Upgrade IT systems. Outdated financial systems can impair a business's ability to compete, but conversions take time and resources. Companies that are planning systems upgrades should ensure they have the budget and staffing resources to manage the implementation.
7. Prepare for new products and services. For companies that are considering new product or service launches, this is the time to ensure that the new offering can be introduced quickly when the economy rebounds.
8. 'Re-recruit' your best people. Just as your firm may be considering additional hiring, so are other firms. Don't be surprised if top performers are approached with other offers once the economy turns around. A best defense is a good offense: Managers should meet with their best people now to discuss their careers and remind them how much their contributions are valued.
Stop treading water. Now is the time to get prepared so you'll be ready when opportunity strikes.
LeAnn Carlson is the Audit Manager with Cook & Associates, a public accounting firm offering tax, advisory, and audit services to clients from its offices in San Marcos and San Antonio, TX
Now is the time to analyze your business. Now is the time to plan and prepare for economic recovery. Robert Half, an accounting and finance staffing company, has some good tips on how to prepare:
1. Keep reassessing budgets. It's important to continually modify budgets to reflect progress or setbacks. Those companies that fully leverage the expertise of financial, budget, treasury or cost analysts will be better positioned to capitalize on improving conditions.
2. Evaluate your bench strength. Have you cut a significant amount of staff? Is it time to do some re-hiring? This can be an ideal time for a "talent upgrade" as many highly skilled financial professionals are in the job market. If you're reluctant to add employees, you can still prepare for the future by engaging temporary professionals to fill potential skills gaps.
3. Revisit compliance requirements. Companies should be prepared to evaluate financial reporting competencies, information technology controls, risk assessment procedures and documentation.
4. Anticipate next-generation financial reporting. The U.S. Securities and Exchange Commission has mandated that public companies report their financials using Extensible Business Reporting Language, or XBRL, an interactive data format, by 2011. In addition, while the timetable for convergence between International Financial Reporting Standards and U.S. GAAP is uncertain, proactive firms are already offering education and training to help staff better understand these initiatives and plan for eventual implementation.
5. Invest in your people. It may be time to consider reinstituting training and development programs. Firms that invest in staff training better prepare their teams for new business opportunities. Professional development also boosts employee job satisfaction.
6. Upgrade IT systems. Outdated financial systems can impair a business's ability to compete, but conversions take time and resources. Companies that are planning systems upgrades should ensure they have the budget and staffing resources to manage the implementation.
7. Prepare for new products and services. For companies that are considering new product or service launches, this is the time to ensure that the new offering can be introduced quickly when the economy rebounds.
8. 'Re-recruit' your best people. Just as your firm may be considering additional hiring, so are other firms. Don't be surprised if top performers are approached with other offers once the economy turns around. A best defense is a good offense: Managers should meet with their best people now to discuss their careers and remind them how much their contributions are valued.
Stop treading water. Now is the time to get prepared so you'll be ready when opportunity strikes.
LeAnn Carlson is the Audit Manager with Cook & Associates, a public accounting firm offering tax, advisory, and audit services to clients from its offices in San Marcos and San Antonio, TX
Thursday, December 3, 2009
MANAGING YOUR BUSINESS USING ONLINE TOOLS
On Tuesday, December 8, I will be presenting a webinar for the San Marcos Chamber of Commerce entitled, “How To Effectively Manage Your Business using Online Accounting Tools”.
The seminar will be no more than one hour long and begin at noon. The program is a great opportunity for non-profits, healthcare, professional and small business to learn what tools are currently available and how they benefit you.
For information regarding the presentation at the following link:
www.ez.com/SanMarcoschamber
For reservations for the presentation, use the following link:
www.ez.com/SanMarcoschamber1
We look forward to seeing everyone for lunch next Tuesday.
The seminar will be no more than one hour long and begin at noon. The program is a great opportunity for non-profits, healthcare, professional and small business to learn what tools are currently available and how they benefit you.
For information regarding the presentation at the following link:
www.ez.com/SanMarcoschamber
For reservations for the presentation, use the following link:
www.ez.com/SanMarcoschamber1
We look forward to seeing everyone for lunch next Tuesday.
Tuesday, December 1, 2009
TIME FOR SOME TRANSPARENCY, UNCLE SAM
The U.S. government is currently operating with a great deal of debt. This is common knowledge. Not so common knowledge is the exact dollar amount of this debt. This is about to change, though.
Under a new standard issued by the Federal Accounting Standards Advisory Board (FASAB), the federal government will soon be required to issue annual reports on its fiscal sustainability.
Representative James Cooper, a member of the FASAB task force that researched the standard, speaks on the implications of this requirement. “Including a statement of fiscal sustainability into the financial report is a step in the right direction. I'm proud of the members of FASAB for coming to consensus on this. If we're ever going to get a handle on our $56 trillion fiscal gap, we need to be more honest about how we account for it. I hope they can take the next step and begin treating our social insurance promises to Social Security and Medicare as liabilities in our national balance sheet - our accrued debt."
According to the Institute for Truth in Accounting, the federal government is currently under-reporting the national debt by as much as $60 trillion. No business would be allowed to misrepresent its liabilities this badly – why should our government? The newly required report should provide a reconciliation of the two figures. The report will also present required supplementary information that will detail income and expenses, deficits or surpluses, and Treasury debt held by the public as a share of gross domestic product (GDP).
While the report will be somewhat technical, it should still provide information that is understandable and meaningful to the general public. More transparency in government will promote accountability and provide valuable information to citizens about how and where their money is being spent. Hopefully, the end result will be a more fiscally responsible government.
--LeAnn Carlson is the Audit Manager for Cook & Associates, a full service public accounting firm operating from offices in San Marcos and San Antonio, TX.
Under a new standard issued by the Federal Accounting Standards Advisory Board (FASAB), the federal government will soon be required to issue annual reports on its fiscal sustainability.
Representative James Cooper, a member of the FASAB task force that researched the standard, speaks on the implications of this requirement. “Including a statement of fiscal sustainability into the financial report is a step in the right direction. I'm proud of the members of FASAB for coming to consensus on this. If we're ever going to get a handle on our $56 trillion fiscal gap, we need to be more honest about how we account for it. I hope they can take the next step and begin treating our social insurance promises to Social Security and Medicare as liabilities in our national balance sheet - our accrued debt."
According to the Institute for Truth in Accounting, the federal government is currently under-reporting the national debt by as much as $60 trillion. No business would be allowed to misrepresent its liabilities this badly – why should our government? The newly required report should provide a reconciliation of the two figures. The report will also present required supplementary information that will detail income and expenses, deficits or surpluses, and Treasury debt held by the public as a share of gross domestic product (GDP).
While the report will be somewhat technical, it should still provide information that is understandable and meaningful to the general public. More transparency in government will promote accountability and provide valuable information to citizens about how and where their money is being spent. Hopefully, the end result will be a more fiscally responsible government.
--LeAnn Carlson is the Audit Manager for Cook & Associates, a full service public accounting firm operating from offices in San Marcos and San Antonio, TX.
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