Tax

Tax Due Dates for July 2012

July 10

Employees Who Work for Tips – If you received $20 or more in tips during June, report them to your employer. You can use Form 4070.

July 16

Employers– Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in June.Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in June.

July 31

Employers– Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2012. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.Employers – Federal unemployment tax. Deposit the tax owed through June if more than $500.

Employers – If you maintain an employee benefit plan, such as a pension, profit sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2011. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.

Certain Small Employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2012 but less than $2,500 for the second quarter.

By Leon Clinton
July 2, 2012

Start Planning Now for Next Year’s Tax Return

This year’s tax deadline may have come and gone already but it’s never to early to start planning for next year. With that in mind, here are eight things you can do now to make next April 15 easier.

1. Adjust your withholding. Why wait another year for a big refund? Now is a good time to review your withholding and make adjustments for next year, especially if you’d prefer more money in each paycheck this year. If you owed at tax time, perhaps you’d like next year’s tax payment to be smaller.

Give us a call if you need assistance in adjusting your withholding.

2. Store your return in a safe place. Put your 2011 tax return and supporting documents somewhere secure so you’ll know exactly where to find them if you receive an IRS notice and need to refer to your return. If it is easy to find, you can also use it as a helpful guide for next year’s return.

3. Organize your recordkeeping. Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Just be consistent to avoid a scramble for misplaced mileage logs or charity receipts come tax time.

4. Review your paycheck. Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions and other items. These payroll adjustments can make a big difference on your bottom line. Fixing an error in your paycheck now gets you back on track before it becomes a huge hassle.

5. Consult a tax professional early. If you are planning to use a tax professional to help you strategize, plan and make financial decisions throughout the year, then contact us now. You’ll have more time when you’re not up against a deadline or anxious for your refund.

6. Prepare to itemize deductions. If your expenses typically fall just below the amount to make itemizing advantageous, a bit of planning to bundle deductions into 2012 may pay off. An early or extra mortgage payment, pre-deadline property tax payments, planned donations or strategically paid medical bills could equal some tax savings. If you need help with tax planning for 2012 give us a call. We can help you prepare an approach that works best for you.

7. Strategize tuition payments. The American Opportunity Tax Credit, which offsets higher education expenses, is set to expire after 2012. It may be beneficial to pay 2013 tuition in 2012 to take full advantage of this tax credit, up to $2,500, before it expires.

Each household’s financial circumstances are different so it’s important to fully consider your specific situation and goals before making large financial decisions. Feel free to contact us any time you have questions or concerns. We can help you stay abreast of tax law changes throughout the year–not just at tax time.

By Leon Clinton
June 29, 2012

Tax Court Ruling Benefits Small Business Owners

Owners of closely held businesses, including family owned and other small businesses can now pass assets to heirs with minimal taxation thanks to a recent tax court ruling (Wandry v. Commissioner, US Tax Court March 26, 2012).

Under current regulations ownership of the business can be transferred to heirs using yearly and lifetime exemptions ($5,120,000 in 2012), as well as gifting $13,000 per year per heir. The catch is that there must be a professional appraisal of the business, but the IRS can contest the appraised value after the gift is given, and if the IRS finds the value is significantly higher there may be tax consequences.

Here’s what happened.

In 2001 Albert and Joanne Wandry (the donors), and their children formed Norseman Capital, LLC. In 2004, the Wandrys gifted $261,000 of business interests to each of their four children. Each of their five grandchildren received $11,000. The terms specified that the gifts should be equal to the dollar amount of their exemptions, which at the time were $1 million lifetime and an $11,000 annual exclusion.

The Wandrys’ assignation statement stipulated that an independent appraiser would provide valuation for the company, but that if the IRS challenged the valuation and it was determined to be different in a court of law, then the gifted interests would be adjusted to reflect this. This is known as a defined value clause.

In 2006, the IRS audited the couple’s gift tax returns. It appraised the valuation higher than that of the independent appraiser the Wandrys used and said that the gifts now exceeded the exclusion limits. The IRS also argued, among other things, that the defined value clause used in the case was contrary to public policy in part because it discouraged any attempt to collect the tax due.

The tax court disagreed however, and dismissed the argument stating that there was no distinction between a defined value clause in Wandry from that where there was a charitable donee. It also stated that the intent was to make gifts that were equal to their exemptions. As such, there was no additional dollar amount per se, and therefore no tax liability.

Wandry was groundbreaking for a couple of reasons. First, in that the defined value clause had hitherto only been used to reallocate fixed dollar amounts of business interests to charities and not the donors and their children and grandchildren; and second in that when the IRS appraises the business value at a higher amount the difference would not be subject to gift tax, provided the Wandry formulaic model is used.

The lifetime exemption is scheduled to revert to $1 million in 2013, so you might want to consider transferring business assets in 2012 while the exemption is still high. Keep in mind however, that while it’s likely the Wandry case will stand, the IRS has a three month window in which to appeal.

Questions? Give us a call today. We’re happy to help!

By Leon Clinton
June 22, 2012

Tax Court Ruling Benefits Small Business Owners

Search

News Categories

Recent Articles