tax relief

Tax

Tax Due Dates for October 2012

Note: September due dates were extended to January 2013 for areas impacted by Hurricane Isaac. See article “Tax Relief for Those Affected By Natural Disasters” in this newsletter.

October 10 Employees who work for tips – If you received $20 or more in tips during September, report them to your employer. You can use Form 4070.
October 15 Individuals – If you have an automatic 6-month extension to file your income tax return for 2011, file Form 1040, 1040A, or 1040EZ and pay any tax, interest, and penalties due.

Electing Large Partnerships – File a 2011 calendar-year return (Form 1065-B). This due date applies only if you were given an additional 6-month extension. See March 15 for the due date for furnishing the Schedules K-1 to the partners.

Employers (nonpayroll withholding) – If the monthly deposit rule applies, deposit the tax for payments in September.

Employers (Social Security, Medicare, and withheld income tax) – If the monthly deposit rule applies, deposit the tax for payments in September.
October 31 Employers – Social Security, Medicare, and withheld income tax. File form 941 for the third 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 November 13 to file the return.

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 third quarter.

Employers – Federal Unemployment Tax. Deposit the tax owed through September if more than $500.
Tax

Expanded Adoption Credit

The Affordable Care Act raises the maximum adoption credit to $13,360 per eligible child in 2011, up from $13,170 in 2010. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees, and travel expenses. In order to claim the credit or refund however, your modified adjusted gross income (MAGI) must be less than $225,210.

If you adopted a child this year, you may be eligible for this credit. Make sure you contact us early, though. To claim this tax relief, we must file a paper return, which means your refund will be slower than if you could file electronically.

Accounting Business Tax

Year End Tax Saving Ideas For Individuals – Mutual Fund Investments

Mutual Fund Investments

Before investing in a mutual fund, ask whether a dividend is paid at the end of the year or whether a dividend will be paid early in the next year but be deemed paid this year. The year-end dividend could make a substantial difference in the tax you pay.

Example: You invest $20,000 in a mutual fund at the end of 2011. You opt for automatic reinvestment of dividends. In late December of 2011, the fund pays a $1,000 dividend on the shares you bought. The $1,000 is automatically reinvested.

Result: You must pay tax on the $1,000 dividend. You will have to take funds from another source to pay that tax because of the automatic reinvestment feature. The mutual fund’s long-term capital gains pass through to you as capital gains dividends taxed at long-term rates, however long or short your holding period.

The mutual fund’s distributions to you of dividends it receives generally qualify for the same tax relief as long-term capital gains. If the mutual fund passes through its short-term capital gains, these will be reported to you as “ordinary dividends” that don’t qualify for relief.

Tip: Wait until after the dividend to buy the shares because the share net asset value will drop after the dividend is paid. Alternatively, buy the shares in 2011, but opt to take the dividend in cash instead of having it reinvested.

In spite of these tax consequences, it may be a good idea to buy shares right before the fund goes ex-dividend. For instance, the distribution could be relatively small, with only minor tax consequences. Or the market could be moving up, with share prices expected to be higher after the ex-dividend date.

Tip: To find out a fund’s ex-dividend date, call the fund directly.

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