Corporate and Personal Income Taxes are Due Soon!

CPA Serving Atlanta GA & Beyond

It is certainly that time of year again. Please be reminded that corporate returns are due March 15. If we want to file by the due date, I will need to receive your data in next few weeks so that I will have an ample amount of time to file. As always, I will file for the automatic six-month extension in the event I do not get the data in time. Please be reminded that an extension to file is not an extension to pay and that both the IRS and the state expect you to pay your taxes as you earn the monies. Please be reminded there are no valid extensions after the September 15 final due date lapses.

To process your corporate return, please forward your balance sheet and your profit and loss and copies of any W-2’s the corporation might have issued. If you have not yet done so, please be reminded that 1099’s should be issued by the end of January; your payroll service will handle this if you get them the information. Before you send the current years financial please be sure to always review the prior years balance sheet on the tax return and ensure that your internal books equals the return while being sure to make any appropriate adjustments. That way you will be assured of starting the year off with a clean set of records which will otherwise distort you current years operating results.

To complete your corporate return, please forward:

• your year to date Balance sheet, Profit & loss
• Year end Bank Statements and Bank reconciliations
• Aged Accounts Receivable
• Year end Inventory
• Aged Accounts Payable
• Year to Date Payroll Records by Employee
• Notes Receivable and Payable Balances at Year end
• copies of new Notes
• the amount of medical insurance paid for each shareholder
• If your company is new, please forward copies of the incorporation papers.

This is to confirm that you are aware are handling all of your payroll and independent contractor/1099 needs, of the need to have a business license, to pay the annual registration fee, to have your annual Board of Directors and Shareholders Meeting, and to file the county property tax report (please be sure to claim the Freeport Exemption on your inventory if you qualify as this can substantially reduce the amount owed).  Please note that if you have not yet set up a retirement plan or have a formal financial plan, that  I suggest that we sit down together soon to get the right plans in place to help ensure your long-term financial success! 

This is to confirm that I suggest that you formally tax plan at least twice annually.

To process your personal income tax return, please forward:  

• Copies of all reported income forms, i.e. Forms W-2, 1099, brokerage statements, interest, dividends, etc.
• Summary of all medical expenses with copies of all individual items over $1,000.
• Summary of property taxes with copies of all individual items over $1,000.
• Summary of Ad valorem Taxes (property tax on cars) with copies of all individual items over $1,000.
• Summary of Mortgage Interest with copies of all individual items over $1,000.
• Summary of cash and property contributions with copies of all individual items over $1,000.
• Be sure to include any changes in address, dependents, filing status, or any other substantive changes from the prior year which would have impact on this years return.
• Please forward student loan interest, child care expenses, tuition, and any other miscellaneous deductions/income.
• Please be sure to let me know of any changes to the claiming of dependents, filing status, address, etc.
• If you are a new client to us please bring along for both corporate and personal a copy of your prior year tax returns. If a brand new corporation, please forward along a copy of your incorporation papers, Federal ID #, and your S Corporation acceptance.

The initial due date for personal returns is April 15. For returns not filed by that date both the IRS and GA allow for a six month extension. Please be reminded that there are no valid extensions after the October 15 final due date lapses. Please be reminded that an extension to file is not an extension to pay and that you are required by tax law to pay applicable taxes as the monies are earned or you will be subject to additional penalties and interest. 

Please be reminded that the mileage rate is 50.5 cents per mile for 1/1/08-6/30/08, and 58.5 cents per mile from 7/1/08 to 12/31/08. Effective 1-1-09 the mileage rate is 55 cents per mile. Please note IRS rules require you to keep a by day log to support business miles. Please turn in an expense report monthly to get reimbursed for these and any other business expenses you might have paid personally. Please be reminded that extending the filing of a return does not delay the need to pay as you go as both the IRS & GA will bill you for penalties and interest if you do not pay your taxes during the tax year to which they relate. 

I am looking to grow my business by adding key accounts like you with goals and aspirations just like yours.  So if you know anyone looking for a Good CPA, please let me know and to check me out at www.HISCPA.com  or our ministry at www.John-Dillard.com 

Please be sure to allow 10 days for me to complete your returns after I get all of the information needed. 

The end of the year is a good time to focus on tax planning and assess your financial status and goals. These strategies may help minimize your tax bill.

Thinking about your taxes will almost always give you a headache, especially around the holidays. But staying on top of your finances as the year comes to a close can mean the difference between owing thousands of dollars in federal taxes and receiving a sizable check from the government in the spring.

Martin Scoll, Vice President of Life Event Services for Wachovia Securities, says it is paramount to start preparing as early as possible. “Good tax preparation and planning starts on January 1,” he says. “Don’t wait until December to start dealing with your year-end planning. Reviewing your finances and giving some thought to your taxes in October and November will not only keep you ahead of the game — it will also likely save you money.”

Here are some tax-efficient strategies to consider as the end of the year approaches.

Review Your Investments

Real Estate. For many people, a home is their best investment. Not only does a home typically rise in value over the long term — it also provides one of the best tax advantages out there, since the interest paid on a mortgage is generally deductible from your federal taxable income.

Stocks and Mutual Funds. Scoll says it is important to give your entire portfolio a review as the year comes to an end. If you have taken a loss from some stocks this year, it might be wise to sell them off before the end of December. Losses in equity markets can be used to offset any capital gains on stocks that have been realized during the year, and any excess losses can offset up to $3,000 of ordinary income, with any remainder carried forward for use in future years.

If you do decide to sell off stocks, make sure to do it before December31, the last day of the year the stock market is open. Getting stuck holding stocks with losses will not decrease your tax bill.

Also, if you are expecting capital gain to be returned from a hedge fund in which you are invested, try to defer that event until the beginning of next year, unless you think the rates will be substantially higher next year

Retirement. If you are receiving distributions from your qualified plan, you can roll over the entire balance or distributions in excess of any RMD (required minimum distribution) into a traditional IRA. If you do this custodian to custodian or within 60 days (subject to limitations), you will not have to pay taxes on those distributions. Be sure to speak with your Wachovia Securities Financial Advisor before setting up the IRA account.

Give Away Money, Increase Your Deduction

Often people donate money in the fourth quarter to increase their tax deductions. “Philanthropy is definitely something to consider,” says Scoll. “But there are limitations to how much you can give to charity and use the deduction.” You should talk to both your tax advisor and your Financial Advisor before embarking on a philanthropic giving plan.

There are also other kinds of gifts you can make to reduce taxes for long-term estate planning. First, you can give up to $12,000 per donor per recipient to family members and others each year without triggering gift taxes. You can also give to your children’s or grandchildren’s education through 529 savings plans. You can gift $12,000 a year to a 529 plan tax-free — or better yet, take advantage of a law that allows you to give a single contribution, covering five years, to a 529 plan. That means you can give a maximum of $60,000 (five years of gifting) per donor per recipient tax-free in one year — and still be able to move that money between heirs’ education funds.

Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 plan..

Additional Tax-Saving Tips

In addition to reviewing your investments, there are other strategies that can help save you money come tax time.

Scoll believes it is always cost-effective to hire a good accountant. “Very often a good tax preparer is going to save you more money than he is going to cost you,” Scoll says. “It pays to have a smart professional help you prepare your taxes.”

While spending some time at year-end preparing your taxes is a smart idea, it’s also a good time to assess your financial status and goals for next year — so that when the end of next year rolls around, your investment and tax planning will already be off to a strong start.

Be Sure to Consider:

• Making the necessary adjustments in your portfolio to help maximize your tax savings this year.
• How you should approach and adjust your IRA to avoid paying unnecessary taxes.
• Gifting money to family members or your children’s education fund to reduce your future estate taxes.

Withdrawals are subject to ordinary income tax and may be subject to a federal 10-percent penalty if taken prior to age 59½.

This article was written by Wachovia Securities and provided courtesy of The Strong Gaddy Lilly Wealth Management Group in Gainesville, GA. You can contact Mr. Michael Gaddy at 770-532-6361.

A COUPLE OF DEFERRAL TIPS

• Max out your 401(k). Defer as much of the $15,500 maximum as possible, especially if your employer offers a matching contribution. This maximum is indexed for inflation starting in 2008. Assuming a tax bracket of 35 percent, a $15,500 contribution could defer $5,425 in federal income taxes, plus state and local tax savings. If you are age 50 or older, you could defer an additional $5,000 in 2008 and further indexed in 2009.

• Consider your rollover option. If you change jobs in 2008, “don’t cash in your retirement plan. There are high taxes associated with that — including a 10 percent penalty tax if you are under 591⁄2,” says Scoll. Instead, consider rolling your 401(k) or 403(b) plan into an Individual Retirement Account (IRA). You will ultimately pay taxes on your retirement savings — but in general, the longer you keep them tax-deferred, the better.

FINALLY, CAPITAL GAINS

• Watch your mutual fund purchases. Don’t invest in a mutual fund shortly before a capital-gains distribution. Why? If you buy a mutual fund on Dec. 1, and on Dec. 10 it pays a 10 percent dividend, you will owe capital gains on the dividend. “A lot of people get snake-bitten by this one and they don’t realize it until after it’s done,” says Scoll. Fund companies are required to post anticipated distribution dates, and you can find them on their websites.

• Use losses to offset gains. When you generate short-term gains of investments held one year or less, you pay ordinary income tax — though you can use long-term or short-term losses to offset taxes on capital gains. (The most tax-efficient use of capital losses is to offset short-term capital gains.) You can also use up to $3,000 in excess capital losses to reduce the amount of ordinary income that is subject to tax. That loss can also be used to offset capital gains paid out by mutual funds in their annual distributions.

• Give it away. If you’re planning on making a large charitable contribution, do so in a high-income year. The higher your income, the greater the allowed deduction (subject to phase-out limitations). Also, think about gifting appreciated assets instead of cash to a charity. Neither you nor the charity pays tax on the gift. Meanwhile, you get the deduction and avoid the capital-gains tax.

“When it comes to taxes,” says Scoll, “there is still time for the planning it takes to enhance your position. Don’t wait until April — you’ll only end up paying more than you have to.”

Together, we can discuss:

• Strategies you can use to convert ordinary income tax into capital-gains tax.

• Gifting strategies that can reduce your capital-gains tax.

• Whether you should tap investment assets to purchase business equipment and accelerate an expense deduction

Your financial advisor can help you understand the potential impact of these and other economic indicators on your investment portfolio.

This article was written by Wachovia Securities and provided courtesy of The Strong Gaddy Lilly Wealth Management Group in Gainesville, GA. You can contact Mr. Michael Gaddy at 770-532-6361.

Knowing the pitfalls of many is often the best step to ensure that you do not fall prey to otherwise might be an easy to make common mistake. By staying away from these most often repeated mistakes you will avoid much of the pain which will otherwise will be created. The most frequently committed mistakes are:

1. Tax Planning. Many forget the value of a well thought out plan. Remember that failing to plan is analogous to planning to fail. Just as you would not set out on a journey to a distant city without a good road map first; so should we consider and carefully contemplate what lies ahead tax-wise. This will enable us to take the surprise out of our year-end taxes while also allowing us the ability to legally reduce our overall tax debt during the year while there are still great options to explore during the year. Just as a soldier can change the outcome of a war while it is still being fought so can proper planning do much to determine what will otherwise exist at year-end.

2. Deadlines. The whole of the tax code with its rules and filing deadlines are both date specific as to both filing and payment. Failure to abide by these can add substantially to your tax bill  with additional penalties and interest for late payment but also assessments for the late filing of returns. Being aware of these deadlines and the correct forms to be filed and monies to be paid is your first and best defense in ensuring peaceful co-existence with the IRS.

3. Never Underestimate the Value. For those you go it alone you are risking financial suicide of not only your personal taxes for the year but also the financial security of your family and business. For example, if you have a cold you will probably be best served with over the counter medicines. However if you are suffering from a more serious malady such as a heart attack, you had better get to a qualified physician fast. So is it similarly important to have a CPA to help you with all of your serious tax issues. Those who got it alone who have an audit, a business of their own, or have other family investing and financial planning needs are prone to disaster. It is always best to never underestimate the value of a good business CPA as their fees will frequently we substantially loss than those the IRS will determine and assess.

4. False Beliefs. Many taxpayers have the mistaken belief that an extension to file is an extension to pay. Since World War II, the Internal Revenue Service tax system has been a pay as you go system requiring taxpayers to file and pay by certain deadlines. Although the IRS does offer some extensions for the filing of returns, there is never the ability not to pay until the final extension lapses. Therefore it is critical to pay your taxes as monies are earned to avoid unnecessary assessments.

5. Reporting Stock Sales. Frequently taxpayers do not track or have the ability to re-create what they originally paid for a stock. This information is needed as tax law allows those selling of the stock to offset against the sales price against the original purchase price of a stock. This is critical for determining the related gain or loss on the stocks sale and reporting. It is prudent to continue to keep books, records, and statements for all of your outstanding stock so that at any time you can adequately report and be aware of a specific original stocks basis.

6. Ask the Box. In this day and time computers have done much to make our jobs easier and indeed to make us more efficient. However, just as speed dialing gave us the ability to dial wrong numbers faster so does tax software allow us to mathematically accurately process inaccurately prepared returns. Just as a tool in the hands of its master may do wonderful and skillful things, so should taxpayers be cautious in the use of tax software without adequate and proper knowledge of tax law. Often to the laymen, tax questions will appear to be dealing with one issue while in reality they are truly asking another. Failure to understand all of the questions asked and attendant nuances and complexities might well result in errors in both filings and payments.

7. Recordkeeping. Keeping adequate and well organized documents and records is an essential part of properly preparing your return. Foremost, absent good records you are most apt to miss deductions that otherwise you would be legally entitled to. Staying current on your accounting is an critical component of this process as often expenses may be missed if you wait until the end of the year to try to pull it all together. If you are a business owner being sure to reimburse any business expenses each and every month you might have paid personally, is the first best step to ensure that you track and record every legal deduction.

8. Mileage Logs. Whether you own your personal car and use it for business, whether you lease your business car, or if your business owns the car that you drive, you are required by tax law to have a by-day log to support business miles. Many fall prey to this miss-conception falsely believing that this requirement does not apply to them. It is most convenient to track business miles on ones calendar so that you are constantly reminded of not only where you have been but also the need for adequate reporting.

9. Ad Valorem taxes. Many taxpayers fail to keep in mind that Ad Valorem taxes on their personal vehicles, boats, trailers, motorcycles, and motor homes is an available tax deduction. One of the best first steps in the preparation of a given years taxes, is to first review the taxes of prior years to ensure both completeness of prior returns and that every legal deduction is being considered and assimilated.

10. K-1 Reporting. A K-1 is an attachment to a S Corporation, Partnership, LLC, or LLP tax return, which indicates each respective partners pro-rata portion of the business operating results. Although the tax information and reporting on a K-1 is very specific and exacting, they, by themselves, will not reveal all of the important tax information and knowledge needed for the proper preparation of a return. For example tax losses of an S Corporation cannot personally be deducted by a shareholder unless they have sufficient tax basis to do so. Similarly, it is possible to have a tax profit on a K-1 which might be legally be offset against prior year losses which were suspended and rolled forward. A keen awareness of tax law and the proper use of a good CPA will help alleviate much of this pain.

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

The IRS has just announced the 2008 adjustments for inflation affecting tax brackets, exemptions and other adjustable amounts. These amounts are adjusted each year by the Internal Revenue Service to account for and consider the effect that inflation has on these amounts, while striving to mitigate and eliminate the tax impacts that inflation would otherwise have on specific tax line items. Some of the more key items for 2008 will include:

-Changing the personal exemption amount to $3,500 per taxpayer, up from $3,400 in 2007.

-The new standard deduction for married taxpayers will be $10,900 as long as they are filing a joint return. For single taxpayers and married taxpayers filing a separate return the standard deduction for 2008 will be $5,450. The standard deduction for taxpayers filing as head of household will be $8,000.

-Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $65,100, up from $63,700 in 2007.

-The maximum Hope Credit has been increase from $1,650 in 2007 to $1,800 in 2008.

-The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000) and $101,000 (up from $99,000) for singles and heads of household.

-The maximum limits for married taxpayers to contribute and deduct in full to a traditional IRA is $85,000 of income and for single taxpayers and for head of household the limit is $53,000.

-The maximum amount for eligible for contribution for a defined benefit plan will be $46,000.

More information about the pension and retirement plan-related changes can be found in IR-2007-171.  Other inflation adjustments are described in Revenue Procedure 2007-66 and details on the IRS’s web-site.

These simple guidelines will help you determine your filing status and give you a leg up on understanding the nuances of what tax filing status you can legally claim on your personal return. There is much confusion over what is allowable in making these determinations and the below overview will do much to erase many of the existing mystiques surrounding the proper status and therefore the correct filing of your personal return.

Single - Only taxpayers who are single on the last day of a tax year may claim single status. It does not matter what your marital status is on the first 364 days of the year but only what is your status on the last day of the tax year/December 31st, which is the key determining factor. A taxpayer who is married on the last day of a tax year cannot claim single status regardless of whether they want to file a return without their spouse.

Head of Household - To qualify as filing as head of household a taxpayer generally must have a dependent child who lives with them throughout the year. However a single taxpayer who is allowed by a divorce decree to claim a child as a dependent, but the child does not predominantly live with them, does not qualify for Head of Household Status. Conversely, a child who predominantly lives with a parent for most of the year, can still claim Head of Household Status even if the decree specifies the other parent to be eligible for the dependency exemption in a given year. Generally speaking, married individuals with dependents who do not live with their spouses for the second half will also qualify for Head of Household status. The Head of Household tax rate is the second lowest behind the tax rates of those who are married and filing a joint return.

Married Filing Jointly & Married Filing a Separate Return- Taxpayers who are married on the last day of the year must file as either Married Filing a Joint Return, Married Filing Separately, or Head of Household (see above). Generally speaking it us usually most advantageous to file a joint return if one can, as most often the aggregate tax bill will be lessened and the attendant reporting less due to the filing of one return vs. two. You will want to keep in mind that the Married filing a joint return is the lowest of the overall tax rates/brackets and that Married Filing Separately is the most expensive/highest tax brackets.

Please be reminded these are general guidelines only and that you should work closely with your CPA to determine which filing status you are able to claim to ensure you fully understand and qualify for the status you will be claiming.

The 15th of October if the final deadline the IRS has for clients to file their 2007 personal returns. Often taxpayers fail to remember that an extension to file is not an extension to pay, accordingly taxpayers frequently are surprised to discover that late penalties/interest are assessed/and due for late payment even though a tax return has been properly/timely extended and filed.

During the second World War, the U.S. government/IRS changed the rules of paying personal tax bill obligations so that all taxpayers became responsible to pay their taxes as they go rather than waiting until the end of the year filing to pay, which was allowed before this change. Therefore all taxpayers are now responsible to ensure that all taxes are paid as the monies/profits/taxable income is generated.

To avoid unnecessary payment of additional penalties and interest on top of the taxes, which may be due, taxpayers should be doing tax planning now for the 2008 tax year. At a minimum I suggest that this process/issue should be addressed at least twice annually and more often for situations which are subject to/incurring rapid and substantive change.

Although I fail to recall which U.S. Senator said it or their exact words of “a billion here and a billion there and all of a sudden you are talking about real money” and the advice to guard you wives, you family, your wealth, and your freedom while Congress is in session. This sage words have resonated through time and I believe they are no less true than today. By our living in a democracy we are able to peacefully impact our world by electing our leaders.

Often it is A Voice of One who is heard above all others by making their thoughts, conscience, and beliefs heard can indeed change the world we live in. Therefore being actively involved in issues which impact you the most and those, which are dear to your hear are essential rights and indeed moral obligations of our freedom so many have fought so hard for. Intuition and insight as to laws which are likely to best get to Congress’s floor and to be signed by the President are those which would should warrant the most attention as many “trial balloons” are sent up by Congress, Presidential candidates, and the press alike striving to see which issues both “stick and resonate with the people.” Thereby paying attention and having an influence on laws, which will soon impact you, are a critical part of the privilege of voting and the responsibility of sound business management and indeed a critical part of staying connected and informed as your business and future economic viability depend on it. 

Finding an Atlanta CPA is not as difficult as some make it out to be nor is it as easy as some would like to think. When looking for a good CPA for your business you will want to be sure of the below factors before making your decision. How well you select your CPA will impact the financial health of your business, your employees, and even your long term financial security of your retirement. By utilization of these criteria you will be best armed to look at finding a CPA who is best apt to help guide your business to the Promised Land of financial success.

Seek to find a CPA who is not transaction oriented. Anyone can do what you ask or perhaps even file your returns for a few years while striving to keep your tax bill as low as legally possible. You will want to find a CPA whose ambition matches that of your own including your zeal and temperament and one who is a forward thinker. His practice and focus should be foward thinking and insightful, while consistently giving advice focusing on the future of your business and not solely an interpreter of its past. No CPA can change what has already transpired but a wise and sage CPA can help you and your business avoid pitfalls which will befall you otherwise. A CPA can help strengthen your management team, if used wisely and often, and can help guide you through many of business most thought provoking issues while offering counsel to both maximize your time and efforts.

Retain a CPA who has consistently outperformed his peers. You can discover this by seeking to know what civic and business organizations they belong to and what positions they have held. Learn about their civic callings, their involvement in community issues, and what they have done to make the world a better place. Do they frequently volunteer their time in both missions and work related activities? Although being a member and team player are important aspects to all of our lives, seek out a CPA who constantly excels in all areas of their lives. Check their grades in college.  Did they pass the CPA exam early?  Did they graduate with honors?  Did they earn awards while in college?  These early indicators will be a prelude to what their business success will approximate.Review their web site to learn substantive content about their past achievements, current involvements, and content. Is their web site material insightful in nature?  Does it provide subject matter which will enable you to manage your business and personal financial affairs better?  Does it clearly list their achievements, goals, and aspirations for you and your business?

Check references and look into what a CPA’s  present customers say.  The reputations they have with the business and civic community alike are critical components of finding and retaining an adviser who is suitable to your business. Be sure to ask for references indicating their standards of performance and whether they consistently outperform  client expectations in response and turnaround time as well as the processing and quality of their work. Inquire as to whether their CPA is readily available by Internet, phone, and for meeting face to face. This is perhaps the most widely voiced complaint about CPA’s and also one of the most critical. What good is the best CPA in the world if you can’t get find them to get your answers resolved.

Seeking out a good CPA will be one of the most important and critical decisions you will ever reach so be sure to find someone who is both technically competent, excels in their work, is accessible, and who’s style and character match that of your own.

Now that April 15th has come and gone, it is time to dig deep down and pull all of your personal information together.  If you are among the millions who extended the due date of filing their return legally from April 15 to October 15th, you should be in no less of a rush to file and pay all 2007 taxes because:

• A delay to file is not a delay to pay as both the IRS and individual states access a late payment fee/penalty and interest for all monies paid after April 15th
• Now is the time to see what you can begin to do to legally lower your 2008 tax bill rather than being past oriented.  There’s a reason for many success’s of business owners and that is their ability to think and plan ahead.  A good steward is always contemplating what comes next and how to always be prepared.

Tax planning is not for the meek or ill prepared so be sure to get all past filings done today so that you can focus on the success’s and planning for 2008 and beyond.