Issue 5 – December 2012
As this newsletter is published the “Fiscal Cliff” has not yet been resolved. It is now clear that there will be very little time, if any, to undertake tax planning if Congress resolves the issues before December 31. I will be publishing a special edition newsletter as soon as Congress has reached agreement on the “Bush” tax cuts and other expiring tax provisions. In the meantime if you have not yet done any year end tax planning have a read of the two tax planning newsletters I published in October.
With this being the season of giving and goodwill I have an article in this issue showing how you can make donations to local Arizona charities and receive more than 100% tax relief. Not only can you help the charities but also make a little bit for yourself as well!!!
I also have an article on the latest QuickBooks version.
If you have any topics or questions that you would like me to cover in the newsletter do not hesitate to call me on (480) 363-4808 or email me at firstname.lastname@example.org.
If you want to read previous issues of the newsletter they are available on the archive page.
Enjoy the newsletter.
Greetings of the season and best wishes for a prosperous New Year.
Mark Smith, RTRP – December 2012
TOPICS IN THIS NEWSLETTER
December 17, 2012 – Corporations must deposit the fourth installment of any estimated tax due.
December 31, 2012 – If you want to set up a qualified pension plan such as a 401(k) plan, it needs to be set up by the end of the tax year. Note that some other plans can be set up later and deductions still apply to the earlier year so consider all the options with your financial advisor and tax advisor.
December 31, 2012 – If you have an IRA or pension plan such as a 401(k) make sure that you have taken your Required Minimum Distribution (RMD) by this date if you are aged over 70 1/2. In the year you turn 70 1/2 you have until April 1 of the following year to take the RMD. If you do not take the RMD by the end of the year you will be charged a penalty of 50% on the RMD you do not take.
December 31, 2012 – For greater than 2% owners of S-Corporations make sure that any health insurance premiums are reimbursed by the S-Corporation and put through the payroll. This will ensure that you maximize the deduction for the health insurance premiums. If you are operating a multi member S-Corporation talk to your tax advisor to make sure that this does give you the best tax deduction.
I am pleased to announce that after successfully passing the IRS exam I am now designated as a Registered Tax Return Preparer (RTRP) by the Internal Revenue Service. The following article gives more information on how to choose a tax preparer and the changes affecting the regulation of tax preparers.
With the recent release of QuickBooks 2013 I have now obtained my QuickBooks 2013 certification.
Starting in 2014 the only people allowed to prepare individual income tax returns for compensation will be Registered Tax Return Preparers, Enrolled Agents, CPAs or Attorneys. This is part of the IRS’s ongoing attempt to regulate and improve the quality of tax preparation services.
To become a Registered Tax Return Preparer (RTRP) a person needs to pass an exam set by the IRS. The exam started to be offered early in 2012 so this upcoming tax season is the first one to include those RTRPs who have taken and passed the exam.
For more information on the new rules and tips for finding a paid tax preparer read here…..
During this season of giving you might be thinking about giving a donation to a charity. In Arizona there is a tax credit called the Credit For Contributions To Charities That Provide Assistance To The Working Poor. A long winded title, but in essence this gives a credit for cash donations to certain charities.
The benefit of this credit is that it gives you a dollar for dollar reduction in your Arizona tax whereas claiming the donation on Schedule A as an itemized deduction only saves you tax at your marginal tax rate.
The amount and qualifying conditions are:-
- You must claim itemized deductions on Schedule A – if you take the standard deduction you cannot claim the credit.
- The credit is worth up to $200 for single and head of household filers, and $400 for married filing joint filers.
- If the credit is more than your Arizona tax you can carry forward the surplus for up to 5 years.
- The donations must be check or cash.
- Only certain charities qualify. To see the list of charities that qualify, visit the AZDOR Working Poor Tax Credit page.
Where the extra bonus comes in with this credit is that you are getting 100% tax relief on your Arizona tax return and also tax relief on your Federal tax return at your marginal tax rate.
For example, if you are filing as married filing joint and you make $400 of qualifying donations you will get a $400 tax credit on your Arizona tax return. If your Federal marginal tax rate is say 25% then you will also save $100 tax on your Federal tax return. So, $400 of donations will save you $500 in tax, netting you $100. A win for the charities and a win for you.
The net saving to you will depend on how much you donate and your marginal Federal tax rate.
If you wish to take advantage of this credit you may want to check with your tax advisor before making the donation to see how much you will save.
There are also some other Arizona tax credits that offer similar benefits which you can read about here……..
In late September 2012 QuickBooks 2013 was released.
In line with recent QuickBooks upgrades it is more of an incremental improvement rather than anything dramatic. That means for a lot of current users of QuickBooks there is no immediate need to upgrade.
Given that QuickBooks is a relatively mature product it is not surprising that there are only incremental improvements. Also Intuit is now putting a lot more resources in to developing their QuickBooks Online product as that is where they see the future growth occurring.
To learn more about what is new in QuickBooks 2013 and whether you should upgrade read my article here……
With Intuit concentrating their resources on QuickBooks Online it is being updated and improved on at least a monthly basis. Whilst still not as feature rich as the desktop version of QuickBooks it is getting better all the time. It is certainly a very viable product for straight forward service based businesses or those businesses with limited inventory requirements.
The November update to QuickBooks online had some useful improvements which you can read about here…….
Disclaimer – This newsletter does not constitute personal accounting or tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate accounting or tax planning depends on your personal and unique circumstances.
The IRS does not endorse any particular individual tax return preparer. For more information on tax return preparers go to IRS.gov.