2011 Income Tax Return – What’s New

Posted on January 3, 2012 | Comments Off on 2011 Income Tax Return – What’s New

So the 2011 tax year filing season has started. As you are getting the information and documents together to prepare your individual income tax return we will have a look at some of the tax changes for this year’s tax return.

  • Filing Deadline – The due date for filing the 2011 tax return is April 17, 2012. It is two days later than normal because April 15, 2012 falls on a Sunday and April 16, 2012 is a holiday in the District of Columbia (why don’t the rest of us get that holiday!!).
  • Reporting Capital Gains on Form 8949 – Rather than reporting individual capital gains and losses on Schedule D, most gains and losses are now reported on new Form 8949 and the totals transfer to Schedule D.
  • Standard Deduction – This has increased for some tax payers. For example, single $5,800 (2010-$5,700), head of household $8,500 (2010-$8,400), married filing jointly $11,600 (2010-$11,400).
  • Exemption Amount – This has increased to $3,700 (2010-$3,650).
  • Alternative Minimum Tax Exemption – This has increased. For example for married filing jointly it is $74,450 (2010-$72,450), single $48,450 (2010-$47,450).
  • Health Savings Accounts and Archer MSAs – Two big changes here. If you withdraw funds and don’t use them for qualified medical expenses the additional tax is 20% (it was 10%). Qualifying medical expenses no longer include over the counter medicines or drugs. They need to be prescribed by your doctor.
  • Roth Rollovers – If you rolled over an IRA or 401(k) pension plan to a Roth IRA or account in 2010 and elected not to report that on your 2010 income tax return then half must be reported on the 2011 income tax return and half on the 2012 return.
  • First Time Homebuyer Credit – There is no need to fill in Form 5405 if you are doing the annual repayment of the 2008 version of the credit. If you are repaying for any other reason for any version of the credit you need to complete From 5405.
  • Foreign Financial Assets – In a continued effort to attack overseas tax evasion a new Form 8938 needs to be completed if you hold significant foreign financial assets. This will be relevant for Green Card holders who still retain pension funds in their home country. Note this form needs to be completed in addition to the FBAR filed in June each year.
  • Some forms and items are no longer needed or available. Some will be missed but others won’t be, certainly by tax preparers.
    • Schedule L is no longer needed as the standard deduction cannot be increased by real estate taxes paid.
    • Schedule M is no longer available as the Making Work Pay tax credit ceased in 2010. It was replaced by the 2% social security reduction which Congress kindly extended until February 2012.
    • The self-employed health insurance deduction no longer reduces the self-employment tax calculated on Schedule SE. However the deduction can still be claimed against income on the income tax return 1040.

This gives you a flavor of some of the changes to look out for this tax season. In subsequent articles we will explore some of these in more detail.

If you need assistance preparing your 2011 Income Tax Return look at our tax services page to see our latest offers and call (480) 363-4808 to make an appointment. If you live in Chandler, Tempe, Mesa, Gilbert or Queen Creek, AZ we will come to you to prepare your income tax return. If you live elsewhere we can prepare the tax return using information you upload to our secure client portal or mail to us. We look forward to helping you prepare your income tax return.

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

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Year End Tax Planning Part 2 – Deductions

Posted on December 20, 2011 | Comments Off on Year End Tax Planning Part 2 – Deductions

In the first part of this article we discussed tax planning for income. In this second part we consider some tax planning ideas for deductions.

Bear in mind that most of these planning ideas require you to spend some money before the year end so there is little time left to implement them before December 31, 2011.

Also, as we mentioned in the first part don’t let the tax tail wag the dog. In other words if a tax planning idea does not make commercial sense then being commercial should take priority over the tax planning. That becomes even more important when you are spending hard earned cash.

So, what can you do about your deductions that may save you tax?

Here are some ideas to consider:-

  • Advance Deductions– If you can pay for a deduction before December 31 that will bring the tax saving on that deduction in to the current tax year. However, you need to estimate what your marginal tax rate will be in the following tax year to see if this will be beneficial. If your marginal rate is 10% this year but will be 25% next year then it wouldn’t make sense to advance deductions in to the current year. Some deduction items that might be advanced include:-
    • Tution fees for the Spring semester
    • Pay real estate taxes in advance
    • Pay for business expenses faster than normal
    • Make extra 401K or IRA pension contributions
    • Do extra charity donations
    • Sell loss making investments to realize the loss


  • Expiring Tax Provisions– Unless Congress extends them, the following will be expiring on December 31, 2011:-
    • Teacher’s Education Expense deduction – Get your $250 deduction by paying for class room supplies before December, 31 2011
    • Student loan deduction – Pay for arrears of interest before December 31, 2011
    • State and local sales tax deduction – Consider making a big purchase like a car before December 31, 2011
    • 100% Bonus Depreciation – Buy and put in to use new capital business assets before December 31, 2011
    • Adoption Credit – This ceases to be refundable after December 31, 2011 so try and get the adoption finalized before then

These give you a flavor of what can be done as part of your year end tax planning. There are many more ideas to consider so speak soon to your tax advisor.

If you would like us to review your current tax position then please call us on (480) 363-4808, book an appointment on our home page or email us.

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

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Reporting Arizona Use Tax

Posted on December 13, 2011 | Comments Off on Reporting Arizona Use Tax

Update January 4, 2013 – Starting with the 2012 Arizona income tax return the Arizona use tax no longer needs to be reported on the tax return. For more details read our January 2013 article. However, the use tax still needs to be paid to the state and local city so the rest of this article is still relevant to help you with use tax issues.

Since 1955 Arizona has required individuals to pay use tax. The only way to report this is to mail in the use tax to the Arizona Department of Revenue (AZDOR). In 2011 the Arizona Legislature passed a law allowing the AZDOR to include a line on the Arizona individual income tax return 140, 104A or 140EZ for individuals to report their use tax for the year. This started with the 2011 tax returns but was then repealed in 2012 so that it only applied to 2011 tax returns.

Note that businesses report use tax on their sales tax returns.

What is use tax?

It is basically the sales tax due on items purchased online, by phone or catalog from out of state retailers. Often these out of state retailers will not charge Arizona sales tax because they are not required to do so unless they have some sort of physical presence in Arizona. The most common examples are Amazon and a lot of other on-line retailers. Starting from February 1, 2013 Amazon will start charging Arizona sales tax on Arizona purchases.

Use tax may also apply if you go to another state to buy something and bring it back to use in Arizona. However, in this situation you do get credit for any sales tax you may have paid in the other state.

How Do I Report The Use Tax?

You basically mail in the use tax to the AZDOR. You will add up all your taxable purchases that have not been subject to sales tax and multiply it by the state use tax rate, which is currently 6.6%. This will give the use tax to be paid to the state.

One thing to bear in mind is that most local cities also collect use tax and that will need to be reported separately to the local city.

Planning Points

The key to keeping your use tax to the minimum is to only include purchases that are taxable. Remember to exclude anything on which you have already paid sales tax. Also exclude purchases that are exempt such as prescription medicines, food and casual sales.

You can get more information from Pub 610A Arizona Use Tax For Individual Income Taxpayers.

What If I Don’t Report The Use Tax On My Tax Return?

If you fail to correctly report the use tax you may be subject to penalties and interest.

If you need any assistance with your Arizona use tax we will be pleased to assist you. Call us on (480) 363-4808, book an appointment on our home page or email us.

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

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Year End Tax Planning Part 1 – Income

Posted on November 30, 2011 | Comments Off on Year End Tax Planning Part 1 – Income

It is that time of year again to do some year end tax planning. I know, you are all starting to yawn. However, bear in mind that looking at your tax position after the year end when you prepare your tax return will often be too late.

This year in particular there are several beneficial tax provisions expiring on December 31, 2011 so you need to take action before they expire.

Spending a little time with your tax advisor now may well be beneficial to you.

In this first article we will look at what planning you can do for the income you receive.

The first thing you need to do is get together your income and deductions for the year to date and an estimate of what you think they will be for the whole year. If you are an employee you can use your latest paycheck to get the income and tax withheld. If you run a business now is a good time to get your books up to date to get an estimated profit figure. If you use QuickBooks® having a tune-up done would make sense at this time.

Once you have your estimate for the year your tax advisor can work out your estimated tax position for the current year, what refund you can expect or how much tax is due. This will also show your marginal tax rate which is important to know when deciding whether to implement a tax planning idea.

So, what can you do about your income that may save you tax?

Here are some ideas to consider:-

  • Defer Income– If you can delay receiving income until after December 31 that will defer the tax due on that income until the next tax year. However, you need to estimate what your marginal tax rate will be in the following tax year to see if this will be beneficial. If your marginal rate is 10% this year but will be 25% next year then it wouldn’t make sense to defer income in to the later year. Some income items that might be deferred include:-
    • Wage bonus
    • Exercising an employee stock option
    • Delaying invoicing sales
    • Delay selling capital assets until next year
    • Don’t take an IRA distribution until next year


  • Advance Income– This may seem counter intuitive but receiving income early may save you tax in some situations. If you expect your marginal tax rate to be much higher next year then receiving income in the current year will save tax. Examples of income that might be advanced include:-
    • Realizing gains on capital assets like company stock.
    • If you are a cash basis business, chasing up accounts receivable to get cash in before the year end
    • Start taking an IRA distribution this year

These give you a flavor of what can be done as part of your year end tax planning. One big caveat to bear in mind with any tax planning is don’t let the tax tail wag the dog. In other words if a tax planning idea does not make commercial sense then being commercial should take priority over the tax planning.

If you would like us to review your current tax position then please call us on (480) 363-4808, book an appointment on our home page or email us.

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

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Small Business Saturday Contest – 2 Days Left

Posted on November 24, 2011 | Comments Off on Small Business Saturday Contest – 2 Days Left

Win Coupons Worth Up To $100

Small Business SaturdaySmall Business Saturday is on Saturday November 26, 2011. It is a day dedicated to small businesses that are the back bone of our economy.

There are only 2 days left to enter our draw to win coupons off the cost of preparing your 2011 individual tax return or a QuickBooks® tune up.

Remember you do not need to live in Phoenix, AZ to enter as we can prepare your tax return or do a QuickBooks® tune up wherever you are located in the US.

Go to our Contest page to see more details and to enter.

Best of luck and remember to support your small businesses on November 26, 2011.

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Small Business Saturday Contest – 3 Days Left

Posted on November 23, 2011 | Comments Off on Small Business Saturday Contest – 3 Days Left

Win Coupons Worth Up To $100

Small Business SaturdaySmall Business Saturday is on Saturday November 26, 2011. It is a day dedicated to small businesses that are the back bone of our economy.

There are only 3 days left to enter our draw to win coupons off the cost of preparing your 2011 individual tax return or a QuickBooks® tune up.

Remember you do not need to live in Phoenix, AZ to enter as we can prepare your tax return or do a QuickBooks® tune up wherever you are located in the US.

Go to our Contest page to see more details and to enter.

Best of luck and remember to support your small businesses on November 26, 2011.

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QuickBooks® 2012 Certification

Posted on November 22, 2011 | Comments Off on QuickBooks® 2012 Certification

We are pleased to announce that Mark Smith, our Certified QuickBooks ProAdvisor®, has now gained his certification in QuickBooks® 2012.

Mark provides advice on all aspects of your QuickBooks® accounting system.

Following the recent launch of the 2012 version, Mark can advise you on whether to upgrade your existing QuickBooks® version or if you do not currently have QuickBooks® which version is the best one for your business.

To book an initial free 1 hour consultation with Mark please call us on (480) 363-4808, email us, or click the booking button on the right hand side of this page.

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Small Business Saturday Contest – 9 Days Left

Posted on November 17, 2011 | Comments Off on Small Business Saturday Contest – 9 Days Left

Win Coupons Worth Up To $100

Small Business SaturdaySmall Business Saturday is on Saturday November 26, 2011. It is a day dedicated to small businesses that are the back bone of our economy.

There are only 9 days left to enter our draw to win coupons off the cost of preparing your 2011 individual tax return or a QuickBooks® tune up.

Remember you do not need to live in Phoenix, AZ to enter as we can prepare your tax return or do a QuickBooks® tune up wherever you are located in the US.

Go to our Contest page to see more details and to enter.

Best of luck and remember to support your small businesses on November 26, 2011.

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QuickBooks® Contributed Reports

Posted on November 9, 2011 | Comments Off on QuickBooks® Contributed Reports

In QuickBooks® 2012 Pro and above the contributed reports have been improved.

The big improvement is that you can now access report templates contributed by other users. You can also share your favorite reports with other users. This could save you time by not reinventing the wheel if you want a more complex report that is not one of the QuickBooks® standards.

To access the contributed reports either click on Reports | Contributed Reports then select the category of report you want or click on Reports | Report Center then click on the Contributed tab. You will see the following screen.

QuickBooks Contributed Reports

On the left hand side you can choose what type of report you are looking for. At the top you can filter by type of industry and sort by rating, popularity, or who created the report.

If you hover over each report you can click on run to run the report on your data. You can then memorize the report to save it on your machine. Clicking on info brings up more information about the report and the chance to see the reviews.

QuickBooks Contributed Reports Info

You can also click on the Fave icon to add the report to your favorites in the Report Center.

If you create a report that you would like to share with other QuickBooks® users you can do this by clicking on the Share Template button at the top of the report screen.

QuickBooks Report Share Template

This will bring up the following screen where you can enter information about your report such as details about what the report does and if it applies to any specific industry.

QuickBooks Share Report Screen

In summary this is a useful improvement to QuickBooks® and will save time if you need a more complex report.

If you are unable to find a suitable report we can assist you with creating custom QuickBooks® reports for your business. Call us on (480) 363-4808 or email us.

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Reporting of Employer Provided Healthcare on Form W-2 – Code DD

Posted on November 8, 2011 | 6 Comments

Starting with the 2011 W-2 you will be receiving/issuing in January 2012 you may see in Box 12 a new code DD. This is to report to the employee the cost of employer provided healthcare.

This reporting requirement was introduced by the 2010 Affordable Care Act. The idea is that reporting the cost of healthcare will enable employees to be better informed about their healthcare costs and the choices available to them.

There is some transitional relief for employers. For 2011 the reporting is optional. For 2012 the reporting is required for employers filing more than 250 W-2s. The 250 limit may be reduced in the future but for the moment small employers are not required to report the cost of healthcare coverage.

Impact on Employees
For the employee they will see in box 12 of their W-2 an amount and a Code DD. This will be the total cost of employer provided healthcare coverage, employer and employee contributions.

The key point to note is that this entry on the W-2 is not taxable income. It is not included in box 1 of the W-2 and does not need to be entered any where on your tax return. It is just information to let you know the total cost of the healthcare provided by your employer.

Impact on Employers
The IRS has useful information on the Affordable Care Act and the related regulations at their ACA Center.

In summary some of the key points to consider are:-

  • Watch the transitional relief rules, particularly for small employers.
  • Check the rules for what type of coverage is included in box 12 and which coverage is not or is optional.
  • Evaluate how you will collect the information for Box 12 and get it in to Box 12. Is your payroll or other software set up to collect this information.
  • Choose the correct valuation method for your circumstances

This is one of many provisions from the Affordable Care Act that are coming in over the next few years so keep an eye out for more reporting and changes in the future.

If you are ready to prepare your income tax return call me on (480) 363-4808 to book an appointment. If you live in Chandler, Tempe, Mesa, Gilbert, Phoenix, Scottsdale or Queen Creek AZ I will come to you to prepare your income tax return. If you live elsewhere I can prepare the tax return using information you upload to my secure client portal or mail to me. I look forward to helping you prepare your income tax return.

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

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