As a part of the tax stimulus effort of our generous Uncle Sam, those taxpayers who do not itemize their deductions can take limited additional deductions on Schedule L while still benefiting from their full standard deduction.

Here are the three instances:

• If you’ve paid real estate taxes of up to $1,000 in 2009, $500 of that amount ($1,000 if married filing jointly) can be included on your Schedule L.
• If you purchased a new motor vehicle in 2009, the state and local sales tax on the purchase price of up to $49,500 can be included on the Schedule L.
• If you had a federally declared disaster loss in 2009, as computed on Form 4684, that amount is available as a deduction on Schedule L.

 All of this and you still get your full standard deduction. Isn’t it great to have a rich Uncle? For further information, give us a call at (904) 396-5400.

Filed under: Tax by Mark Patrick
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If you bought a new car, light truck, motor home or motorcycle in 2009 you may qualify for a special tax deduction for the sales and excise tax on that purchase. Your vehicle must not weigh more than 8,500 pounds, except for motor homes, on which there’s no weight limit, and you must have bought it between February 16, 2009 and January 1, 2010. The taxes paid on up to $49,500 of each qualifying vehicle are deductible.

Other points of note:

• If you live in a state with no sales tax you may be eligible to deduct other fees charged by the state.
• Even if you don’t itemize, you can add this amount to your standard deduction by completing Schedule L.
• Taxpayers with a modified adjusted gross income below $125,000 ($250,000 for joint filers) are eligible for the entire deduction, but there’s a phase out between $125,000 and $135,000 ($250,000 and $260,000 for joint filers).

Questions about this deduction? Call us for an appointment: (904) 396-5400.

Filed under: Tax by Lynn Barwell
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As a part of the stimulus package, in February 2009 new withholding tax tables were released, recognizing a $400 credit for each worker over the balance of the year. A similar provision is built into the 2010 tables.

The credit was designed to offset some of the Social Security tax withheld, to get more disposable income to Americans quickly. While most workers benefited from this additional net amount in their paycheck, some may find that they won’t qualify for the offsetting credit when they prepare their 2009 or 2010 tax returns. Likely victims are individuals with more than $75,000 of modified adjusted gross income (MAGI) and joint filers with more than $150,000 MAGI. Others who may be disappointed are individuals who are claimed as a dependent by someone else, government retirees and workers who receive Social Security or disability benefits as a veteran. Those recipients received a $250 benefit, so are only eligible for an additional $150 credit as an employee.

For those who are self employed, the same $400 credit is available. In all cases, the available credit is computed on a new Schedule M included in the 2009 or 2010 tax return. If it’s expected that the credit will be limited or insufficient withholding is likely in a particular set of circumstances, the IRS recommends that the W-4 be modified to cover that shortfall.

For questions regarding this credit, give us a call at 396-5400 or email us at office@CPAsite.com.

Filed under: Tax by Mark Patrick
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You may have heard there is a new opportunity for the rollover of traditional IRA accounts to a Roth IRA. Two of the significant limitations for Roth accounts from the beginning (about a dozen years ago) have been income restrictions on both the ability to make a current contribution and on rollovers from traditional IRA’s and qualified retirement plans. Of course, just because someone could rollover sheltered funds to a Roth why would anyone pay taxes now instead of many years from now? Upon further review, it might make sense to consider. Read carefully as this is quite complicated.

While there is still an income limitation on who can contribute to an individual Roth IRA ($167,000 to 177,000 for joint filers and $105,000 to $120,000 for others in 2010), since 2007 (assuming that your employer approves) you have been able to contribute your 401(k) or 403(b) income deferral to a Roth type of account. What’s new is that, beginning in 2010, everyone who has a traditional IRA can make a rollover contribution to a Roth account regardless of income. What’s more, there is a special “this year only” break to declare the income from the conversion as taxable either in 2010, or pay half in 2011 and half in 2012. So now that you know this opportunity exists, is it the right thing for you to do? Here are the basic issues that you need to consider in making your decision.

Reasons that you should consider making a conversion:

1. You expect to have higher tax rates in retirement years.
2. You expect your IRA portfolio to appreciate significantly in the next few years.
3. You have a decade or more before you plan to need or are required to take retirement funds.
4. A Roth IRA distribution has no income tax ever or early withdrawal penalty if you have reached 59 ½, or have held the account for at least five years from the first contribution.
5. You have a large percentage of your contributions of traditional IRA assets qualifying as after tax contributions.
6. There’s no requirement to make any distributions in your lifetime.

 Reasons to consider not making a conversion:

1. You expect to have lower tax rates in your retirement years.
2. You don’t expect your IRA portfolio to appreciate much in the next few years.
3. You’ll have to pay the income tax on the conversion from the IRA funds.
4. Your retirement date is only a few years away.

Safety nets to give you flexibility:

1. If you change your mind about having made a Roth conversion, you have until as late as October 15, 2011 to unroll the transfer by a re-characterization. (Tip – segregate each conversion into a separate Roth account to simplify the reversal.)
2. You can pay the tax on the conversion in full in 2010, or report half of the income in 2011 and the balance in 2012. By filing your return on an extension later in 2011, you should have a better picture of your future income tax rates before making a commitment.

 Other items you need to know:

1.  Any qualified retirement plan can be rolled to a Roth IRA in certain circumstances.
2. There’s no guarantee that Congress will treat the Roth account so kindly in all future years. (Have you heard the discussion about means testing recently?)
3. By segregating your asset classes in different Roth accounts, you would have the opportunity to move declining assets back to the traditional IRA while leaving the high performing assets in a Roth.

So what should you do? Obviously there are many variables in making such a decision, but you should give a conversion serious consideration, regardless of your current income tax situation or investment prognosis. With the opportunity to reverse your decision with limited negative impact, it seems to be a win-win decision in early 2010 in most situations. Also, remember that this isn’t an all or nothing rollover. A partial move toward a Roth may be your best option.

Procrastination isn’t likely to do you any favors in this decision. There are many software tools to help with your computation based on your facts and assumptions. Because of the complexity of such a consideration, it is important that you consult a tax advisor or a CPA. We will be happy to walk through a discussion of the wisdom of such a switch in direction for your retirement funds.  Call us at 904-396-5400.

Filed under: Tax by Mark Patrick
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Our healthcare system has been driven into over-diagnosing every ailment with lab tests and imaging we haven’t had access to before. 

Are these tools worthless? Of course not. The medical profession can now use some amazing resources, without which we would suffer more and die sooner. However, we’ve forced some doctors to become tour guides, telling us the stops on the decision-tree they must follow to avoid looking negligent in deciding what they often already knew. 

Why do they follow this process? Because in those rare cases where a physician’s education and experienced judgment fails, one mistake can ruin a lifetime of good work through a catastrophic lawsuit. Without taking these extra steps, doctors’ malpractice carriers won’t insure them, their peers won’t support them and their lawyers can’t defend them. 

And who pays for these extra tests and medications? Doctors’ liability insurance companies and defense attorneys? No; you, your employer and the insurance carriers do. 

How to fix this issue: All professionals need national tort reform. Certainly the consumer who’s been wronged needs the right to recover for true negligence. But the unlimited risk that professionals face in their practices forces too much defensive work, which compromises time doing productive work and adds unnecessary costs to an already sluggish administrative system.

As always, please post your thoughts or comments.  If you have enjoyed our second healthcare reform posting, check the archives for the first.

Filed under: General by Mark Patrick
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An education tax credit temporarily improved last year—and may benefit you even if you don’t owe taxes.

The American Recovery and Reinvestment Act enacted in early 2009 increased the tax credit for college expenses for 2009 and 2010. The credit is refundable, meaning if you owe no tax, you may still receive a refund of up to $1,000. It provides up to $2,500 in credits for the first $4,000 of qualifying college expenses. 

Making the change even better, the definition of “college expenses” expanded: not only does it include tuition and required school fees, but it also includes the cost of course materials such as lab supplies, software and other class needs. Students should keep all receipts for tuition, books, supplies and other required college items as supporting documentation.

In addition, the credit expanded to cover all four years of post-secondary education instead of two. Like other credits, this one is phased out for higher income individuals. Full credit is available to those with modified adjusted gross income of $80,000 or less, or $160,000 or less for married couples filing jointly.

For more information on how to take advantage of this opportunity, give us a call at 396-5400.

Filed under: Tax by Lisa Campbell
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Patrick & Robinson recently joined a recycling program and we invite you to participate. You probably know that you can’t just throw your nickel-cadmium (Ni-Cd) batteries in the trash in Florida (other states have differing laws), but they’re recyclable along with other rechargeable batteries.

We use a number of rechargeable batteries in our office and can’t always dispose of them easily, so we’ve joined Call2Recycle (an authorized collection center) to dispose of these batteries in a manner that doesn’t hurt our environment.

All the items collected are refurbished or recycled to create other types of materials; nothing goes into landfills. The advantage of Patrick &Robinson becoming a collection center rather than just recycling our own waste is that we can provide an easy (and free) way for you to join us.

What are we collecting? 

Rechargeable batteries only: Ni-Cd, Ni-MH, Li-ion, Ni-Zn and small sealed lead (maximum 11lbs). 

Cell phones: any size, make, model, age, digital or analog, with or without battery.  Data from the phones will be erased, but for your security and peace of mind we encourage you to erase your own data before bringing us the phone. Please note that we can’t take any phones other than cell (no household cordless phones, two-way radios, pagers, etc.). 

How should you get your items to us?

This program will be ongoing, so stop by any time. Of course, if you need some tax planning or if there are any other services we can provide for you, maybe you can save time (and gas) and save yourself some green ($) while helping the environment.

If you would like more information about Call2Recycle or the recycling program you can find it at www.call2recycle.org.

Filed under: General by Lynn Barwell
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A new opportunity has opened this year for many Americans who have traditional IRA accounts. As the Roth IRA moves to its teen years, the households with these accounts number approximately half of those with the much more mature traditional IRA accounts. Other than the 23 year head start that the original IRA has over the Roth version, the younger sibling lags behind because there have been many limitations on who qualified to contribute to them. So was this new opportunity worth waiting 32 months from when the law was passed to make a move? Why would anyone want to pay taxes sooner than necessary, regardless of the future benefits? It may actually make sense. Read carefully as this is quite complicated.

While there is still an income limitation on who can contribute to an individual Roth IRA ($167,000 to 177,000 for joint filers and $105,000 to $120,000 for others in 2010), since 2007 (assuming that your employer approves) you have been able to contribute your 401(k) or 403(b) income deferral to a Roth type of account. What’s new is that, beginning in 2010, everyone who has a traditional IRA can make a rollover contribution to a Roth account regardless of income. What’s more, there is a special “this year only” break to declare the income from the conversion as taxable either in 2010, or pay half in 2011 and half in 2012. So now that you know this opportunity exists, is it the right thing for you to do? Here are the basic issues to consider in making your decision.

 Reasons that you should consider making a conversion:

1. You expect to have higher tax rates in retirement years.
2. You expect your IRA portfolio to appreciate significantly in the next few years.
3. You have a decade or more before you plan to need or are required to take retirement funds.
4. A Roth IRA distribution has no income tax ever or early withdrawal penalty if you have reached 59 ½, or have held the account for at least five years from the first contribution.
5. You have a large percentage of your contributions of traditional IRA assets qualifying as after tax contributions.
6. There’s no requirement to make any distributions in your lifetime.

 Reasons to consider not making a conversion:

1. You expect to have lower tax rates in your retirement years.
2. You don’t expect your IRA portfolio to appreciate much in the next few years.
3. You’ll have to pay the income tax on the conversion from the IRA funds.
4. Your retirement date is only a few years away.

 Safety nets to give you flexibility:

 If you change your mind about having made a Roth conversion, you have until as late as October 15, 2011 to unroll the transfer by a re-characterization. (Tip – segregate each conversion into a separate Roth account to simplify the reversal.)

1. You can pay the tax on the conversion in full in 2010, or report half of the income in 2011 and the balance in 2012. By filing your return on an extension later in 2011, you should have a better picture of your future income tax rates before making a commitment.

 Other items you need to know:

1. Any qualified retirement plan can be rolled to a Roth IRA in certain circumstances.
2. There’s no guarantee that Congress will treat the Roth account so kindly in all future years. (Have you heard the discussion about means testing recently?)
3. By segregating your asset classes in different Roth accounts, you would have the opportunity to move declining assets back to the traditional IRA while leaving the high performing assets in a Roth.

 So what should you do? Obviously there are many variables in making such a decision, but you should give a conversion serious consideration, regardless of your current income tax situation or investment prognosis. With the opportunity to reverse your decision with limited negative impact, it seems to be a win-win decision in early 2010 in most situations. Also, remember that this isn’t an all or nothing rollover. A partial move toward a Roth may be your best option.

 Procrastination isn’t likely to do you any favors in this decision. There are many software tools to help with your computation based on your facts and assumptions. Contact us if you want to walk through a discussion of the wisdom of such a switch in direction for your retirement funds.

Filed under: Tax by Mark Patrick
No Comments »

It’s the end of the season and you don’t want to miss any of the games on TV, but we’re into the New Year and there’s business to take care of. With the aid of a laptop you may be able to be productive while enjoying your favorite pastime, but be careful when you jump out of your chair to cheer a big play! 

There are certain steps you need to take to close your books for the year and get all the annual tax returns complete by the due dates:

Closing the Books

• Enter all transactions in your accounting system
• Reconcile bank and credit card accounts
• Compare year-end loan balance statements to amounts in accounting system
• Make year-end adjustments or accruals
• Review fixed asset purchases and make copies of fixed asset receipts to send to your CPA
• Review fixed asset list prepared by CPA and note any assets you no longer own
• Receive depreciation expense from CPA and enter into accounting system
• Print income statement and balance sheet for the year
• Compare income statement and balance sheet to figures on tax return
• Make backup of computerized accounting system

Due Dates for Tax Forms

• Prepare W-2s for employees by January 31^st
• Prepare 941 and State UTC-6 4^th quarter reports by January 31^st
• Prepare annual 940 FUTA report by January 31^st
• Issue 1099s to subcontractors by January 31^st
• Send W-2s and W-3 to IRS by February 28^th
• Send 1099s and 1096 to IRS by February 28^th
• Complete corporate tax return by March 15^th (for 12/31 year end) or file an extension
• Complete and send county tangible return by April 1^st or file an extension

If you have any questions regarding the information above, give us a call at (904) 396-5400 or email us at office@CPAsite.com.

Filed under: Accountants by Adam Robinson
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There are only a few more days left this year, but business owners and individuals can still do some things to minimize their taxes for 2009 and 2010. What you do will depend on what sort of a year you’ve had.

If 2009 was a good year for you, you should consider paying all your bills this next week and getting them on your books before the end of the year. 

Some other business ideas:

• Consider a charitable contribution; not-for-profit organizations like the City Rescue Mission are finding themselves hard pressed with more people needing assistance and fewer people making donations. 
• Pre-pay expenses you know will be coming up in January. Individuals can only take advantage of this strategy with their mortgage payment and sometimes real estate taxes, but companies have more flexibility.
• The vehicle sales tax deduction for individuals is due to expire on December 31, so if purchasing a new car is on your “to do” list you might want to make it a priority.
• Invest in your retirement. Any salary deferral plans such as 401(k)’s or Simple plans need to be made by year end. However contributions to SEPs or IRA’s can be made in the following year through the due date of the return.
• If you’re planning to sell investments with gains, waiting until after January 1 will postpone the tax bite for another year.

If you’re an individual:

•  Make a charitable contribution before December 31.
• Make a charitable contribution this year of up to $100,000 directly from your IRA. You don’t need to report the income and then deduct it.  This strategy is especially important if you cannot itemize.
• Individuals aren’t required to take minimum distributions from retirement funds in 2009, so if you don’t need the money you can decrease your 2009 tax burden by leaving it where it is.
• Prepay mortgage payments and real estate taxes.
• Be sure to spend the balance of your Flexible Spending account by December 31 or you may risk losing it. Schedule doctor’s appointments and purchase medical supplies by year end.
• You and your spouse can gift up to $13,000 each (for a total of $26,000) to as many people as you would like without paying gift taxes.
• If you make the necessary purchases before December 31, there are several tax credits from which you may benefit. If you have a college student, you may be able to get a tax credit of up $2,500 for qualified education-related costs, such as textbooks, tuition, a computer, etc., through the American Opportunity Tax Credit.  Also, you could qualify for the federal tax credit of up to 30% off the product cost for any qualifying energy-efficient standards units and products. 

If your business was like many others and 2009 was a leaner year for you, you may not need to minimize your taxes. In anticipation of 2010 being better, businesses operating on a cash basis should push year-end expenses to January if possible. Take advantage of the 5-year net operating loss carry back to recapture some or all of the taxes you paid over the past 5 years.

Contact us if you’ve got specific questions that you’d like answered. We can be reached by calling 904-396-5400, or emailing Office@CPAsite.com.

Filed under: Tax by Adam Robinson
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