The RLH team and their family and friends had so much fun at last years York Revolution game that we did it again! On Friday evening, September 2, 2011, RLH headed back to Sovereign Bank Stadium to see the York Revolution take on the Long Island Ducks. First up was Aaron Miller, son of Jeff Miller, CPA, CITP, who was given a ceremonial first pitch. Everyone enjoyed the dinner buffet, the kids loved the carnival style play area, and although the Revolution did not win, everyone had a great time socializing! The evening ended with a spectacular fireworks display! Overall, a fun filled, memorable evening for everyone!
Many taxpayers give much more than just cash to their favorite charity. Many also provide their time, travel, meals, and other “out of pocket” expenses in order to assist the charity in doing good work. And while you can’t take a charitable deduction for your time, you are allowed to deduct other expenses incurred in support of a charity, such as vet bills for your local humane society, or wood and nails for a “habitat” charity.
Let’s examine your house of worship. It’s possible for members to deduct evangelism travel expenses, even if the charity (a church in this example) never initiated, controlled, supervised, or assisted with the trips. The church fostered missionary work in general. Before the trip, the church provided the taxpayers with letters of commendation serving as introductions to other interfaith groups during the trip. And after the trip, the charity publicized the member’s efforts to the other congregations. This allowed the taxpayers to deduct mileage at the prescribed IRS rate, air fare, lodging, and meals while on their missionary trip.
Consider the potential deductions for those taxpayers involved as board members to a charity, or simply significantly involved. In a recent decision, the Tax Court noted “control” by the charity is only one of the factors to be considered. You don’t have to necessarily be controlled or directed by the charity to make your deductions stand up. But there should be a strong affiliation with the charity, and the taxpayer must be accountable to the charity.
There are recordkeeping requirements. Noncash contributions greater than $250 must be acknowledged by the charity. The taxpayer will likely have to request this from the charity with a simple form, one which the charity will be happy to complete in order to secure your deduction and advance the mission of the charity.
The cost of sending a child to college is daunting. According to the latest figures from the independent College Board, the total average cost for the 2010/2011 academic year – including tuition and fees, room and board, books and supplies, transportation and other sundries – for in-state students at four-year public colleges was $20,339. For out-of-state students, the average cost jumped to $32,329. The cost at four-year private colleges averaged $40,476. And costs are expected to keep rising.
Nevertheless, you can lighten the financial burden of putting your children through school by taking advantage of certain tax-favored vehicles. These techniques are generally available to grandparents as well as parents.
Here are four prime examples.
Contact us if you would like to determine the best approach for your situation.
An important part of our service to you is to help identify actions you can take before year-end to minimize your 2011 income tax bill. Accelerating or delaying income and deductions, contributing to retirement plans, and taking investment losses are just a few of the strategies you might want to consider. There are also tax credits that require careful planning or they may be lost.
Our new 2011-2012 Tax Planning Guide is now available for your review. This guide is designed to make you aware of many tax planning strategies that are available to help you minimize your tax burden.
If you’d like to discuss tax-cutting options that fit your particular situation, please contact us soon for a year-end planning review.
In 2008, Pennsylvania lawmakers passed Act 32, which completely restructured and significantly changed the withholding, reporting and collection of local earned income taxes. Act 32 goes into full effect on January 1, 2012 and will have an impact on all business taxpayers.
Prior to passage of the Act, the earned income tax collection process was complex and confusing. The provisions of Act 32 will streamline this process by standardizing forms and definitions and by consolidating tax collectors. All individual taxpayers in Pennsylvania will file the same local earned income tax return at the end of each year and all business taxpayers will file the same local earned income tax withholding returns each quarter or month, no matter where they or their employees reside. In addition, each county will have one designated earned income tax collector. This will decrease the number of tax collectors from about 560 to about 21! The tax collector in each county will be responsible for forwarding tax payments received by each business to the appropriate municipalities.
All employers will be required to withhold and remit local earned income taxes for all employees. Each employee will be required to complete a certificate of residency form. The tax rate that each employer will use to withhold tax for each employee will also change. The employer will use the higher of 1) the rate for the municipality in which the business is located or 2) the rate for the municipality in which the employee lives.
Pennsylvania’s Department of Community and Economic Development (DCED) oversees the implementation of the changes required by Act 32. To obtain more information from the DCED, including access to the newly required Residency Certification Form, visit http://www.newpa.com/get-local-gov-support/tax-information/dceds-act-32-eit-collection-system.
If you have questions or would like assistance with the implementation of these changes in your business, please contact our office and we will be glad to help.
Unemployment compensation can provide a welcome buffer while you’re transitioning to a new job. But with the help comes a tax effect, because the benefits provided under federal or state laws are usually includable in your income in the year you receive them.
As a result, depending on the amount of unemployment benefits you expect to receive, you may want to complete Form W-4V, Voluntary Withholding Request, to have federal income tax withheld from your benefits. The withholding rate is generally 10%. You can also ask the unemployment office to withhold state income tax.
Alternatively, you can adjust or begin making quarterly estimated tax payments. The amount of unemployment compensation you report on your income tax return is also affected by benefits you have to repay. If you receive and repay benefits in the same year, you can subtract the repayment from the total you received.
However, if you make repayments in a year following the receipt of the benefits, the tax treatment depends on how much you repay, and can be claimed either as an itemized deduction or a credit against your current-year tax.
Please contact us if your employment situation changes. We can help with tax and benefit related issues such as severance pay, retirement account rollovers, and deductions related to job hunting.
In business, making pricing decisions is always tough - and even more so when the economy is slow and sales are slipping. It’s tempting to cut prices hoping to generate higher sales volume. But sometimes that just produces lower margins on a low volume. What do you do if you’re being squeezed by cost increases? Can you increase prices in a slow economy? How do you respond if your customers complain? Can you justify holding prices steady if your competitors cut their prices? There are no easy answers, but running through a three-step process can help you make the right decision.
Do you regularly monitor your company’s cash accounts? You should. Even if you leave the job to your bookkeeper or accountant, you should stay aware of where the cash is going and how the spending is approved. Along with inventory "shrinkage," theft or improper expenditures of cash are among the chief sources of loss for small companies.
Periodically, you hear about a huge loss caused by an employee who’s been quietly embezzling cash for years. But many smaller cases are never noticed. And it’s not always employees at fault. In fact, the vast majority of employees are scrupulously honest and loyal. Outsiders can be stealing your cash too, by submitting false or inflated invoices that are paid without proper review.
What can you do to reduce the risk of losses? The textbook answer is "internal controls." This refers to things such as standard procedures for approving and paying bills. It includes segregation of duties - having more than one person involved in preparing, signing, and reconciling checks. Unfortunately, many small companies don’t implement proper controls - either because there’s not enough staff or because they think it’s too much trouble.
Regardless of the size of your business, here are some steps you can take.
* Maintain a strict rule that all invoices must have an approval signature before being paid. Nothing focuses a person’s mind like having to sign his or her name on something.
* Have a policy that all employee expense reports must be signed off by a higher-level employee.
* Make it a rule that the person who prepares a company check can’t sign that check.
* Ask your bookkeeper or accountant to give you a signed note each month affirming that the bank statement has been reviewed and balanced.
* Follow up personally to make sure that these procedures are being followed.
* On occasion ask to see the bank statement and canceled checks for the prior month. Review them in detail. Not only will this increase your chances of spotting fraud, but it will also remind you just what the company’s cash is being spent on.
Please contact our office for details or for assistance in improving controls over your company’s cash.
If you change jobs you may have an important decision to make - what to do with your 401(k) plan. You’ll have several choices. Unfortunately, the easiest choice is the worst choice: that is, to take a distribution from the old plan and put it in the bank. It may be tempting, because who couldn’t use some extra cash. But if you do, you’ll owe taxes on the balance and usually a 10% penalty as well. You’ll lose the benefits of future tax-deferred growth on your savings. And if you spend the money, you’ll have to start from scratch in saving for retirement. Instead, consider three options.
* Ask your new employer whether you can roll your balance into the new company’s plan. If you can, arrange a direct transfer between plans. You may have to complete a probationary period before you can join your new company’s plan.
* Explore whether you can leave your balance in the old plan, at least for a while. That removes the pressure for an immediate decision.
* Roll over your balance into an individual retirement account (IRA). This avoids immediate taxes and lets your savings continue to grow tax-deferred. It also gives you maximum flexibility for future investments. You even have the flexibility to later convert into a Roth IRA. Be sure to ask for a "trustee-to-trustee" transfer to avoid any short-term tax risk.
A word of caution: If part of your account is invested in company stock, get details on the tax issues before you withdraw or roll over funds.
The bottom line: Do all you can to keep your savings in a tax-favored account. You’ll be glad you did when you reach retirement age. Please call our office if you’re facing this situation. We’ll be happy to advise you on your options.
Have you taken the time to check your income tax withholding for 2011? It’s true that there were no major changes in tax rates or deductions for this year. However, there are still several reasons why you might want to adjust your withholding.
For example, if you’ve bought a house for the first time, the deductible mortgage interest could cut your taxable income. That means you might need less tax withheld from your paycheck every month. Or if you refinanced last year, your interest deduction could be lower and you might want more dollars withheld.
Even if your financial situation hasn’t changed, your withholding could be higher than it needs to be. Many people like to have extra withheld so they receive a large tax refund each year. That’s fine if you’re worried about being surprised by a big tax bill, but it means you’re making an interest-free loan to the government. If you’ve consistently received a large refund for several years, consider reducing your withholding. Don’t just fritter away the extra take-home pay. Use the money wisely by paying down credit card debt or boosting your retirement contributions.
You can adjust your withholding by asking your employer for a Form W-4 and filling out the simple worksheet. If you need help figuring out the right withholding level, contact our office.
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