Deadlines, Deadlines, Deadlines

Let's take the guess work for decisions out of it...knowing the below deadlines can help ease the pain of your year-end tax planning. Please take a moment to log these dates away:

Employee Sponsored Plans (to include a 401(k) and a Keogh)
The deadline here does not budge..have your plan in place by December 31, 2009.

SEP IRA's
You have until the due date for filing your return plus any extension to make contributions. Therefore, with extensions, you can deduct payments for 2009 as late as Oct. 15, 2010. This offers a nice tax planning safety net for those self-employed individuals who missed the December 31 cutoff for Keogh Plans.

Traditional IRA, Roth IRA, and Coverdell Education IRA
The deadline is April 15, 2010 for a contribution to be deductible in 2009. The plan must be established and your contribution must be made by this date; in this case, filing an extension will not extend this due date. When making a contribution in 2010 before April 15, be sure to clearly notify your plan sponsor as to what year your contribution is being made for- 2009 or 2010. Here, be cognizant of your plan limits also, especially in regards to Adjusted Gross Income phase out ranges.

Flexible Spending Accounts
Depending on whether or not your company has adopted the 2 1/2 month grace period now permitted by the IRS, then December 31, 2009 may be the last day you have to clear out your balance in your flexible spending account. Whatever is left at this date will be forfeited. Please check with your plan sponsor for the date this deadline applies to your plan.

Deductible Charges (Credit Cards)
If you pay bills for your business or make purchases for your business using a credit card, be aware of a distinction between bank credit cards and retail credit cards and what your deduction deadline might be. If you make a charge on a retail credit card, then you may only take that charge as a deduction in the year in which the bill is paid. If you make a charge on a bank credit card, then you must take the deduction in the year in which you charged the purchase.

Gifting
As the Holiday season just passed, here are some final reminders about gifting and the deadline and rules that apply. The Annual Gift Tax Exclusion for 2009 is $13,000 - any gifts made up to this level are made gift tax free, and by electing gift splitting as a married individual, this limit is doubled to reach $26,000. There are two special breaks worth mentioning from this $13,000 annual exclusion cap and that is for gifts made for tuition and medical expenses. If a tuition gift is paid directly to the school, then the gift tax break is unlimited. The same can be said for any medical expenses paid to the donee. If you made your Holiday or year-end gift in the form of a check, make sure the donee deposits that check before December 31, 2009. If not, this gift will not count as a gift for 2009 gift tax purposes. If your donee is unreliable in these regards, consider delivering a certified check as this will take that worry away. A certified check cut by December 31, 2009 is treated a 2009 gift whether deposited or not.

That's all for 2009. We look forward to planning with you in 2010 and beyond. Please have a safe and Happy New Year's!!!

info@mcathurco.com
704.544.8429

Twas The Night Before Christmas...

We're not quite there yet, but we are just a few short days away. As such, we are going to take a pause from tax planning this week to wish everyone out there a Happy Holiday. As many of us are preparing to travel this week and weekend, please take heed to travel safely and with patience and kindness to your fellow road (and/or air) warriors. As many wise folks out there take time to sing in their best holiday voices every single year, "Tis the season to be jolly".

Happy Holidays!!!

P.S. We just couldn't help ourselves... Next week is the last week for many important 2009 tax planning initiatives. Take the time to call your CPA and see what you need to have done before the clock strikes midnight on New Year's Eve.

info@mcarthurco.com
704.544.8429

A Few More Tips for the End of the Year

The end of the year is quickly approaching and as many of us become distracted by the multitude of activities associated with the holiday season, some important financial decisions can fall between the cracks. Over the last several weeks, we've tried to emphasize the importance of looking at the various credits and deductions available to you and implementing them into your planning with the help and advice of your CPA. Today, we're going to focus on a few last matters for your 2009 planning.

Let us first highlight some unique opportunities available to businesses in the current tax climate. If you are a business considering the purchase of a business vehicle that would be subject to the 280F depreciation limitations, you can receive up to an additional $8,000 in depreciation deductions if the vehicle is acquired AND placed in service by the end of the 2009 calendar year. Contact your accountant to further discuss what vehicles may qualify and if this plan of action makes sense for you.

Next, if you are an S Corp who found yourself in the position of repurchasing your own debt for less than the adjusted issue price or you had all or a portion of your indebtedness forgiven, you can elect to defer the income for 4 years and then report the income over the subsequent 5 years. Additionally, if the taxpayer is bankrupt or insolvent, then all or a portion of the income realized from the repurchase or forgiveness of business debt may be excluded.

Now, moving to the individual, if you found yourself in the tough position of claiming unemployment pay this year, please keep in mind that you can exclude up to $2,400 from your federal income taxation for 2009 only. Additionally, if you did not elect to have withholding taken from your unemployment payments, it could create an unexpected surprise come tax time. Please consult your CPA if you feel this may be an issue for you.

A classic end of year tax planning tip has always been to bunch your itemized deductions, such as property tax payments, into the current year. This tip still holds true in 2009 for those taking itemized deductions. However, non-itemizers can also get a boost to their 2009 Standard Deduction by claiming an additional "Standard Deduction" amount for state and local property taxes you pay. This deduction is limited to the lesser of $1,000 filing jointly ($500 if filing single) or the actual real estate taxes you paid. This deduction does not help those of you out there who take itemized deductions. However, if you are planning to take a Standard Deduction in 2009 and you are holding a current property tax bill that will help you meet the $1,000 cap, then be sure to pay that bill before the end of 2009 to maximize this additional "Standard Deduction" opportunity.

As we move into next week, we are going to shift our focus from the End of the Year planning into a mode where we start planning for 2010 and beyond. First up on our list is to tackle issues and opportunities related to the new version of the First Time Homebuyers Credit.

info@mcarthurco.com
704.544.8429

Every Dollar Counts - Take Advantage of Available Tax Credits

There are a number of tax credits out there, some of which can and should apply to your situation and others that just won't work for you. We have highlighted a few below that are new onto the scene.

"Making Work Pay" Tax Credit: For 2009 and 2010, those with earned income may qualify for this credit at an amount of $800 for joint filers and $400 for single filers. This credit is phased out as your Modified AGI increases from $150,000 to $190,000 if married filing jointly ($75,000 to $95,000 on a single return). This tax credit is different from last year's economic stimulus plan in that instead of receiving a rebate check, the IRS has reduced the federal income tax withholding by the amount of the credit. Therefore, your 2009 take-home pay has been increased by the amount of the credit. Since the credit is built into the withholding calculations, it could result in your withholding being less than your taxes due. This situation becomes more likely if both you and your spouse are employed and your combined income is above the phase-out levels or you have two jobs and both employers are reducing your withholding. If you fit this criteria, please contact your CPA to determine whether you need to increase your 2009 withholding to avoid a penalty.

Hybrid Vehicle Credit: If you have decided to "go green" this year and purchased a hybrid vehicle, then you may be eligible for a tax credit, and for the first time, this tax credit is allowed against AMT. There are phase-out rules per manufacturer, so please check out the updated list of the credit status of all hybrid vehicles: http://http//www.irs.gov/businesses/corporations/article/0,,id=203122,00.html


If you purchased a hybrid vehicle and need help determining your eligibility, please contact your CPA.

Please see the below links for further tax credits that may be available to you, and as always, if you are looking for help in your tax planning, please contact us.

Foreign Tax Credit http://http//www.irs.gov/publications/p514/index.html

Credit for Child Care & Dependent Care Expenses http://http//www.irs.gov/publications/p503/index.html

Education Tax Credits http://http//www.irs.gov/publications/p970/index.html

Credit for the Elderly or Disabled http://http//www.irs.gov/publications/p524/index.html

Retirement Savings Contribution Credit http://http//www.irs.gov/pub/irs-pdf/p4703.pdf

Earned Income Credit http://http//www.irs.gov/publications/p596/index.html

Empowerment Zone & Renewal Community Employment Credit http://http//www.irs.gov/publications/p954/index.html


In addition to the above credits, we want to talk about one more planning opportunity with you today, and that is how to plan with the current zero percent capital gains tax rate. This opportunity started in 2008 and will be available through 2010. Long-term capital gains and qualified dividends that would be otherwise be included in the 15% or below ordinary income tax bracket are taxed at zero percent if realized in 2009 or 2010. For 2009 taxpayers filing jointly who have W-2 income up to $67,900 can take advantage of the zero percent rate. If you have been historically at a higher rate, but find yourself between jobs, recently retired, or have higher than normal business deductions, please be aware of this opportunity and speak with your CPA to formulate an end of year plan.


Come back next week for more insight on how to maximize your tax planning for the end of this year and looking forward to 2010. We even have a tip out there for those of you that file with a standard deduction!



704.544.8429 info@mcarthurco.com

More on Year-End Tax Planning

We hope that Thanksgiving treated you all nicely and that we have all recovered from our turkey-induced comas. December 1st is here and as we enter the final month of 2009, it is no time to become complacent with your year-end tax planning. Let's dive into a few more areas to focus on today.

Estimated tax payments are a confusing topic for many taxpayers and can create penalties if incorrectly computed and underpaid. Generally, if your 2008 Adjusted Gross Income (AGI) was $150,000 or less, one way you could avoid 2009 underestimated tax penalties is to make your timely 2009 estimated tax payments based on 100% of your 2008 tax liability. If your 2008 AGI was over $150,000, you can avoid penalties by basing your 2009 estimated tax payments on 110% of your 2008 tax liability. 2009 offers one additional method to avoid underpayment penalties for 2009 only! If you qualify, you can eliminate 2009 underestimated tax penalties by basing your 2009 estimated tax payments on 90% (rather than 100% or 110%) of your 2008 tax liability. To qualify, you must meet the following requirements: you must have had an AGI below $500,000 or $250,000 if married and filing separate returns for 2008 AND you must certify that more than 50% of the gross income on your 2008 return came from a "qualifying small business". For purposes here, a qualifying small business is one that employed, on average, less than 500 employees during 2008. Please contact your accountant as soon as possible if you think that your current tax withholdings or estimated tax payments may not meet one of these safe harbors. If so, we may be able to eliminate the penalty by having you withhold additional taxes from your year-end bonus, distribution from your IRA, etc.

Avoiding the impact of the Alternative Minimum Tax (AMT) is complicated and is affected by a number of different areas. One such area is that of Incentive Stock Options (ISO). If you exercised an ISO in 2009, there is a possibility that it generated AMT if the difference between the stock's value and the exercise price is substantial. If you did exercise such an ISO in 2009 and the stock you acquired has declined in value since the date of exercise, it may be possible to eliminate or reduce your 2009 AMT liability if you sell the stock on or before December 31, 2009. Please check with your accountant if you have exercised ISO's during 2009 and the price of the stock has fallen since the date of the exercise.

One more area to be cognizant of as year-end approaches is that of mutual fund purchases. Many mutual funds typically distribute income, including capital gains, near the end of each year. As such, if you invest near year-end but before the date of record, then you will be taxed on this distribution as if you held the fund the entire year. Before investing, determine the amount and timing of any year-end payout.

Check back with us next week as we look at the tax credits that may be available to you and whether or not you are eligible for the temporary 0% capital gains tax rate.


info@mcarthurco.com 704.544.8429

Tax Planning for Businesses in a Down Year

In light of the holiday season's arrival, we want to first start by talking a little bit about charitable contributions. A few reminders...for your charitable contribution to be deductible in 2009 your check must be mailed on or before December 31, 2009. A pledge to a church or any other organization made in 2009 is not deductible until paid. One great way to increase the bang for your buck with your charitable contribution is to donate appreciated stock. If you've owned the shares for over a year (long-term in nature), then you can deduct the full value of the stock and pay zero taxes on the appreciation of said stock. The alternative is to sell the stock, pay capital gains tax, and then donate the money. In this scenario, you get hit with a tax bill and the charity receives less. If you have stock that has fallen in value, then do not donate this stock because you will lose the ability to deduct the loss on your return. The better strategy in this case is to sell the stock and then donate the proceeds. Whatever charitable cause that may be near and dear to your heart this holiday season is ready for your contribution. While making these contributions, keep in mind the above reminders and gifting methods.

Now, let's shift our focus to end of year tax planning for businesses and business owners. There's not doubt that the recession has hit many small businesses hard; as such, it requires a closer examination of some end of the year decision making. If your S Corporation is anticipating a taxable loss this year, it is important to contact your CPA promptly. These losses are only deductible on your personal return if you have adequate "basis" in your S Corporation. If you do not have sufficient basis, there are steps that can be taken to correct the issue, but they must occur before the end of the tax year. Again, please contact your CPA as the steps to correct this lack in basis are complicated and require precise actions.

Another area that planning in a down year might change is how closely-held corporations decide to pay year-end "bonuses". Since your corporation can deduct a bonus, but not a dividend, year-end "bonuses" are traditionally paid to a shareholder/employee in the form of a bonus in order to take the deduction where it has the largest tax benefit. However, in light of the recessionary times, if your corporation is operating at a current loss and/or has net operating loss carryovers to the current year, then little or no tax benefit will be realized by paying these year-end "bonuses" as bonuses. Instead of structuring the year-end "bonus" payment as a bonus, it would be prudent to consider making the payment in the form of a dividend to a shareholder/employee. In this case a dividend taxed at a maximum rate of 15% will generally save taxes. On the other hand, if your corporation has thrived and is currently in a high tax bracket, then a bonus would likely save taxes. The key here is to know your corporation's situation and plan accordingly.

Lastly, as business owners look to their future and the future of their employees, establishing a retirement plan might be appropriate. It is important to remember the following deadlines in this effort. Calendar year taxpayers who wish to establish a qualified plan in 2009 generally adopt the plan no later than December 31, 2009. However, a SEP may be established by the due date of the tax return (including extensions), and a SIMPLE plan must be established no later than October 1, 2009.

In economic times that are tight, planning your finances and having your financial house in order are more important than ever. If you feel that you have work to do and need an experienced guide, please contact us and we will be glad to see if we can meet your needs.

Happy Thanksgiving!

704.544.8429 or info@mcarthurco.com

Tax Planning for Individuals, Continued...

As promised, we are back with more tax planning tips for End of Year Planning 2009. We hope for these tips to not only be informative, but also useful in your tax preparation. In fact, two of these next tips have been used by clients at our firm.



We'd first like to discuss an important topic not only for your taxes, but for our environment-Energy Efficient Improvements to your Home. Unlike many other tax benefits, these credits are not reduced or eliminated as your AGI increases and they offset Alternative Minimum Tax so they can provide a tax planning opportunity irregardless of your income level. The 2009 updates allow a 30% credit for "qualified energy-efficient home improvements" to your principal residence if located in the United States. Some conditions do apply, so be sure to check with your tax professional. First, the improvements must be in service in either 2009 or 2010. Secondly, there is a limit to the credit. It maxes out, cumulatively, at $1500 for the 2009 and 2010 tax years. Some examples of qualified improvements include the the following: energy efficient roofs, insulation, exterior windows including skylights, exterior doors, heat pumps, hot water boilers, and air conditioners. Please check with the manufacturer of any qualified improvements to ensure that your device meets the government requirements. In addition to the above credit applicable to only principal residences, a second part of the 2009 update allows for a credit for improvements for principal residences and second residences alike. A 30% credit for "qualified residential solar water heaters, geothermal heat pumps, wind energy property, and solar electric generating property" installed can be applied to your tax bill. In the case of the above tax planning opportunities, going green can also save you some green.



A second topic that may be of interest to some in light of the recent and current economic struggles is the opportunity to waive your required minimum distribution (RMD) for 2009, and 2009 only! The RMD's from employer-sponsored retirement plans and IRA's alike. This waiver can only be applied to distributions for the 2009 calendar year. If you have already received your 2009 RMD, you can keep the payment as you normally would and just simply report it in your income. If you want to avoid taxation of the distribution, then you are required to roll the amount distributed into an IRA within 60 days of receipt. However, the IRS recently announced that it will waive the 60-day requirement if you complete the rollover no later than November 30, 2009. Please note that if you have income tax withheld on these payout amounts, you may owe an estimated tax underpayment penalty by skipping the 2009 RMD. The waiver of the 2009 RMD must be analyzed carefully, so please consult your tax advisor.



Please tune in next week as we shift our focus to End of Year Tax Planning for Business entities including Establishing a New Retirement Plan for 2009 and Closely-Held Corporations Paying Dividends Over Year-End Bonuses. And in light of Thanksgiving, we'll talk a little bit about making the most of your charitable contributions!

The End of the Year is Here- Tax Planning for Individuals

Here at McArthur & Company, we believe in providing our clients with proactive, current and valuable information that can maximize their understanding of tax planning opportunities and decrease their tax liability where possible. Part of that push for information can be found here weekly on our blog. We hope that you enjoy, learn, and follow regularly!!!

The end of the year is upon us and it is never too early to start the appropriate tax planning, especially in a year where Congress, the IRS, and the courts have flooded taxpayers and tax planners alike with significant tax developments. In such a year, we want to highlight a few new opportunities that exist for the taxpayer under these new provisions. We suggest you call our firm before implementing an tax planning techniques discusssed herein to confirm the tax implications for your personal situation.

Sales Tax Deduction on a New Car: Cash for Clunkers is gone, but a sales tax deduction on a new car may still be available to you for cars purchased between February 17, 2009 and December 31, 2009. This deduction can be claimed for the sales or excise taxes you pay on the purchase of a "qualified motor vehicle". If you itemize deductions, you may deduct the qualified sales or excise taxes. If you do not itemize, you may deduct the qualifies sales or excise taxes as an "additional standard deduction". Watch for the phase out limits. The deduction is limited to the sales or excise tax on the first $49,500 of the vehicle's purchase price. For Modified Adjusted Gross Income, you are phased out ratably from $250,000-$260,000 on a joint return or $125,000-$135,000 on a single return. An additional tax tip is that the IRS has allowed this sales tax deduction for more than one qualifying purchase.

Tune in next week for more tips on End of the Year Tax Planning for "Individuals" as we look into tax credits for making energy-efficient improvements to your home and the waiver of required minimum distributions for 2009.

Please contact us at 704.544.8429 or info@mcarthurco.com