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Avoiding Penalties | | |
The IRS penalizes taxpayers who haven't withheld or made sufficient Estimated Tax payments for Federal Income Tax during the year. To avoid a penalty situation, in general, you must either
- pay 90% of your 2011 tax or
- pay 100% (110% for higher income taxpayers) of your 2010 tax.
Email Doris if you have questions. |
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Updated 2011
Standard Mileage Rates:
- 51¢ per mile for the period January 1 through June 30, 2011
- 55.5¢ for the period July 1 through December 31, 2011
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Tax Trivia - Did you know? | | |
The first U.S. income tax began in 1862 and the first tax form had only 10 lines! The purpose was to fund the Civil War. That income tax was repealed 10 years later.
The income tax was reinstituted in 1894, but was declared unconstitutional by the Supreme Court.
Our current income tax system was put in place in 1913 after enough states ratified the 16th Amendment to the Constitution allowing Congress to have power to lay and collect taxes on all incomes. Alas, it is probably here to stay in some form. |
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Greetings!
As we approach year-end, it's again time to focus on moves you can make to save taxes-both on your 2011 return and in future years. To get you started, I've included Year-End Tax Planning ideas that you may want to put in action before the December 31.
Thanks to all who participated in the survey. The survey results were very positive and helpful. I plan to implement new services and act on your constructive feedback in time for the next tax filing season.
Looking ahead to the 2011 tax preparation season, we are continuing our "be more green" mindset and will deploy additional paperless options including the ability to send / receive source documents / tax returns. |
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Individual Tax Planning
Moves | |
*Increase the amount you set aside for next year in  your employer's health flexible spending account (FSA) if you set aside too little for this year. Don't forget that you can no longer set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids.
*If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year's worth of deductible HSA contributions for 2011.
*Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, then buy back the same securities at least 31 days later. It may be advisable for us to discuss year-end trades you should consider making.
*Postpone income until 2012 and accelerate deductions into 2011 to lower your 2011 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2011 that are phased out over varying levels of adjusted gross income (AGI). These include child tax credits, higher education tax credits, the above-the-line deduction for higher-education expenses, and deductions for student loan interest. Postponing income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2011. For example, this may be the case where a person's marginal tax rate is much lower this year than it will be next year.
*Read more ...
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Business Tax Planning Moves | |
Please note that most of these planning tips are relevant to sole proprietors as well as corporate entities.
*Businesses should consider making expenditures that qualify for the business property expensing option. For tax years beginning in 2011, the expensing limit is $500,000 and the investment ceiling limit is $2,000,000. And a limited amount of expensing may be claimed for qualified real property. However, unless Congress changes the rules, for tax years beginning in 2012, the dollar limit will drop to $139,000, the beginning-of-phaseout amount will drop to $560,000, and expensing won't be available for qualified real property. The generous dollar ceilings that apply this year mean that many small and medium sized businesses that make timely purchases will be able to currently deduct most if not all their outlays for machinery and equipment. What's more, the expensing deduction is not prorated for the time that the asset is in service during the year. This opens up significant year-end planning opportunities.
*Businesses also should consider making expenditures that qualify for 100% bonus first year depreciation if bought and placed in service this year. This 100% first-year writeoff generally won't be available next year unless Congress acts to extend it. Thus, enterprises planning to purchase new depreciable property this year or the next should try to accelerate their buying plans, if doing so makes sound business sense.
*Nail down a work opportunity tax credit (WOTC) by hiring qualifying workers (such as certain veterans) before the end of 2011. Under current law, the WOTC won't be available for workers hired after this year.
*Read more ... |
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Franchise Tax Update |
 Good news for small businesses throughout Texas! The $1 Million No-Tax-Due Threshold was extended. The original provision was set to expire on December 31 and was extended for two additional years (December 31, 2013). A $600,000 no-tax-due threshold takes effect January 1, 2014. |
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Social Security Tax Rates for 2011 Expiring | |
The employee tax rate for social security (4.2%) is scheduled to expire at the end of 2011. President Obama has recommended an extension and enhancement for 2012. As of this writing, no bill has been approved by Congress. The employer tax rate for social security remains unchanged
at 6.2%. |
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I am honored you trust me to handle your tax and accounting matters. As potentially major developments and opportunities emerge, I am available to discuss the impact on your personal or business situation.
Referrals are a big part of the tax and accounting business. Thank you to all who have referred clients and thank you to all who will refer clients!
Sincerely,
Doris Cloud |
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