The IRS requires people to pay taxes on profits made from the sale or redemption of stocks and mutual funds.  Likewise, taxpayers can claim a deduction if the sale results in a loss.  Be sure to know the purchase dates and costs of all such items as well as the sales price and date of the sale.  The gain or loss on a stock sale is calculated by subtracting your cost basis from the proceeds of the sale. The dates of purchase and sale are important to determine whether the loss is short term or a long-term capital gain.  Profits made on investments held for more than one year (long-term) are taxed at a lower rate.

If you do not have a record of what you paid for a stock, your broker might be able to provide that to you, or the company may be able to provide you the value of the stock on the purchase date.  For those who participate in dividend reinvestment plans, remember to keep the year-end reports that tell the basis of the newly acquired shares.  Always keep purchase records until an asset is sold.  Please contact us if you have any questions.

Taxpayers whose deductions total close to the standard amount can try to bunch deductible expenses into one year. They can itemize in the year into which they shift deductible expenses and take the standard deduction in the year from which the expenses are shifted.  It might work in your favor to pay real estate taxes in January for the current year, and again in December for next year. Similarly do the same with health insurance premiums.  This strategy might take you above the standard deduction threshold and make it worthwhile to itemize every other year.  Please contact us if you have any questions.

Mon, 01 March 2010

The 1099-INT is for interest earned and these usually come from your bank or broker.  The 1099-DIVs are for dividends and generally come with your broker statements.  If you receive a 1099-DIV, it is usually better to wait until mid-March or sometimes later to file your tax return since you may receive corrected forms.  This is common, particularly if you have mutual funds.  By waiting, you may save the bother and expense of filing a corrected return.  Please contact us if you have any questions.

Monday, 22 Feb 2010

Individuals who make energy efficiency improvements to their principal residence may be eligible for a federal tax credit.  Things like exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners, and water heaters that qualify as energy efficiency improvements and are installed in 2009 may claim the credit.  The credit is limited to 30% of the cost of qualified energy efficiency improvements for the tax year.  The amount of credit a taxpayer may claim is limited to a maximum of $1500.  This maximum credit is not limited to the $1500 for certain solar, wind, and fuel cell installations completed before 2017.  Please contact us if you have any questions.

Monday 15, 2010

Taxpayers who take the standard deduction in lieu of itemizing their deductions for their 2009 returns are eligible to take an additional standard deduction for property taxes paid in 2009.  This additional deduction is equal to the lesser of the amount actually paid for real estate taxes or $500 for single taxpayers or $1,000 for couples filing jointly.

Also, if you bought a new vehicle in 2009 after February 16th, you can deduct the amount of sales and excise tax on the first $49,500 of the purchase price, even if you do not itemize.  This deduction is phased out for higher income individuals ($125,000 for single and $250,000 for joint filers)

If you’re unsure as to whether a charity is qualified, IRS Publication 78 lists most organizations that are qualified to receive deductible contributions.  This publication is available online and in many libraries. Check the list at IRS.gov and click on Search for Charities.  In addition, most churches, synagogues, temples, and mosques and government agencies are eligible, even if they are not listed.  Contributions to individuals or trust funds set up to help families of individuals are NOT eligible for a deduction.

Monday o1, February 2010

The IRS is allowing taxpayers who donate cash or checks to qualified charities providing earthquake relief to Haiti, to claim the donation on either their 2009 or their 2010 tax return.  To get the tax benefit, the taxpayer must itemize deductions.  To be eligible for the deduction in 2009, the donation must be made after January 11, 2010 but before March 1, 2010.  If Jim Davis CPA is preparing your 2009 tax return and you wish to claim a contribution you made in 2010, please discuss it with us.

Much discussion has been made of the refundable tax credit of up to $8,000 available to first time homebuyers. Unless extended by Congress, this credit will expire on November 30, 2009. The credit is calculated at the lesser of 10% of the purchase price or $8,000 and is fully refundable and not limited by the tax you owe. To qualify as a first time homebuyer, you must not have owned a home as your personal residence in the previous three years. You can receive the funds from this credit quicker by amending your 2008 income tax return. Please contact us with any questions.

As you approach the end of the 2009 calendar year, it is wise to take the time to assess your current financial situation and project where you would like to be at the end of 2010. Our firm can assist you in gauging projected income taxes due for 2009 and show you ways to ease this burden. Also, we can review your current financial plans in light of your investment and retirement funds and make suggestions to assist you in meeting your goals. Please contact us for an appointment so that we may assist you.

The October 15, 2009 deadline is quickly approaching for those individual taxpayers who extended the filing of their 2008 personal tax. It is important that you meet this deadline, as the penalties for late filing can be severe. If you cannot pay the tax due at the time of filing your return, installment arrangements with the Internal Revenue Service are available. If you have any questions, please contact us.