Dear Valued Client,
With the holidays approaching, we would like to wish you a very happy holiday season. Also keep in mind this is the best time to get all your tax planning done. Please call us before the end of the year if you would like us to help you with this.
With the drop of the stock market in the past few months, many of you are sitting on some significant losses. We are recommending that you may want to take these losses in 2008. You may not receive much benefit for these losses this year, but by taking the losses now you will create a capital loss that you can use in future years and avoid capital gains tax. Please keep in mind that there are wash sale rules that state that you cannot repurchase those shares within 30 days or the losses will be disallowed.
Another reason to potentially take your losses this year is the possibility that the capital gains tax rate may increase. If this occurs, then the losses you have this year can be carried forward to be used if you have a gain in a future year if the capital gains rates are higher.
Also we do not recommend selling stocks in your IRA or 401K simply to take the losses. These losses cannot be deducted and you receive no tax benefit for doing that. The only reason to sell stocks in a retirement account would be to change your strategy.
If you are invested in a Roth IRA and you have lost a significant amount, if you liquidate the entire Roth IRA account, you can take the losses on your tax return. Keep in mind however, if you do this you cannot reinvest into this Roth IRA again unless you meet the income requirements, but even then you would be limited to $4,000.
Sincerely,
Todd Baldwin, CPA
Tax-Free Provisions for Mortgage and Debt Relief Workouts |
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If the decline in the real estate market or the nation’s economic downturn has caused you to lose your home by foreclosure or short sale, or you voluntarily signed the deed over to the lienholder, you will probably be faced with debt relief income.
New and Old Favorite Deductions Extended |
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The Economic Stability Legislation that was passed into law on October 3, 2008 included several individual bills that Congress had before them.
Strict Documentation Rules for Charitable Contributions |
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Do you have plans of making a cash contribution to your favorite charity or donating some items that are sitting in your garage or basement? If so, make sure that you are aware of the new requirements that apply to charitable contributions.
Energy Tax Incentives for Businesses |
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Part of the Economic Recovery Act passed in October extended two energy-related provisions for businesses and added a tax-free employee benefit. Here is a rundown on those provisions.
Independent Contractor vs. Employee |
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Are your workers independent contractors or employees? The answer can have a profound impact on how much tax you will pay as a small business owner. Depending on whether or not your workers are considered employees, it will affect the amount of taxes that must be withheld from their pay, how much additional cost your business must bear, the documents and information that must be provided to you, and the tax documents that must be given to them.
Reminder – Single Member LLCs |
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Under the disregarded entity rules, certain single-owner limited liability companies (LLCs) are disregarded as entities separate from their owners for tax purposes. As a result, the disregarded entity is ignored and its property and activities are treated as those of the owner of the entity. In the past, single-owner LLCs with employees could file their employment tax obligations using their individual tax ID number or under the ID number obtained for the LLC’s employment reporting obligations.
A Little Help for Your Friends |
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In these troubling financial times, many individuals are struggling to do their own taxes. Some need guidance with their tax and financial issues, while others would like to take advantage of the vast number of new tax benefits available in 2008 and subsequent years.
Advanced Lean-Burn Technology Vehicle Credits |
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The Internal Revenue Service has acknowledged the certifications by manufacturers that certain advanced lean-burn technology vehicles qualify for the alternative motor vehicle tax credit.
Home Energy-Efficient Credit |
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The credit for certain energy-efficient property installed on the taxpayer’s principal residence that originally expired in 2007 has been reinstated for
2009 only.
Education Related to Business |
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A business deduction is available for education that maintains or improves the skills related to a person’s trade or business. Educational costs are also deductible if the education is required (e.g., by law) to maintain a business.
Overcoming Business Expense Limits |
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A major tax break for small businesses is the ability to write off the cost of machinery and equipment used in the business in the year of purchase rather than writing off the cost over a period of years (usually five or seven) via depreciation deductions.
Use Closing Date to Protect Prior Year Data |
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You’ll likely be closing the books on 2008 soon and your records will become the basis for your tax return. It’s critical that your QuickBooks records for a given year match the corresponding tax return, so consider setting a closing date in QuickBooks so that no one inadvertently changes the supporting documents for your tax return.
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