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Businesses:

Monthly payroll deposits due for March on April 15 (17th in 2011))

Partnership Filing Return Deadline is April 15 (17th in 2011)

1^st Quarter Payroll Report Due on April 30

1^st Quarter Sales Tax Report and Payment due on April 20

 

Individuals:

Tax Return Filing Deadline is April 15 (17th in 2011)

 

Did you feel good last year when you wrote out that check to your favorite charity? Many – but not all — taxpayers also will find a financial glow waiting for them when they fill out their income tax returns.

Federal law rewards donations to charitable organizations with deductions that reduce taxable income. But the Internal Revenue Service also requires proof for taxpayers to claim the write-offs, and the rules have been getting stricter in past years.

EricJohn Ltd. and other tax preparers can guide taxpayers through the tax codes about contributions. Here are a few principles about pleasing Uncle Sam when deducting charitable donations on 2011 income tax returns:

ELIGIBILITY

• You must file IRS Form 1040 (the long form) and complete Schedule A which lists itemized deductions.

TYPES OF DONATIONS

• Money in any form – cash, checks or credit card transactions — is eligible.
• Financial property, such as stocks or bonds, also can be gifted. Physical property, including real estate and personal goods ranging from clothing to autos (new or used) can be deducted. 
• There even is a way to deduct costs incurred in volunteering (but not the value of time or skills spent in volunteer activities)

PROOF OF DONATIONS – This is where charitable deductions can get complicated.

• While cash donations are deductible, you or your tax preparer cannot merely declare the amount of contributions made over the year. The IRS now requires bank records, receipts or payroll stubs to back up the donations. Those proofs also must show at least the amount given, the organization and the date of the contribution. If an instance is $250 or more, a written acknowledgment from the charity is necessary. A bank record alone is not enough, the IRS says.
• “Non-cash” contributions — such as personal goods or autos – also require proof, and it increases with the size of the donation. In general, the IRS expects a written receipt from the charity along with a description of the property. The charity also must disclose if you received any benefit from the contribution, as well as the amount involved. Generally, the IRS accepts “fair market value” as the dollar value for non-cash donations. If the total value of non-cash donations reaches $500 or more, you must file Form 8283, which your tax advisor can help complete.

HINTS FROM ERIC ABOUT DEDUCTIONS FOR CONTRIBUTIONS

• Back up deductions for non-cash contributions easily with photos from a cell phone or point-and-shoot camera. Keep the photos and charity’s receipt slip in a tax return file.
• In most cases, the IRS allows at least a basic “thrift value” of 10 percent of original cost of a non cash item. But it also can be worth more, if a price is established either by an appraisal or perhaps in comparisons with prices on services such as eBay.com for very similar goods. Many eBay items sell for about 30 percent of original cost, Eric says.

Remember the often-quoted Boy Scout motto, “Be prepared”?

Keep it in mind before you sit down with your accountant or preparer for a tax chat. Your advisor knowsIRS tax rules, but you’ll have to dig into your own records for the figures needed to draw up accurate 2011 federal and state income tax returns. The advance work can save time and money!

Professional tax experts, such as EricJohn Ltd., often will provide you with a “tax organizer” document in advance of your visit. It prompts you for important details, including personal information required by the Internal Revenue Service, various types of income and a range of expenses that can be turned into deductions or tax credits.

Our tax organizer at EricJohn Ltd. covers income reports from employers or investment companies, and reminds you about tax-related expenses, such as auto mileage or charitable contributions.  Did you spend money for child care? Did you make a move during 2011? Do you have the receipts you need to verify expenses?  The organizer jogs your memory.

Don’t forget to take along your 2010 federal and state income tax returns. They can be good guides for this year, and often can supply important numbers for 2011. For example, some items, such as stock losses, can be carried forward and used to reduce this year’s tax impacts.

A SHORT LIST FOR YOUR VISIT;

Here’s some tax-related paperwork to pack for a visit to preparer:

• All W-2 statements (issued by employers)
• All 1098 forms (issued by mortgage companies or educational institutions, among others)
• All 1099 forms (issued by other income payers, such as banks and investment houses, etc.)
• Statements from non-profit organizations about cash donations; statements showing donations of goods.
• Property tax statements
• Prior year’s tax returns
• Any envelope that is stamped, “Important Tax Information”

An extra 48 hours to file! Thank the District of Columbia.

 Think April 17 this season!

 For a second year in a row, the Internal Revenue Service has moved Tax Day back a few days on the calendar.  Federal income tax returns for 2011 will be due on April 17 this year.  

 Here’s why.  The normal deadline, April 15, falls on a Sunday, but the next day, Monday the 16^th, is a legal holiday in the District of Columbia.  So, even though it’s a work day in the rest of the county, taxpayers nationwide will have an extra 48 hours to file those Forms 1040.

 But don’t wait until the final days to contact us at EricJohn Ltd. Tax time already is in full swing and we’d like to help file your return as soon as possible. The quicker the return, the quicker your refund!

You may have heard that tax credits for energy-saving repairs to homes are disappearing from income tax returns.

It’s true.  Some credits are fading away. But, if you’re working on your 2011 taxes, don’t throw away those repair receipts yet!

 HOME ENERGY IMPROVEMENTS

The Internal Revenue Service still offers credits of as much as 10 percent for adding insulation, replacing leaky windows or sealing a drafty roof. That’s not as lucrative as in prior years, but it’s still delivers a direct chop off your tax bill.

 Here’s what you need to know:  

•  The maximum credit available for 2011 is $500. However, that maximum also is a lifetime credit. If you claimed improvements for energy efficiency in past returns, those credits reduce the $500 on this year’s 1040. (There’s also a maximum of $200 for windows.)
• The credit applies to costs of materials – not to labor charges for installing them.
• The improvements must go into a principal residence, not a vacation or second home.

 Taxpayers also can claim a 10 percent tax credit for installing what the IRS calls “residential energy property.” These are high-efficiency heating or cooling systems, including furnaces or air conditioning systems water heaters and even some stoves that burn biomass fuels such as wood. The IRS is more generous with this tax credit than with home improvements above; the credit applies to both equipment and the labor charges for the installation.

 SAVING GREEN BY GOING GREEN

 

The greatest of the 2011’s tax credits goes to the greenest projects — alternative energy. Taxpayers can capture a tax credit of 30 percent of total cost for installing solar panels, wind turbines, fuel cells or geothermal systems.

It’s called the Residential Energy Efficient Property Credit. The costs of these projects typically are well into thousands of dollars, so a dollar-for-dollar tax credit can be quite an incentive. In general, labor costs are included in the credit. In addition, there is no IRS limit, except in the case of fuel cells.

However, there are some details to claiming it.  With the big reward, taxpayers will want to make sure they have a manufacturer’s tax credit certification, which should come with the installation. Not all systems qualify, the IRS says.

EricJohn Ltd. can guide you through the ins and outs of energy tax credits. They require a special IRS form. Contact us for the guidance and the proof you need to tap energy efficiency credits on your 2011 return!!

 

Retirement Plans for S Corporations and C Corporations

• SEP Establishment Date is March 15 (or until extended due dates)
• SEP Contribution Date is March 15 (or until extended due dates)
• Simple IRA

Other Plans – Contribution Dates

Contribution Date is March 15 (or until extended due date)

• Profit Sharing/ Money Purchase

Contribution date is March 15 (or until extended due date)

• 403(b)(7)/ Roth 403(b)(7)

Contribution Date is March 15 (or until extended due date)

• 401(k)/ Roth 401(k)

Contribution Date is March 15 (or until extended due date)

• Safe Harbor 401(k)/ Roth Safe Harbor 401(k)

Contribution Date is March 15 (or until extended due date)

• Individual K/ Roth Individual K

Contribution Date is March15 (or until extended due date)

 

Businesses:

Monthly payroll deposits due for February on March 15

Corporations Return Filing Deadline March 15

Retirement Plan Contributions

• Simple IRA made per pay period
• 403(b)(7)/ Roth 403(b)(7) made per pay period
• 401(k)/ Roth 401(k) made per pay period
• Safe Harbor 401(k)/ Roth Safe Harbor 401(k) made per pay period
• Individual K/ Roth Individual K made per pay period

 

Payroll Tax Cut Extension

President Obama has signed the Middle Class Tax Relief and Job Creation Act of 2012, which extends to the end of the year the payroll tax cut for employees, continuing the reduction of their social security tax withholding from 6.2 percent to 4.2 percent of wages paid. The Act also repeals the “recapture” provision, which applied to those employees who received more than $18,350 in wages during January and February (the social security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount).

The IRS has released a revised Form 941 that enables employers to properly report the extended payroll tax cut.

Source: NATP