Tax time is never fun. Freelancers, such as writers, often are stumped on how to handle their income reporting for the year and worry about the amount owed to the government for unpaid personal income taxes. There are many things a writer can do to ensure they can avoid a potential audit from the IRS as well.
Writing as a Business
Treating writing like a business is the best way to ensure that a tax dilemma does not occur. This includes keeping accurate records on all income and recording it in a place that is easily accessible come tax time. Make sure to record earnings as well as expenses since many expenditures can be tax deductible if they are qualified. This includes writing supplies, equipment and other purchases necessary for the writing business. Subscriptions and even home office space may be tax deductible, so keep a file of every single expense.
For tracking income, make sure to at least include the source, a description of the service or piece, the form of payment issued as well as the amount. This form of payment can be a copy of the payment.
Staying organized as a writer and treating writing like a business will help make tax time much easier on you, lower the amount of taxes to pay as well as decrease the chance of an audit.
What Tax Forms to Fill Out as a Writer
Freelance writers who have made any income the previous year will need to fill out a long 1040 as well as a Schedule C and a Schedule SE (self-employment tax) to report profit and loss. Keep in mind that if planning to deduct a lot of expenses, additional forms will need to be filled out as well. You should consult a tax expert if you are unsure of how to prepare you tax forms.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Showing posts with label Year End Tax Prep. Show all posts
Showing posts with label Year End Tax Prep. Show all posts
Thursday, February 25, 2010
Thursday, February 18, 2010
Gambling Winnings Are Always Taxable Income for Your Return
Any and all gambling winnings are fully taxable and must be reported on your tax return. Here are the top seven facts the Internal Revenue Service wants you to know about gambling winnings.
Gambling income includes winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes. This is not the entire list of gambling income but it is a good start for your review.
Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld federal income taxes from the payment. Usually if the value is over one thousand dollars they will provide a W-2G.
The full amount of your gambling winnings for the year must be reported on line 21 of IRS Form 1040; you may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form. All W2-G’s are submitted to the government so make sure you account for them on your tax return.
If you itemize deductions, you can deduct your gambling losses for the year on line 28 of Schedule A, Form 1040. You cannot deduct gambling losses that are more than your winnings. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Gambling income includes winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes. This is not the entire list of gambling income but it is a good start for your review.
Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld federal income taxes from the payment. Usually if the value is over one thousand dollars they will provide a W-2G.
The full amount of your gambling winnings for the year must be reported on line 21 of IRS Form 1040; you may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form. All W2-G’s are submitted to the government so make sure you account for them on your tax return.
If you itemize deductions, you can deduct your gambling losses for the year on line 28 of Schedule A, Form 1040. You cannot deduct gambling losses that are more than your winnings. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Thursday, January 28, 2010
Five Facts about IRS Publication 17
While the Internal Revenue Service provides publications about a wide range of topics, there is one publication every taxpayer should have with them when they are preparing their federal tax return. Publication 17, Your Federal Income Tax is available at IRS.gov and contains a wealth of information for individual taxpayers.
Here are the top five things the IRS wants you to know about Publication 17 and how it will come in handy when you prepare your taxes.
The online version of Publication 17 contains electronic links that make finding your answer simple. Both the downloadable PDF and online 2009 Publication 17 have more than 6,000 hyperlinks.
Publication 17 features details on recent tax law changes and legislation that can help you save money at tax time. You’ll find lots of helpful information about the American Recovery and Reinvestment Act of 2009, including the Making Work Pay Credit and the First-time Homebuyer Credit.
This publication is packed with basic tax-filing information and tips on what income to report and how to report it. Publication 17 also includes information on figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and using IRAs to save for retirement.
Publication 17 is also available in Spanish.
You can get a hard copy of Publication 17 for free. To get a copy, visit IRS.gov or call 800-TAX-FORM (800-829-3676).
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Here are the top five things the IRS wants you to know about Publication 17 and how it will come in handy when you prepare your taxes.
The online version of Publication 17 contains electronic links that make finding your answer simple. Both the downloadable PDF and online 2009 Publication 17 have more than 6,000 hyperlinks.
Publication 17 features details on recent tax law changes and legislation that can help you save money at tax time. You’ll find lots of helpful information about the American Recovery and Reinvestment Act of 2009, including the Making Work Pay Credit and the First-time Homebuyer Credit.
This publication is packed with basic tax-filing information and tips on what income to report and how to report it. Publication 17 also includes information on figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and using IRAs to save for retirement.
Publication 17 is also available in Spanish.
You can get a hard copy of Publication 17 for free. To get a copy, visit IRS.gov or call 800-TAX-FORM (800-829-3676).
As always if you have any questions or comments please email me at rondazaragoza@gmail.com. I will try and reply to your question within 24-48 hours of receipt.
Thursday, January 21, 2010
Twenty-Two Last-Chance Opportunities for Tax Savings
1. Income. Up to $2,400 of unemployment compensation benefits are excluded from gross income by the recipient. However, the exclusion is not available for benefits received in tax years beginning after 2009 [IRC Sec. 85(c)].
2. Personal deductions. Clients can claim a deduction (whether they itemize or claim the standard deduction) for sales or excises taxes paid on the purchase of a new vehicle. The deduction (phased out at higher income levels) does not apply to purchases after December 31, 2009 [IRC Sec. 164(b)(6)(G)].
3. Personal deductions. Clients who claim the standard deduction can take an additional deduction for state and local property taxes, up to a maximum of $500 ($1,000 for joint return filers). The deduction is not available for tax years beginning after 2009 [IRC Sec. 63(c)(7)].
4. Personal deductions. A client can elect to take an itemized deduction for state and local general sales taxes instead of an itemized deduction for state and local income taxes, but the election is available only for tax years beginning before Jan. 1, 2010 [IRC Sec. 164(b)(5)(I)].
5. Personal deductions. A client may claim an above-the-line deduction for “qualified tuition and related expenses” paid for the enrollment or attendance of the client, the client’s spouse, or a dependent at an eligible institution of higher education. The deduction cannot exceed $4,000 (phased out at higher income levels) and applies only to tax years beginning before January 1, 2010 [IRC Sec. 222(e)].
6. Personal deductions. The maximum deduction allowed annually for charitable donations is increased in the case of “qualified conservation contributions.” The increased deduction is not available for donations after December 31, 2009 [IRC Sec. 170(b)(1)(E)].
7. Business deductions. For tax years beginning before 2010, teachers in grades K-12 and other eligible educators can claim an above-the-line deduction for up to $250 of their out-of-pocket expenses for books and supplies used in the classroom [IRC Sec. 62(d)(1)].
8. Business deductions. A client can claim an additional 50% depreciation allowance for qualifying business machinery and equipment placed in service before January 1, 2010 [IRC Sec. 168(k)(2)(A)].
9. Business deductions. A client can claim a Section 179 expensing deduction for the first $250,000 of qualifying equipment and machinery placed in service during the year, subject to a phase out if more than $800,000 of eligible property is placed in service during the year. For tax years beginning after December 31, 2009, the maximum Section 179 deduction drops to $125,000 (adjusted for inflation) with the phase-out starting at the $500,000 level [IRC Sec. 179(b)(7)].
10. Business deductions. The cost of qualified leasehold improvement property, restaurant property, and retail space improvement property can be written off over 15 years. The 15-year write-off period is not available for property placed in service after December 31, 2009 [IRC Sec. 168(e)(3)(E)].
11. Business deductions. Business clients may claim enhanced deductions for donations of food inventory to a charitable organization if the organization uses the property solely for the care of the ill, the needy, or infants. The enhanced deduction does not apply to donations after December 31, 2009 [IRC Sec. 170(e)(3)(C)].
12. Business deductions. The maximum first-year depreciation deduction for passenger automobiles used for business purposes is increased by $8,000 for automobiles placed in service before 2010 [IRC Sec. 68(e)(3)(B)].
13. Business deductions. Certain qualifying machinery and equipment used in a farming business may be written off over a five-year cost recovery period. The original use of the property must begin with the taxpayer and the property must be placed in service before January 1, 2010 [IRC Sec. 168(e)(3)(B)].
14. Personal tax credits. A client who hasn’t owned a home during the previous three years can claim a first-time homebuyer credit of up to $8,000 (phased out at higher income levels) for the purchase of a principal residence. The credit can be claimed only for homes purchased before December 1, 2009 [IRC Sec. 36].
15. Business credits. Employers may claim a 20% income tax credit for qualifying differential pay paid to employees on active military duty. The credit expires for payments made after December 31, 2009 [IRC Sec. 45P].
16. Business credits. An eligible contractor may claim a credit of up to $2,000 for each qualified new energy efficient home that the contractor constructs and that is acquired from the contractor for use as a residence. The credit does not apply to homes acquired after December 31, 2009 [IRC Sec. 45L].
17. Alternative minimum tax. Clients can offset nonrefundable personal tax credits, such as the child and dependent care credit and the Lifetime Learning credit, against their alternative minimum liability. The offset will not be available for tax years beginning after 2009 [IRC Sec. 26(a)(2)].
18. Alternative minimum tax. For tax years beginning in 2009, the exemption amounts used in calculating a client’s alternative minimum taxable income of $70,950 for married couples filing a joint return and $46,700 for singles and heads of households. For tax years beginning after 2009, these amounts are scheduled to drop to $45,000 and $33,750, respectively [IRC Sec. 55(d)(1)].
19. Estimated taxes. For small business owners with adjusted gross income of $500,000 or less, the “required annual payment” of 2009 estimated taxes is the lesser of (1) 90% of the current year’s tax or (2) 90% of the prior year’s tax. For 2010, the prior-year’s-tax threshold rises to 100% (or 110% for clients with adjusted gross income of $150,000 or more) [IRC Sec. 6654(d)(1)].
20. Retirement plans. The requirement that an IRA owner age 70 ½ or over must receive a minimum distribution annually is suspended for 2009, but is reinstated in 2010 [IRC Sec. 401(a)(9)(H)].
21. Retirement plans. An IRA may exclude from income distributions of up to $100,000 annually if paid directly by the IRA trustee to charitable organization. The exclusion expires in tax years beginning after 2009 [IRC Sec. 408(d)(8)].
22. Employee benefits. Clients who are covered by employer-sponsored health plans and are laid off before January 1, 2010 can qualify for subsidized plan continuation (COBRA) coverage for up to nine months. Employers can claim a credit against employment taxes for the subsidies provided to employees [IRC Sec. 6432].
As always if you have any questions or comments please email me at rondazaragoza@gmail.com.
1. Income. Up to $2,400 of unemployment compensation benefits are excluded from gross income by the recipient. However, the exclusion is not available for benefits received in tax years beginning after 2009 [IRC Sec. 85(c)].
2. Personal deductions. Clients can claim a deduction (whether they itemize or claim the standard deduction) for sales or excises taxes paid on the purchase of a new vehicle. The deduction (phased out at higher income levels) does not apply to purchases after December 31, 2009 [IRC Sec. 164(b)(6)(G)].
3. Personal deductions. Clients who claim the standard deduction can take an additional deduction for state and local property taxes, up to a maximum of $500 ($1,000 for joint return filers). The deduction is not available for tax years beginning after 2009 [IRC Sec. 63(c)(7)].
4. Personal deductions. A client can elect to take an itemized deduction for state and local general sales taxes instead of an itemized deduction for state and local income taxes, but the election is available only for tax years beginning before Jan. 1, 2010 [IRC Sec. 164(b)(5)(I)].
5. Personal deductions. A client may claim an above-the-line deduction for “qualified tuition and related expenses” paid for the enrollment or attendance of the client, the client’s spouse, or a dependent at an eligible institution of higher education. The deduction cannot exceed $4,000 (phased out at higher income levels) and applies only to tax years beginning before January 1, 2010 [IRC Sec. 222(e)].
6. Personal deductions. The maximum deduction allowed annually for charitable donations is increased in the case of “qualified conservation contributions.” The increased deduction is not available for donations after December 31, 2009 [IRC Sec. 170(b)(1)(E)].
7. Business deductions. For tax years beginning before 2010, teachers in grades K-12 and other eligible educators can claim an above-the-line deduction for up to $250 of their out-of-pocket expenses for books and supplies used in the classroom [IRC Sec. 62(d)(1)].
8. Business deductions. A client can claim an additional 50% depreciation allowance for qualifying business machinery and equipment placed in service before January 1, 2010 [IRC Sec. 168(k)(2)(A)].
9. Business deductions. A client can claim a Section 179 expensing deduction for the first $250,000 of qualifying equipment and machinery placed in service during the year, subject to a phase out if more than $800,000 of eligible property is placed in service during the year. For tax years beginning after December 31, 2009, the maximum Section 179 deduction drops to $125,000 (adjusted for inflation) with the phase-out starting at the $500,000 level [IRC Sec. 179(b)(7)].
10. Business deductions. The cost of qualified leasehold improvement property, restaurant property, and retail space improvement property can be written off over 15 years. The 15-year write-off period is not available for property placed in service after December 31, 2009 [IRC Sec. 168(e)(3)(E)].
11. Business deductions. Business clients may claim enhanced deductions for donations of food inventory to a charitable organization if the organization uses the property solely for the care of the ill, the needy, or infants. The enhanced deduction does not apply to donations after December 31, 2009 [IRC Sec. 170(e)(3)(C)].
12. Business deductions. The maximum first-year depreciation deduction for passenger automobiles used for business purposes is increased by $8,000 for automobiles placed in service before 2010 [IRC Sec. 68(e)(3)(B)].
13. Business deductions. Certain qualifying machinery and equipment used in a farming business may be written off over a five-year cost recovery period. The original use of the property must begin with the taxpayer and the property must be placed in service before January 1, 2010 [IRC Sec. 168(e)(3)(B)].
14. Personal tax credits. A client who hasn’t owned a home during the previous three years can claim a first-time homebuyer credit of up to $8,000 (phased out at higher income levels) for the purchase of a principal residence. The credit can be claimed only for homes purchased before December 1, 2009 [IRC Sec. 36].
15. Business credits. Employers may claim a 20% income tax credit for qualifying differential pay paid to employees on active military duty. The credit expires for payments made after December 31, 2009 [IRC Sec. 45P].
16. Business credits. An eligible contractor may claim a credit of up to $2,000 for each qualified new energy efficient home that the contractor constructs and that is acquired from the contractor for use as a residence. The credit does not apply to homes acquired after December 31, 2009 [IRC Sec. 45L].
17. Alternative minimum tax. Clients can offset nonrefundable personal tax credits, such as the child and dependent care credit and the Lifetime Learning credit, against their alternative minimum liability. The offset will not be available for tax years beginning after 2009 [IRC Sec. 26(a)(2)].
18. Alternative minimum tax. For tax years beginning in 2009, the exemption amounts used in calculating a client’s alternative minimum taxable income of $70,950 for married couples filing a joint return and $46,700 for singles and heads of households. For tax years beginning after 2009, these amounts are scheduled to drop to $45,000 and $33,750, respectively [IRC Sec. 55(d)(1)].
19. Estimated taxes. For small business owners with adjusted gross income of $500,000 or less, the “required annual payment” of 2009 estimated taxes is the lesser of (1) 90% of the current year’s tax or (2) 90% of the prior year’s tax. For 2010, the prior-year’s-tax threshold rises to 100% (or 110% for clients with adjusted gross income of $150,000 or more) [IRC Sec. 6654(d)(1)].
20. Retirement plans. The requirement that an IRA owner age 70 ½ or over must receive a minimum distribution annually is suspended for 2009, but is reinstated in 2010 [IRC Sec. 401(a)(9)(H)].
21. Retirement plans. An IRA may exclude from income distributions of up to $100,000 annually if paid directly by the IRA trustee to charitable organization. The exclusion expires in tax years beginning after 2009 [IRC Sec. 408(d)(8)].
22. Employee benefits. Clients who are covered by employer-sponsored health plans and are laid off before January 1, 2010 can qualify for subsidized plan continuation (COBRA) coverage for up to nine months. Employers can claim a credit against employment taxes for the subsidies provided to employees [IRC Sec. 6432].
As always if you have any questions or comments please email me at rondazaragoza@gmail.com.
Friday, November 27, 2009
Tax and Financial News for November 2009
Tax and Financial News for November, 2009
Year-End Reminders: April 2010 Can Hurt Less
The leaves are falling and winter is just around the corner — so, too, is the end of the year. With that comes the inevitable ritual of searching for ways to minimize your tax burden for 2009. With 10 months already gone, is there a lot you can do to lower this year’s tax bill? Yes, there is. And that is precisely what this article is about, but you must get started soon to keep Uncle Sam from cashing in on your hard work.
Income
The starting point for your tax savings quest is with your income. How much do you project bringing in from sources such as W-2 wages, interest, dividends and other income that is already on the books? Can you defer or, in some cases, accelerate their receipt?
First, let’s talk about deferring income. In most cases, it’s difficult to minimize salary income that’s already scheduled to be paid. However, your employer might be willing to put off payment of year-end bonuses. This is especially true when the payment has no significant effect on either the employer or the employee. For example, regular C-Corporations that report on an accrual basis can typically deduct bonuses that are owed to an employee who owns less than 50 percent of the company as long as those bonuses are paid by March 15 of the following year. If your employer usually pays bonuses on Dec. 31, it probably will not affect its bottom line to put the payment off until Jan. 1, 2010. Receiving that pay one day later can be a significant savings to you and other employees.
What’s the source of your interest income? If you are not already locked into an interest-bearing vehicle that pays at the end of a month, you could reduce taxable income by investing in a certificate of deposit or something else that pays interest after Dec. 31. The same is true for dividend-paying investments. When investing during the last part of the year, one trap you should be wary of is purchasing taxable income. This happens when you buy a mutual fund or stock that is guaranteed to pay a dividend before year’s end. Typically, the price you pay for the investment includes the amount that will ultimately be paid as a dividend. When the dividend is paid, the market price of the investment decreases and you are left paying unnecessary taxes.
How does your investment portfolio look? Believe it or not, there are a lot of folks with investments that are worth less than what they paid for them. The next two months is a good time to harvest a few losses to offset realized gains on other investments. However, remember that Uncle Sam will let you deduct only $3,000 in capital losses against other income, so be judicious in your sales.
Do you have other sources of income such as rents, installment sales or lease bonuses? As a cash-basis taxpayer, these sources do not become taxable to you until you receive them in cash. While care must be exercised to avoid what is called constructive receipt, it is possible to reduce income by putting payment off until 2010.
Constructive receipt is a concept that basically means you can’t avoid tax on income by refusing to accept payment for that which you are legally entitled. For example, say you own a corporation and it rents a building from you. If the business has the cash to pay the monthly rent, you can’t stop accepting rent payment to avoid taxable income.
Earlier, we mentioned accelerating income. Tax planning generally involves playing the rate game. Sometimes, accelerating income for years in which you expect a low marginal tax rate can enhance your overall tax savings. If 2009 is such a year, consider accelerating the income that you can in order to minimize taxes. Additionally, with looming deficits and the current administration’s stated intentions, there is a good chance that capital gains taxes will increase in the future. When that will happen is anybody’s guess, but the probability makes it a reasonable move to report long-term capital gains sooner rather than later.
Expenses
Expenses over which most individuals have control are itemized deductions, rental and Schedule C business expenses. With respect to itemized deductions and rental expenses, the most important thing to remember is that cash is king. If you pay the expenses before Dec. 31, you can deduct them. If you do not pay the expenses by year’s end, you cannot deduct them.
The cash rule can be difficult to follow if your checking account is a little light. Fortunately, there is always the plastic rule. If you pay your deductible medical bills, taxes and contributions with a credit card before year’s end, the deduction is still valid.
Don’t forget to maximize your retirement plan contributions as well. If your plan allows for it and if you can afford to do so, increase your contributions in the last two months of the year to reduce your taxable income.
Conclusion
Just because most of 2009 is now behind us does not diminish all opportunities to save on your tax bill. Give us a call and let’s look at your tax picture now — while there is still time to help you keep more of your hard-earned money.
This article is intended to provide resources for the tax and accounting needs of small businesses and individuals. The information contained in this informative letter is intended to provide general information on matters of interest in the areas of tax and accounting. Readers are encouraged to contact us regarding specific situations.
Ronda Zaragoza
Accountant
Eagle Eye Accounting
PO Box 20925
Albuquerque, NM 87154
505-550-2621
rondazaragoza@gmail.com
As always if you have any questions or comments please email me at rondazaragoza@gmail.com.
Year-End Reminders: April 2010 Can Hurt Less
The leaves are falling and winter is just around the corner — so, too, is the end of the year. With that comes the inevitable ritual of searching for ways to minimize your tax burden for 2009. With 10 months already gone, is there a lot you can do to lower this year’s tax bill? Yes, there is. And that is precisely what this article is about, but you must get started soon to keep Uncle Sam from cashing in on your hard work.
Income
The starting point for your tax savings quest is with your income. How much do you project bringing in from sources such as W-2 wages, interest, dividends and other income that is already on the books? Can you defer or, in some cases, accelerate their receipt?
First, let’s talk about deferring income. In most cases, it’s difficult to minimize salary income that’s already scheduled to be paid. However, your employer might be willing to put off payment of year-end bonuses. This is especially true when the payment has no significant effect on either the employer or the employee. For example, regular C-Corporations that report on an accrual basis can typically deduct bonuses that are owed to an employee who owns less than 50 percent of the company as long as those bonuses are paid by March 15 of the following year. If your employer usually pays bonuses on Dec. 31, it probably will not affect its bottom line to put the payment off until Jan. 1, 2010. Receiving that pay one day later can be a significant savings to you and other employees.
What’s the source of your interest income? If you are not already locked into an interest-bearing vehicle that pays at the end of a month, you could reduce taxable income by investing in a certificate of deposit or something else that pays interest after Dec. 31. The same is true for dividend-paying investments. When investing during the last part of the year, one trap you should be wary of is purchasing taxable income. This happens when you buy a mutual fund or stock that is guaranteed to pay a dividend before year’s end. Typically, the price you pay for the investment includes the amount that will ultimately be paid as a dividend. When the dividend is paid, the market price of the investment decreases and you are left paying unnecessary taxes.
How does your investment portfolio look? Believe it or not, there are a lot of folks with investments that are worth less than what they paid for them. The next two months is a good time to harvest a few losses to offset realized gains on other investments. However, remember that Uncle Sam will let you deduct only $3,000 in capital losses against other income, so be judicious in your sales.
Do you have other sources of income such as rents, installment sales or lease bonuses? As a cash-basis taxpayer, these sources do not become taxable to you until you receive them in cash. While care must be exercised to avoid what is called constructive receipt, it is possible to reduce income by putting payment off until 2010.
Constructive receipt is a concept that basically means you can’t avoid tax on income by refusing to accept payment for that which you are legally entitled. For example, say you own a corporation and it rents a building from you. If the business has the cash to pay the monthly rent, you can’t stop accepting rent payment to avoid taxable income.
Earlier, we mentioned accelerating income. Tax planning generally involves playing the rate game. Sometimes, accelerating income for years in which you expect a low marginal tax rate can enhance your overall tax savings. If 2009 is such a year, consider accelerating the income that you can in order to minimize taxes. Additionally, with looming deficits and the current administration’s stated intentions, there is a good chance that capital gains taxes will increase in the future. When that will happen is anybody’s guess, but the probability makes it a reasonable move to report long-term capital gains sooner rather than later.
Expenses
Expenses over which most individuals have control are itemized deductions, rental and Schedule C business expenses. With respect to itemized deductions and rental expenses, the most important thing to remember is that cash is king. If you pay the expenses before Dec. 31, you can deduct them. If you do not pay the expenses by year’s end, you cannot deduct them.
The cash rule can be difficult to follow if your checking account is a little light. Fortunately, there is always the plastic rule. If you pay your deductible medical bills, taxes and contributions with a credit card before year’s end, the deduction is still valid.
Don’t forget to maximize your retirement plan contributions as well. If your plan allows for it and if you can afford to do so, increase your contributions in the last two months of the year to reduce your taxable income.
Conclusion
Just because most of 2009 is now behind us does not diminish all opportunities to save on your tax bill. Give us a call and let’s look at your tax picture now — while there is still time to help you keep more of your hard-earned money.
This article is intended to provide resources for the tax and accounting needs of small businesses and individuals. The information contained in this informative letter is intended to provide general information on matters of interest in the areas of tax and accounting. Readers are encouraged to contact us regarding specific situations.
Ronda Zaragoza
Accountant
Eagle Eye Accounting
PO Box 20925
Albuquerque, NM 87154
505-550-2621
rondazaragoza@gmail.com
As always if you have any questions or comments please email me at rondazaragoza@gmail.com.
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