Tuesday, May 29, 2012

Before the wedding, talk about your finances


Spring and summer -- the wedding season is upon us. Before walking down the aisle, take a minute to consider a serious matter.

Couples often enter into marriage without ever having had a discussion about financial issues. As a result, they find themselves frequently arguing about money. If you are planning a wedding, here are some steps you can take to get your marriage off to a good financial start.

* Premarital financial discussions. You and your intended might enjoy the same movies and the same kinds of food, but are you financially compatible? Take some time to discuss your finances before you tie the knot. Talk about your assets, your debts, your credit ratings, and your financial attitudes, including your spending and saving habits. Do you share the same goals, such as having children, buying a home, or continuing your education? How will you finance your dreams?

* How will you handle your finances as a married couple? For example, who will pay the bills? Will you maintain joint or separate checking accounts? If you maintain separate accounts, how will you split your expenses?

* Premarital financial counseling. Every couple needs to work out their own style for handling money. Call upon your accountant to assist you in setting up a budget, controlling your taxes, and mapping out a financial plan for your future.

* Premarital legal counseling. If you have substantial assets, discuss the merits of a premarital agreement with your attorney. If your partner has substantial debt, ask your attorney how you can protect yourself from his or her creditors.

Perhaps you plan on buying a house together or combining financial accounts.  Your attorney can advise you on the best way to hold title to your assets.

Discussing your finances before you say "I do" may increase your chances for living happily ever after.  Give us a call if you would like assistance in this area.

Monday, May 21, 2012

What to do if you missed the April tax filing deadline


If you missed the April 17 tax filing deadline for your 2011 return, the IRS has some advice for you.

First, don't panic. But do file your return as soon as possible. If you owe money on the return, the penalty for late filing and interest on the amount you owe will continue to grow until you file. E-filing is the fastest way to file, and this option is available on 2011 tax returns through October 15, 2012.

Second, pay as much of the tax you owe as you can. If you cannot pay the full amount of tax due with your return, you can ask to make monthly installment payments to the IRS. File Form 9465, "Installment Agreement Request," or apply online using the IRS Online Payment Agreement Application available at the IRS website (www.irs.gov).

Third, any additional delay in filing will just increase any penalty and interest charges. These include a late filing penalty, a late payment penalty, and interest on taxes not paid by April 17.

If you haven't filed your return, the problem will not go away by itself. File your return, and if you can't pay the tax owed, inform the IRS of your current financial situation. For more information or filing assistance, contact our office.

Monday, May 14, 2012

Tax questions after you file your tax return


Once you have filed your 2011 tax return, you may still have a few tax questions. The IRS provides these answers to commonly asked questions.

* How can I check the status of my refund?

You can go online to check on your refund. Go to www.irs.gov and click on "where's my refund?" Or call 1-800-829-4477 for automated refund information available 24 hours a day, seven days a week.

* What records should I keep?

Keep receipts, canceled checks, or other substantiation for any deductions or credits you claimed. Also keep records that verify other items on your tax return (W-2s, 1099s, etc.). Keep a copy of the tax return, along with the supporting records, for seven years.

* What if I discover that I made a mistake on my return?

If you discover that you failed to report some income or claim a deduction or credit to which you are entitled, you can correct the error by filing an amended tax return using Form 1040X.

* What if my address changes after I file?

If you move or have an address change after filing your return, send Form 8822 "Change of Address" to the IRS. You should also notify the Postal Service of your new address so that you'll receive any refund you're due or notices sent by the IRS.

Tuesday, May 8, 2012

Gifts: When are they taxable?


If you give away money or property during your lifetime,
you may be subject to the federal gift tax. Here are
some gift tax facts the IRS wants you to know.

* Though the general rule is that gifts are taxable,
  there are many exceptions to the rule. Gifts that are
  not taxable include those that don't exceed the annual
  exclusion amount for a given year ($13,000 for 2012),
  gifts to your spouse, charitable gifts, gifts to
  political organizations, and payments for the tuition
  or medical expenses of someone that you make directly
  to the medical or educational institution.

* You and your spouse can make annual gifts of double
  the exclusion amount even if just one of you owns the
  property being gifted. Such a split gift requires the
  filing of a gift tax return even if half of the split
  gift is less than the annual exclusion.

* Generally, the person who receives your gift is not
  taxed on the value of the gift. If any tax is due,
  you the donor are responsible for it.

* You cannot take a tax deduction for gifts you make,
  except for gifts to charity. To be deductible, charitable
  gifts must be made to IRS-approved organizations;
  gifts to individuals are not tax-deductible.

Friday, May 4, 2012

Health care law scheduled to bring three key tax changes


The U.S. Supreme Court will soon issue its ruling on the health care legislation -- the "Patient Protection and Affordable Care Act" -- passed in 2010. Over half the individual states have challenged the constitutionality of the law that requires individuals to obtain minimum health insurance coverage and penalizes those who don't comply. The law could be upheld or overturned or the court might strike down select provisions.

Although the health care mandate has received the most attention, three lesser-known tax changes in the law could have a major impact. If these provisions are allowed to stand, they will take effect in 2013.

1. Medicare surtaxes. Taxpayers will owe a new 3.8% Medicare surtax on the lesser of net investment income or the amount by which modified adjusted gross income (MAGI) exceeds an annual threshold of $250,000 for joint filers and $200,000 for single filers. For this purpose, "net investment income" includes interest, dividends, royalties and annuities, rent and other passive activity income, capital gains from the sale of property not used in your business, and trading of financial instruments and commodities. It does not include business income, income from tax-free municipals, or distributions from IRAs and qualified retirement plans.

In addition, a separate 0.9% Medicare surtax applies to earned income in excess of $250,000 for joint filers and $200,000 for single filers. A taxpayer might have to pay both surtaxes.

2. Medical deductions. Currently, a taxpayer may deduct unreimbursed medical expenses in excess of 7.5% of adjusted gross income (AGI). This threshold is scheduled to increase to 10% in 2013 for those under age 65.

3. Flexible spending accounts. Currently, there is no legal limit on annual contributions to a flexible spending account (FSA) for health care expenses. Under the health care law, annual contributions to a health-care FSA are capped at $2,500. This amount will be indexed for inflation after 2013.

Faced with these looming tax changes, you may take appropriate steps before 2013. For instance, you might realize long-term capital gains in 2012 to avoid the 3.8% Medicare surtax, especially since the maximum tax rate is only 15% this year (scheduled to increase to 20% in 2013). Similarly, you might consider accelerating nonemergency medical expenses into 2012 to benefit from the lower AGI threshold or to exhaust FSA funds.

We will keep you posted on any major new developments. Don't hesitate to contact us for tax planning guidance suited to your situation.