We hope that 2011 has been a happy and prosperous year for you and your family.
Both the IRS and the California Franchise Tax Board have new requirements, which means that we will need more documents and information than has been required in the past. Here is a list of new information we will need from you when we prepare your taxes.
Sales of stock and securities: If you sold stock or securities through a broker, the broker will issue a Form 1099-B to you. The 2011 Form 1099-B has been revised to add boxes for the reporting of your adjusted basis in stock (usually what you paid for the stock), as well as whether the sale is classified as short-term or long-term. This requirement is new and the form provided by the broker is not yet formatted to capture all sales.
Most of our clients have provided excellent details of their stock activities, often providing us with their own spreadsheets. Please continue to do so, while also providing copies of all 1099-Bs and all other information included by the brokerage firm, including your comprehensive year-end statements.
Merchant charges, 1099-Ks: For those of you who are landlords, are in business or sell merchandise online, you will likely receive a new form – Form 1099-K. This form reports credit card or other merchant payments (PayPal for example) if your receipts for such payments are over certain amounts. Be on the lookout for this new form and please provide us with any 1099-Ks you receive.
Beginning with your 2012 returns, you will have to report sales figures separately, on two separate lines: one for merchant cards and third party payments (generally, credit cards); and the other for cash and check payments. This requirement will apply to sole proprietorships (Schedule C) or rental properties (Schedule E) or other business returns (corporation, partnership, etc.)
You will need to start tracking payments by type beginning in January, 2012. If you need any help setting up your accounting systems to separately track these amounts, please let us know.
Foreign accounts: The reporting requirements for assets held overseas are increasing and the penalties for failure to report them are becoming increasingly harsh. Not all foreign holdings must be reported. If, for example you hold stock in a foreign company through a U.S. broker, those holdings do not have to be separately reported. However, if you hold any other types of foreign assets, (including bank accounts and securities accounts), or if you have any doubt as to whether any of your assets are foreign, please let us know.
Property tax statements: California’s Franchise Tax Board has stated that they will require parcel numbers and other information pertaining to property taxes for any taxpayer who deducts property tax. Although this requirement is not yet slated to take effect, we would like you to provide us with your property tax statements this year so we can do a preliminary review of them in preparation for the new requirement.
Use tax: California requires payment of use tax if you purchase goods out-of-state that are used, consumed or stored in California, when no sales tax is collected on the purchase, (such as purchases from Amazon). Most such purchases are made over the internet or by mail order from out-of-state sellers. Taxpayers who do not hold a California seller’s permit have the option of reporting the use tax on their California income tax returns.
You have the option of totaling all such purchases and we will compute the use tax. We will include a form in your year-end packet that allows you to enter all of your purchases. Your second option is a “lookup table.” If all of your purchases were under $1,000 each, we can use a “lookup table” to compute your tax, based on your income.
Tax benefits
There are multiple tax benefits that we can use to reduce your tax liability for this year and the future. For example, there are tax credits for certain employers who provided health insurance to their employees, and for certain small businesses that increase the number of employees.
Roth IRA conversions are still available and can be a useful way to reduce the tax you will pay.
You still have until December 31, 2011 to make charitable donations directly from your traditional IRA. If you have not yet requested your required minimum distribution for 2011 and need help deciding or completing the paperwork please contact us right away.
Other changes
There are a number of other changes that may affect your tax return this year, including new rules for those who do not wish to file electronically and an electronic payment requirement for higher income California individuals.
2011 Tax Preparation
Please take extra time in compiling your documentation and completing your organizer early to allow us time to do the best possible job preparing accurate returns, while utilizing the most advantageous tax strategies and tax law provisions. Let us try to get your returns prepared as early as possible so you can have plenty of time to review and file them.
Tax Planning is the key to successfully and legally reducing your tax liability. We go beyond tax compliance and proactively recommend tax saving strategies to maximize your after-tax income.
We make it a priority to enhance our mastery of the current tax law, complex tax code, and new tax regulations by attending frequent tax seminars.
Businesses and individuals pay the lowest amount of taxes allowable by law because we continually look for ways to minimize your taxes throughout the year, not just at the end of the year.
We recommend Tax Saving Strategies that help you...
- grow and preserve assets by keeping Uncle Sam out of your pockets.
- defer income so you can keep your money now and pay less taxes later.
- reduce taxes on your income so you keep more of what you make.
- reduce taxes on your estate so your family keeps more of what you've made.
- reduce taxes on your gifts so you can give more.
- reduce taxes on your investments so you can grow your wealth faster.
- reduce taxes on your retirement distributions so you can retire in style.
Here's just a few of the Tax Saving Strategies we use...
- Splitting income among several family members or legal entities in order to get more of the income
taxed in lower bracket.
- Shifting income or expenses from one year to another in order to have them fall where it will be taxed at a
lower rate.
- Deferring tax liabilities through certain investment choices such as pension plans, contributions and other
similar plans.
- Using certain investments to produce income that is tax exempt from either federal or state or both taxing
entities.
- Finding tax deductions by structuring your money to pay for things you enjoy, such as a vacation
home.
Remember, we work for you not for the IRS. Many of our clients save many times the fee in reduced tax
liability through careful planning and legitimate tax strategies.
