The Benefits of Filing an Extension...

The tax deadline is right around the corner and you might be still working on gathering your tax documents. No need to stress- you can extend! There are really almost no cons to extending your return, unless of course you are expecting a huge refund. Most of our clients (that have been with us for more than a year) will not be expecting huge refunds, since we take the extra time as a part of our service, to review and adjust your tax withholdings and estimated payments for the following year. Why leave your money on deposit with the government? They will just use it to bail out another failing American institution…while your family continues to struggle to earn and save and realize the American dream!

eeCPA PLC is different in that rather than just looking at historical data and making estimates based on that data, we actually take a forward looking approach to anticipate new changes in your business or financial life. Further, by staying on top of the new tax law changes, we apply the new law to our forward-looking calculations to save you from paying more tax than you should.

The Myths of Extension…

Filing on time does not yield any substantial benefit for you. In fact, it is often a benefit to extend your returns. Many times a thorough analysis will yield greater tax savings for you. When you do not receive your tax documents until late February, there is just not enough time to thoroughly analyze all deductions and potential tax savings strategies for all clients in just 6 weeks. By extending, we can take more time in making meaningful recommendations to save you money.

Getting an extension of time to file is not viewed by the government like the teacher may have viewed your request for extension of homework. The government is well aware that it is impossible for tax professionals to prepare and file all of their clients’ returns within a six-week time frame. Extensions of time to file are now granted “automatically”. Times have changed, technology has changed, and business investments have all become more complex. It takes time to sort out some of these issues and make accurate calculations to provide proper reporting to the government.

If you would like to file an extension, please send any W-2s or 1099s you received for 2010 to our office. We can make an estimated calculation to determine whether there is any tax due by April 18, 2011. Please contact us if you have any questions!

Energy Efficiency Tax Credits: Get Some Green for Being Green!

Did you make any energy efficient improvements to your home in 2010? The federal government will reward you for your environmentally friendly efforts! If you purchased any energy-efficient property for your principal residence by December 31, 2010, you could be entitled to the Federal Tax Credit for Consumer Energy Efficiency. In order to claim the credit, the improvement must be placed in service in 2010. The tax credit allows you to claim up to 30% of the cost of the improvements up to the limit of $1,500. Qualifying improvements include windows and doors, biomass stoves, HVAC units, insulation, roofs, and water heaters. If you think you might qualify, please send us copies of your receipts and manufacturer’s statement so we can submit the request for the tax credit on your returns.

If you make an energy efficient improvement to your home in 2011, you can still receive a tax credit, albeit at a lower level. The 2010 Tax Relief Act extended the home energy-efficiency tax credit into 2011. Instead of the 30% credit with the $1,500 credit, the levels are now 10% up to $500, with a $200 maximum for windows.

1099 Repeal Passed by Senate-“A Victory in Common Sense”

On Tuesday, April 5^th, the Senate passed a bill that would repeal the 1099 reporting requirements outlined in the Health Care Act and Small Business Jobs Act. The bill is now directed to President Obama for signature. Both parties supported the bill with a lopsided 87 to 12 vote. Senator Mike Johanns of Nebraska stated the passing of the bill was a “victory in common sense.”

In order to offset the $22 billion projected lost revenue from the Health Care Act, the House offered a measure based on the subsidies people receive to purchase health insurance under the Health Care Act. The House’s proposal will require taxpayers who receive a larger subsidy that they are allowed to return the overpayment to the government. Democrats call this proposal a tax increase on the middle class so this measure will likely be debated. For right now, we can at least celebrate the repeal of this unnecessary administrative burden!

New Tax Laws Could Mean a Green Spring for You and Your Business

2010 was a monumental year for tax law. This past year marked a historic intersection of tax laws simultaneously providing much-needed relief to taxpayers and enacting revenue raisers to fight the deficit. What does this mean for you? 2011 could be a very green year!

The 2010 Tax Relief Act includes some very favorable provisions for taxpayers. Capital gains and dividend tax rates will continue to be taxed at the maximum 15 percent rate until 2012, when the rates will increase to 20%. The 2010 Tax Relief Act also reduced the employee share of Social Security tax from 6.2% to 4.2%. The Social Security tax reduction replaces the Making Work Pay credit and will actually provide a greater benefit to taxpayers. Furthermore, the new rules for Roth IRA conversions will remain intact. Individuals may convert funds from a traditional IRA to a Roth IRA, regardless of income. In addition to the benefits for individual taxpayers, the 2010 Tax Relief Act provides numerous benefits to businesses. The Act will double and extend bonus depreciation from 50% to 100% for qualified property acquired between September 8, 2010 and January 1, 2012.

Certain provisions in the 2010 Small Business Jobs Act and the HIRE Act have also been extended. The carryback period for the small business credits has been extended from one to five years. The Small Business Act also increases the amount of deductible start-up expenses from $5,000 to $10,000. Moreover, the HIRE Act included a “Worker Retention Credit” of $1,000 or 6.2% of wages paid by the employers to the employee for employers who qualify by hiring and retaining a previously unemployed worker on the payroll for a consecutive 52 weeks. These available credits could provided a much needed boost for your business!

Meanwhile, a few revenue raisers did pass such as the Health Care and Education Reconciliation Act, which imposes additional Medicare taxes on higher-income individuals. However, these changes will not be in effect until after December 31, 2012. Luckily, some other revenue generating bills managed to lose momentum in 2010. For example, the Senate rejected a bill that would impose self-employment payroll taxes on s-corporation pass-through income for an s-corporation engaged in a service business. Thankfully, the lobbying efforts against these bills thwarted the progress.

Due to the active tax law climate in 2010, these provisions are subject to change. We will be sure to keep you up to date to be green in 2011!

Hope Is On the Horizon- 1099 Law on the Road to Repeal

On March 3, 2011, the House of Representatives passed the Small Business Paperwork Mandate Elimination Act of 2011. This bill would repeal the 1099 reporting requirements outlined in the Patient Protection and Affordable Care Act. It would also eliminate the 1099 reporting requirements already in effect from the Small Business Jobs Act for taxpayers who receive rental income. Last year, the Patient Protection and Affordable Care Act expanded the 1099 reporting requirements to include all payments of $600 or more for goods and services, including corporations. This provision was designed to finance the new health care reform. However, the administrative burden created from the new requirements could cripple small businesses. In order for the law to repeal, the House and Senate must reach an agreement on how to offset the cost of the health care reform. We recommend that you continue to track your expenses as if the reporting requirements will continue in 2011. We will keep you posted as this story develops.

Tax Deadlines Looming

We appreciate your quick response and cooperation in gathering your tax documents this year! The deadline to file corporate returns is March 15^th. If we have not received your tax documents yet, we will file an extension for you. Please look for your extension forms in your email inbox. The deadline to file partnership, trust, and individual returns is April 18^th this year. If you do not wish to extend your returns, please contact our office right away to schedule a meeting to discuss your returns. We look forward to hearing from you!

Save the Date- Client Appreciation Party!

Mark your calendars! Our annual client appreciation will be held Friday, May 6, 2011, at Elizabeth’s home. We are looking forward to a fun evening of games, good food, and of course, even better, our company! This party is all about you, our valued client, so we hope to see you there! More to details to come…