CMJ, LLP

THERE'S STILL TIME TO CUT YOUR 2011 TAX BILL

2012-03-12T06:55:00.002-04:00

Are you still dealing with your 2011 tax return? Do you owe a bigger tax bill than you expected? Are you missing a tax break because your adjusted gross income is too high? Would you like a bigger refund? Don't despair. You might still have time to make some changes.

For example:

* You have until April 17 to make a tax-deductible IRA contribution for 2011. If you qualify, you could contribute up to $5,000 and have it count as a deduction against last year's taxes. If you were 50 years old or older last year, your maximum contribution is $6,000.

* Even if you've already made your 2011 contribution to a Roth IRA, it may not be too late to make a change. You may be able to recharacterize your contribution as a traditional IRA contribution and take the deduction. You'll need to set up a traditional IRA, make a trustee-to-trustee transfer, and report it on your 2011 tax return. Get details before you try this to make sure you avoid any tax traps.

*If you're self-employed, there's still time to set up a SEP-IRA for your business. You have until the due date of your return, including extensions, to set up the plan and make a contribution from 2011 earnings. SEP-IRAs are relatively easy to establish and flexible to manage.

Contact our office at (518) 798-3330 if you're interested in any of these ideas. We can help determine whether you qualify and guide you through the process.

UPCOMING TAX DEADLINES

2012-03-07T06:32:00.002-05:00

March 15 - 2011 calendar-year corporation income tax returns are due. Extensions may be filed to give until September 17, 2012, to file.

March 15 - Deadline for calendar-year corporations to elect S corporation status for 2012.

April 2 - Deadline for payers who file electronically to send copies of 2011 W-2s to the Social Security Administration.

April 2 - Deadline for payers who file electronically to file 2011 information returns (such as 1099s) with the IRS.

DEADLINE FOR ELECTING S CORPORATION STATUS IS MARCH 15

2012-03-06T06:04:00.003-05:00

If you own a small corporation, you have until March 15, 2012, to choose S corporation status for this year. In order to become an S corporation, you'll need the unanimous approval of all shareholders.

The principal advantage of an S corporation is that you avoid paying double taxes. In a traditional C corporation, profits are taxed at the corporate level and then they're taxed again when paid to individual shareholders as dividends. In an S corporation, there are no taxes on earnings at the corporate level. Instead, profits or losses flow directly through to the shareholders. They pay taxes only once, when they report their share of earnings on their individual tax returns.

Another advantage: Doing business as an S corporation can be attractive in the early, unprofitable years of a start-up business. That's because operating losses flow through your personal taxes, perhaps offsetting other taxable income.

There are some trade-offs for these tax benefits, though. If you're an owner-employee and own more than two percent of the company, you'll receive less favorable tax treatment for some fringe benefits. There are also ownership limitations. The company can have only one class of stock, there can't be more than 100 shareholders, all of the shareholders must be U.S. citizens or residents, and the corporation must meet other restrictions.

Despite these drawbacks, doing business as an S corporation can still offer some tax planning advantages. If you can meet the ownership requirements, it might be well worth considering an S corporation election. Contact our office at (518) 798-3330 for an in-depth analysis of the pros and cons for your company.

USE IT OR LOSE IT - DEADLINE APPROACHING

2012-03-05T06:15:00.003-05:00

If your flex plan at work allows a 2½ month grace period for using the pre-tax dollars you set aside for 2011, be aware that a final deadline is approaching. You have until March 15, 2012, to use the funds you set aside for 2011 or you forfeit any leftover dollars.

PAYROLL TAX CUT IS EXTENDED THROUGH 2012

2012-03-02T10:47:00.001-05:00

Congress passed an extension of the 2% payroll tax cut that had been scheduled to expire at the end of February. The extension means 160 million working Americans will continue to pay social security tax on their wages at a 4.2% rate for the rest of 2012, rather than at a 6.2% rate.

Because Republicans and Democrats were unable to agree on how to pay for the extended tax cut, the law included no spending cuts to offset the estimated $93 billion cost of this provision.

The law also provides for long-term federal unemployment benefits, setting the maximum at 73 weeks in states with the worst unemployment and 63 weeks for other states.

Another provision in the law includes the so-called "doc fix" that prevents a scheduled 27% reduction in Medicare payments to doctors.

The unemployment benefits and doctor payments will be paid for by government sales of broadband spectrum, requiring federal workers hired after this year to contribute more to their pensions, and cuts in certain health programs.

President Obama signed the bill into law on February 22.

BE DILIGENT ABOUT SAVING YOUR TAX RECORDS

2012-03-01T06:38:00.002-05:00

You're probably getting ready to sort out last year's financial records and prepare for this year's recordkeeping. But what should you keep and what can you throw away? Here are some suggestions.

Keep records that directly support income or expense items on your tax return. For income, this includes W-2s, 1099s, and Form K-1s. Also keep records of any other income you might have received from other sources. It's also a good idea to save your bank statements and investment statements from brokers.

For expense items, keep documentation that supports any itemized deductions you claim. This includes acknowledgments from charitable organizations and backup for taxes paid, mortgage interest, medical deductions, work expenses, and miscellaneous deductions. Even if you don't itemize, keep records of expenses for child care, medical insurance if you're self-employed, and any other expenses that appear on your return.

The IRS can audit you routinely for three years after you file your return. But in cases where income is underreported, they can audit for up to six years. To be safe, keep your tax records for seven years.

Keep certain other records even longer. These include records relating to your house purchase and any improvements you make. Also keep records of investment purchases, dividends reinvested, and any major gifts you make or receive. And finally, keep copies of all your tax returns and W-2s in case you ever need to prove your earnings for social security purposes.

SOME DEDUCTIONS ARE AVAILABLE EVEN IF YOU DON’T ITEMIZE

2012-02-27T07:33:00.002-05:00

If you’ve given up itemizing deductions, you’re not alone. These days over half of all taxpayers find they’re better off using the standard deduction. But even if you take the standard deduction, you can also deduct some individual expenses on your 2011 tax return, including the following:

* IRA and HSA contributions

On your 2011 tax return you may qualify to deduct up to $5,000 in contributions to a traditional IRA. That increases to $6,000 if you’re age 50 or older. Income limitations may apply in some cases. You can’t deduct contributions to Roth IRAs.

Health Savings Accounts (HSAs) are IRA-like accounts set up in conjunction with a high-deductible health insurance policy. The annual contributions you make to your HSA are deductible. Contributions are invested and grow tax-free, and you’re allowed to withdraw money in the account tax-free to pay for your unreimbursed medical expenses. The HSA contribution limit for 2011 is $3,050 for singles and $6,150 for couples. An additional $1,000 may be contributed by those 55 and older.

* Student loan interest and tuition fees

Deduct up to $2,500 interest on student loans for yourself, your spouse, and your dependents. For 2011, you can also deduct up to $4,000 of tuition and fees for qualified higher education courses. Income limitations apply, and you must coordinate these deductions with other education tax breaks.

* Self-employment deductions

If you’re self employed, you can generally deduct the cost of health insurance premiums, retirement plan contributions, and one-half of self-employment taxes.

* Other deductions

Don’t overlook deductions for alimony you pay, certain moving expenses, and early savings withdrawal penalties. Teachers can deduct up to $250 for classroom supplies that they purchased with their own money in 2011.

Contact our office at (518) 798-3330 for more information on these and other deductions you may be entitled to take on your 2011 tax return.

DEPRECIATION RULES CHANGE FOR 2012

2012-02-22T07:06:00.002-05:00

If you're planning to buy equipment or other business assets this year, you need to be aware of the changes in how much of the cost you can deduct in 2012.

Here are the new limits.

* Bonus depreciation. The enhanced deduction -- up to 100% of qualified assets -- expired at the end of 2011. The maximum bonus depreciation allowance for most qualified property placed in service in 2012 is 50% of the cost of the property.

Bonus depreciation is generally available for new assets that have a useful life of 20 years or less.

* Section 179. The expanded $500,000 Section 179 write-off that has been available for the past two years ended December 31, 2011. For 2012, you can elect to expense up to $139,000 of qualified assets you purchase during the year.

To receive the full benefit of the Section 179 deduction, the total cost of all qualifying assets purchased in 2012 must be $560,000 or less. Your deduction may also be limited by the amount of your business income.

Both new and used assets qualify for Section 179.

Congress may change these rules at any time. If you're thinking of purchasing assets for your business this year, please give us a call at (518) 798-3330 for the latest depreciation developments.

IF YOU HAVE FOREIGN INVESTMENTS, YOU MAY HAVE A NEW FILING OBLIGATION

2012-02-17T08:20:00.002-05:00

If you own foreign investments, you may have an additional federal tax filing requirement this year.

Form 8938, "Statement of Specified Foreign Financial Assets," is due April 17, 2012, and is filed as part of your individual tax return. You'll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements.

What are the reporting requirements? They vary depending on where you live and your filing status. For example, say you’re married and live in the United States, and you'll file a joint tax return for 2011. You'll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2011 is more than $100,000, or if the value exceeds $150,000 at any time during the year.

Tip: In some cases, you may also need to file Form 8938 for tax year 2010.

Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies.

You've probably noticed the reporting requirements are similar to the "Report of Foreign Bank and Financial Accounts" (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you'll still need to complete by June 30.

Penalties for failure to file Form 8938 start at $10,000. We urge you to contact us at (518) 798-3330 so we can help you evaluate your filing requirements for foreign investments.

ARE YOU IGNORING THIS NEW TAX CREDIT?

2012-02-14T16:09:00.002-05:00

Health care legislation passed in 2010 included a tax credit for small businesses that provided health care coverage for their employees. Recent surveys have shown that the majority of small companies that could qualify for the credit have failed to take it. The reasons given for ignoring the credit ranged from being unaware of it to finding the credit too complicated to compute.
* Take another look

If your business or nonprofit organization might be eligible, perhaps you should take another look at the requirements and be sure you're taking advantage of this tax break. If you qualify, you can use this tax credit to offset your federal income tax liability by up to 35% of the cost of health insurance premiums you pay for employees. Since this is a tax credit, not a deduction, it will reduce your tax bill dollar-for-dollar.

* Can your business qualify?

In general, the credit is available to employers that have fewer than 25 full-time equivalent (FTE) employees paying average annual wages of less than $50,000 per employee. Eligibility is based partially on FTEs, not the number of employees; therefore, an employer with fewer than 50 half-time workers could qualify for the credit. The maximum credit goes to those employers with ten or fewer employees who pay annual average wages of $25,000 or less.

When you're self-employed, either as a partner or a sole proprietor, or if you own more than 2% of an S corporation, you're not considered an employee for purposes of the credit.

Tax-exempt organizations can use the credit to offset payroll tax liability (up to 25% of qualified premiums paid).

For assistance in determining eligibility for this tax credit and in doing the calculations to obtain the credit, contact our office at (518) 798-3330.

MEETINGS UNDERWAY ON PAYROLL TAX CUT EXTENSION

2012-02-10T07:15:00.003-05:00

Last December, the 4.2% social security tax rate that workers pay on wages was extended through February 29, 2012.

Now a Congressional conference is being held to find a way to extend the lower tax rate through the end of 2012. The sticking point is lack of agreement between Republicans and Democrats on how to pay for the extension, estimated to cost $100 billion.

House Democrats have expressed the hope that the conference will be completed by the Presidents' Day recess scheduled for the week of February 20. The legislation would extend the current 4.2% payroll tax rate through December 31, extend unemployment insurance benefits, and prevent cuts in reimbursements to Medicare providers.

Several legislators want to include tax extenders in the payroll tax cut legislation. These "extenders" include such provisions as the research and development credit for businesses, the optional deduction for state and local sales taxes, and the $250 deduction for school supplies purchased by teachers. Though these tax breaks appear to be universally popular, finding a way to pay for them remains the big issue.

As you do your 2012 tax planning, keep the uncertain legislative picture in mind.

IRS PLANS RANDOM SMALL BUSINESS AUDITS

2012-02-09T08:05:00.002-05:00

The IRS plans to conduct random audits of 2,500 returns from 2010 filed by corporations with less than $250,000 in assets. The results will be used to update the IRS formulas for selecting returns for audit.

The IRS is also trying to improve tax compliance among sole proprietors. According to a Treasury report, sole proprietors accounted for 20% of the $345 billion tax gap calculated for 2001.

USE ADJUSTED TAX NUMBERS FOR 2012 PLANNING

2012-02-07T09:05:00.005-05:00

The IRS is required by law to adjust certain tax numbers each year. Here are some of the adjusted numbers you'll need for your 2012 tax planning.

STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.

SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.

TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.

SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.

KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).

NANNY TAX threshold increases to $1,800.

HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.

401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).

SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).

IRA contribution limit remains at $5,000 ($6,000 for 50 and older).

ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000.

ANNUAL GIFT TAX EXCLUSION remains at $13,000.

ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.

ALTERNATIVE MINIMUM TAX (AMT) exemption decreases to $33,750 for singles and to $45,000 for married couples.

BASIS REPORTING EXPANDS THIS YEAR

2012-02-06T07:01:00.001-05:00

Your broker statement for 2011 reported the basis in the stocks you acquired last year. This basis reporting requirement expands this year to include mutual fund shares and stock acquired in a dividend reinvestment plan. The cost basis for these investments is included in reports that brokers send to the IRS. The IRS will compare this information with the basis you report on your tax return when you sell the investment.

BRING YOUR CORPORATE MINUTES UP TO DATE

2012-02-02T07:20:00.003-05:00

Writing up the minutes of board of directors' meetings is not exactly a high priority for most business owners. Yet well-documented corporate minutes can provide valuable supporting evidence if your tax positions are ever questioned.

Minutes are especially important where any kind of related-party transactions occur, such as payments, loans, or distributions between the company and its owners. For example, the IRS may challenge the amount of compensation paid to a business owner as unreasonable. Corporate minutes that document the factors considered by the board in approving the compensation can be a strong defense against such a challenge.

Another area that receives close scrutiny from the IRS is the amount of earnings that are retained in the business rather than distributed as taxable dividends. A penalty applies to retained earnings over a certain limit unless they can be justified by business needs. Corporate minutes can be a strong piece of supporting evidence if they clearly spell out the reasons that the company needs to retain funds, for example, to purchase assets or for working capital.

If your company has a tax-qualified retirement plan or a stock option plan, the minutes should show decisions by the board adopting or modifying the plan. They should also document annual decisions on the percentage of contribution to profit-sharing plans and any decisions on fringe benefits, such as medical reimbursement accounts.

Corporate minutes need not be lengthy, but they should provide a clear record of corporate actions and the business factors that were considered when those actions were taken. You should think of your minutes as a key element of your tax planning strategy.

If your corporate minutes need updating, contact your attorney and take care of this important bit of business housekeeping.

MORE TAX DEADLINES AHEAD

2012-02-02T06:54:00.002-05:00

Don't miss these deadlines if they apply to your business:

February 15 - Brokers must provide 2011 Forms 1099-B and 1099-S to customers.

February 28 - Send Forms 1099 with Form 1096 to the IRS. If you file these forms electronically, you have until April 2 to file with the IRS.

February 29 - Send Copy A of employee W-2s for 2011, along with Form W-3, to the Social Security Administration. If you file electronically, you have until April 2 to file.

March 1 - Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.

For more information or filing assistance contact our office at (518) 798-3330.

TAX TIME IS THE RIGHT TIME FOR A FINANCIAL REVIEW

2012-01-30T07:12:00.004-05:00

Now is an ideal time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for your financial well-being?

The following suggestions will get you started on your financial review:

* Hold a discussion with your family. Spouses and children need to share and prioritize their financial aspirations.

* Write down your financial goals. How much money will you need to meet each goal? When will you need the money, and how will you get it?

* Do a net worth statement (a list of your assets and debts), and compare it to last year's statement. Are you gaining or losing ground?

* With your goals (and the effects of inflation) in mind, review the performance of your investments.

* Take steps to protect what you already have. Goals may become instantly unobtainable if you lose your present assets or your income potential.

* Do you have adequate disability insurance coverage to replace take-home pay if you become incapacitated?

* Do you have the proper amount of life insurance if you or your spouse should die?

* Do you have replacement value property insurance on your home?

* Do you have adequate insurance for calamities such as automobile accidents or lawsuits?

* Make sure that you need all of the insurance that you have. Do not duplicate employer-provided coverage. Review your coverage annually; do not just automatically renew policies.

* Review your will and your estate plan. Did your situation change during 2011 (marriage, divorce, births, deaths, move to another state, for example)? This year, the top estate tax rate is 35% with a $5,120,000 exemption. Make appropriate changes to your will and estate plan.

* Review your credit use. Keep your credit card bills current. If you're finding that hard to do, it's probably time to cut up some of those credit cards and get your debt under control.

* Organize your records. If you had trouble assembling data for your financial review, you need a better system. Set one up.

For help with any aspect of your review, call us at (518) 798-3330. We're here to assist you in any way we can.

CMJ, LLP HIRES TWO

2012-01-28T09:06:00.000-05:00

CMJ, LLP is pleased to announce two additions to their staff.

Brian J. Stidd, CPA, is a Senior Associate in the firm’s Accounting, Assurance, and Advisory department. He holds a BBA in Accounting from Siena College in Loudonville, NY, and is a member of the American Institute of Certified Public Accountants and the New York State Society of CPAs. Brian is a native of West Babylon, NY and lives in South Glens Falls.

Amy L. Blaszkow joined the firm as an Associate in the firm’s Accounting, Assurance, and Advisory department. She holds a BS and MS in Accounting from Wagner College in Staten Island, NY and is pursuing her CPA designation. She is a native of Whitesboro, NY and lives in Lake Luzerne.

CMJ, LLP provides financial, tax, and management advisory services for commercial enterprises. They offer specialized services in business valuations, mergers and acquisitions, estate planning, QuickBooks assistance, and retirement plan administration. For more information about CMJ, LLP, contact the firm at (518) 798-3330.

IRS ANNOUNCES BUSINESS MILEAGE RATE FOR 2012

2012-01-25T06:45:00.005-05:00

The IRS recently announced that the mileage rate for business driving in 2012 will be 55.5¢ a mile. The rate can be used for cars, vans, pickups, and panel trucks.

Companies that don't want to keep track of the actual costs of using a vehicle for business purposes may use this standard mileage rate instead. An annual study of the fixed and variable costs of operating an automobile is used to determine what the standard mileage rate will be for a given year.

In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, interest relating to the purchase of the automobile, and state and local personal property taxes.

The standard business mileage rate can't be used for automobiles used for hire (e.g., taxicabs) or for fleets of automobiles used simultaneously by the taxpayer. Nor can the standard rate be used if the vehicle was previously depreciated by other than the straight-line method, including using bonus depreciation or the Section 179 deduction.

When the business mileage rate is used, depreciation will be considered to have been allowed at a rate of 23 cents a mile. This depreciation reduces the taxpayer's cost basis in the vehicle.

RECORDKEEPING IS REQUIRED FOR CHARITABLE DEDUCTIONS

2012-01-20T07:03:00.002-05:00

Get the documentation you'll need for all your 2011 charitable contributions, or you risk losing your deduction. Even gifts under $250 require a bank record or a receipt from the charity.

GATHER DOCUMENTS FOR YOUR 2011 TAX RETURN

2012-01-17T08:01:00.002-05:00

Gather the items you need to file your 2011 tax return: W-2s, 1099's, and other forms you receive from your employer, broker, bank, etc. If you detect errors, contact the sender immediately for a corrected copy.

DO YOUR CHILDREN NEED TO FILE A 2011 TAX RETURN?

2012-01-12T07:01:00.002-05:00

Check your children's need to file a 2011 tax return. A return is needed if wages exceeded $5,800, the child had self-employment income over $400, or investment income exceeded $950. If the child had both wages and investment income, other thresholds apply.

DON'T FORGET THE "NANNY TAX"

2012-01-09T06:45:00.002-05:00

If you paid a household worker, such as a gardener, housekeeper, or nanny, more than $1,700 in 2011 (or will pay more than $1,800 in 2012), you may be liable for payroll taxes on the wages paid. For details or filing assistance in meeting your nanny tax obligations, give us a call at (518) 798-3330.

WHY EVERY CHILD SHOULD HAVE A ROTH IRA

2012-01-06T09:03:00.002-05:00

What if your child could invest tax-free money today, and in 40-50 years take the proceeds out tax-free? Would you be interested? Almost anyone who receives compensation can open up a Roth IRA account.

There are two main types of individual retirement accounts, the traditional IRA and the Roth IRA. Traditional IRA’s allow for tax deductions for current year contributions. When distributed, the original contributions, along with any earnings, are then fully taxable. The Roth IRA allows for your contributions and earnings to accumulate tax-free. No tax deduction is allowed for contributions, unlike the traditional IRA, but you never have to pay taxes on qualified distributions.

IRS guidelines permit people to contribute up to $5,000 to their IRA/ Roth IRA, or up to 100% of compensation, whichever is less. Although there are no minimum age requirements to open a Roth IRA, there are two conditions that you need to be aware of. First, if your child is under the age of majority they are not legally able to open an account. This means that the parent must act as the custodian of the account until your child reaches legal age. Secondly, your child must have earned income and it must at least equal the amount of contributions for the year. If you were to pay your child $20 each week to mow the lawn/shovel snow and $15 to clean the house and take out the garbage then your child has already earned $1,820 for the year.

One of the best benefits of this plan is that your child has earned income but doesn’t have to pay any federal or state income taxes. This means that they don’t need the tax deduction associated with a traditional IRA. An added bonus is that kids can keep their earnings and parents, or even grandparents, could contribute to the funding of the Roth IRA.

Assuming your child was able to invest $1,800 each year from age 10 through the age of 18 and average 8% annual return, his retirement account would be roughly $23,000 at age eighteen. That amount increases to $500,000 if they were able to invest that amount annually until age 50. If investing tax-free money and withdrawing tax-free money for your child’s retirement wasn’t enough, another great reason for you to open a Roth IRA for your child is that they can use part of the funds for college or the purchase of their first home. The IRS allows for tax and penalty free distributions of your contributions for the funding of qualified higher education expenses (tuition, fees, books, supplies and equipment). If distributions are in excess of cumulative contributions, the earnings, would be taxed at your child’s tax rate for that year, but would still be exempt from the 10% penalty.

There is no limit to the amount that can be withdrawn for qualified education and whether it’s entirely tax free or not, they never have to repay any of the distributions. Your child could also use the Roth IRA funds to purchase or build their first home. Assuming that they have had the Roth IRA for five years, your child can take a distribution of up to $10,000 tax and penalty free. That’s regardless of how much of the distribution was contributions or earnings. Again, this amount does not need to be repaid, EVER!

We suggest opening a Roth IRA as soon as possible, making the minimum contribution, and contribute more as circumstances permit. As the above example showed, it’s clearly better to invest even the smallest amount early on, as the rewards for your child are staggering.

2012 TAX LAW CHANGES IN BRIEF

2012-01-06T08:59:00.001-05:00

* PAYROLL TAX CUT for employees extended through February
29, 2012. (Social security tax rate on wages up to
$110,100 will be 4.2% rather than 6.2%.)
* ADOPTION TAX CREDIT decreases to $12,650 for adoption
of an eligible child.
* SECTION 179 maximum deduction decreases to $139,000,
with a phase-out threshold of $560,000.
* STANDARD MILEAGE RATE for business driving remains at
55.5¢ a mile. Rate for medical and moving mileage
decreases to 23¢ a mile. Rate for charitable driving
remains at 14¢ a mile.
* ESTATE TAX top rate remains at 35%, and the exemption
amount increases to $5,120,000. The ANNUAL GIFT
TAX EXCLUSION remains at $13,000.
* 401(k) maximum salary deferral increases to $17,000
($22,500 for 50 and older).
* SIMPLE maximum salary deferral remains at $11,500
($14,000 for 50 and older).
* IRA CONTRIBUTION LIMIT remains at $5,000 ($6,000 for
50 and older).
* KIDDIE TAX threshold remains at $1,900 and applies up
to age 19 (up to age 24 for full-time students).
* NANNY TAX threshold increases to $1,800.
* TRANSPORTATION FRINGE BENEFIT limit decreases to $125
for vehicle/transit passes and increases to $240 for
qualified parking.
* SOCIAL SECURITY taxable wage limit increases to
$110,100. Retirees under full retirement age can earn
up to $14,640 without losing benefits.
* HSA CONTRIBUTION limit increases to $3,100 for
individuals and to $6,250 for families. An additional
$1,000 may be contributed by those 55 or older.

HIGHLIGHT JANUARY TAX DEADLINES ON YOUR CALENDAR

2012-01-04T07:15:00.002-05:00

* January 17 - Final 2011 individual estimated tax payment is due, unless your 2011 tax return is filed and taxes are paid in full by January 31, 2012.

* January 17 - Due date for calendar-year trusts and estates to pay final installment of 2011 estimated tax.

* January 31 - Employers must furnish employees with W-2 statements for 2011. 1099 information statements for 2011 must be furnished by payers. (Deadline for 1099-B and consolidated statements is February 15.)

* January 31 - Employers must generally file 2011 federal unemployment tax returns and pay any tax due.

LAST-MINUTE 2011 DEAL REACHED ON PAYROLL TAX CUT

2012-01-03T10:15:00.004-05:00

On December 23, 2011, Congress finally approved a two-month extension of the payroll tax cut for American workers.

The agreement was reached after weeks of partisan bickering. Though both Democrats and Republicans wanted a one-year extension of the tax cut, they could not agree on how to pay for a year-long extension and settled on a paid-for two-month extension.

The new law extends the 4.2% social security tax on wages through February 29, 2012. Without this extension, the employee tax rate would have gone to 6.2% on the first $110,100 of wages earned in 2012.

The law also extends benefits for the long-term unemployed for two months and prevents a scheduled cut in fees paid to Medicare providers from taking effect January 1, 2012.

These extensions will be paid for by an increase in fees charged by government-backed mortgage companies (Fannie Mae and Freddie Mac) for new home loans.

Included in the agreement is a requirement that President Obama make a decision within 60 days on the construction of the 1,700 mile Keystone oil pipeline.

Finally, the law calls for a House-Senate conference committee to negotiate an extension of the payroll tax cut through the end of 2012, as well as a longer-term extension of unemployment benefits and the Medicare reimbursement to doctors.

TO SUCCEED IN BUSINESS, HAVE A PLAN

2012-01-02T06:59:00.003-05:00

Taking a trip without a map may get you lost, and trying to run a business without a plan is likely to have the same result.

A business plan is a map, your company's written guide into the future. Not only does a good plan let you know where you are and where you're headed, it provides potential lenders and investors with a portrait of your company. Each plan will differ, but certain items are essential.

* First, you must define your market niche and identify the competition. How does your product or service differ from theirs?

* Next, determine your product and delivery costs; then look at your product pricing.

* Do you need new equipment or skills to compete now and in the future?

* What is your marketing scheme?

* How will you get the capital you need for your plans?

* Examine your key operating ratios, and determine projected profits for years covered by the plan.

Most business plans fail because they lack detail. A well-developed plan gives a new company immediate respect in the eyes of lenders, not only because it shows you to be thorough and far-sighted, but because lenders rarely see good business plans.

Wayne Gretzky, when asked the reason for his success said, "Some people skate to where the puck is. I skate to where the puck is going to be." A good plan should help you do the same for your business.

GET THE FACTS BEFORE GETTING A REVERSE MORTGAGE

2011-12-29T08:15:00.003-05:00

Have you noticed the increasing number of advertisements expounding the merits of reverse mortgages? Smiling celebrities advise seniors that their lives could improve immensely if they simply harvested the available equity in their homes. Take an expensive trip, remodel your home, or just have fun with the extra money. They can make it sound pretty appealing.

As the name implies, a reverse mortgage is the opposite of a traditional mortgage. With a traditional mortgage, you borrow a sum of money to purchase a home, then pay off the debt over time. With a reverse mortgage, you receive loan proceeds -- as a lump-sum payout, an annuity, a line of credit, or a combination of all three -- but make no payments as long as you reside in the property. The loan, with any accrued interest, comes due when you move out or pass away. To qualify for a reverse mortgage you need to be 62 or older, own your residence, and generally have significant equity in your home.

As the promotion and pool of potential customers for reverse mortgages continues to grow, so do reports of abuse regarding aggressive and even predatory sales practices. A few things to analyze if you’re thinking about a reverse mortgage include the following:

* Ask yourself if a reverse mortgage makes sense. Evaluate alternatives. Conventional solutions such as a home-equity loan might be a better answer.

* Reverse mortgages can be expensive. Upfront fees are significant. If you stay in your home just a few years, the effective interest rate can be very high.

* Beware of bundled sales pitches. Commission driven salesmen can push life insurance or various annuity products along with a reverse mortgage. You could end up with products you don’t need.

If you are considering a reverse mortgage, call us at (518) 798-3330 so we can explain the pros and cons and review your available alternatives.

DO YOUR BENEFICIARY CHOICES NEED UPDATING?

2011-12-27T06:55:00.002-05:00

Are your beneficiary designations up to date? Do you even know which accounts have beneficiaries and who you've designated? It's easy to lose track. But it's important to keep them current. Here's why.

When you designate a beneficiary for an account, that person inherits the assets in the account, regardless of what your will might say. That's why updating your will periodically might not be enough. Typically, you'll have beneficiaries for each of your IRAs, your 401(k) or other retirement plans, annuities, and insurance policies.

Your designations could be out of date just because of life's changes. Since you made your initial choices, you might have married, had children, or divorced. Some of the beneficiaries you chose could have died, divorced, or married. Their circumstances could have changed so you no longer want them to be the beneficiary.

Also, the tax laws change frequently, and they can have an impact on your choices. Choosing the wrong beneficiary, or failing to name a contingent beneficiary, can affect the long-term value of your IRA assets after you die. That's why it's important to review your choices with tax consequences in mind.

Here's how to update your designations. At a minimum, you should have copies of your beneficiary designations in one place. If you don't, call the trustees of your retirement accounts and your insurance agent, and request copies.

Then review the documents and decide what changes you'd like to make. Make an appointment to review your decisions with your tax and estate planning advisor. Discuss matters such as naming secondary beneficiaries and naming your estate as a beneficiary (sometimes not a good idea).

Finally, send your changes to the account trustee, ask for a confirmation, and keep copies in your records.

PUT FINANCIAL GIFTS ON YOUR HOLIDAY SHOPPING LIST

2011-12-23T07:15:00.002-05:00

When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come.

Some financial gift options you might consider:

* U.S. savings bonds. Savings bonds are used by many families to introduce children to the savings concept. I bonds are indexed for inflation and can provide relatively attractive rates of return.

* IRAs (regular or Roth). For 2011, you can contribute the lower of $5,000 or the earned income of the child. An early financial start can produce amazing benefits from compounded interest accumulated over several decades.

* Stocks or mutual funds. Equities are a good way to introduce a child to the investment world.

* Collectible stock certificates. Vibrant framed certificates are available for many companies. A Disney, Dream Works, or Coca-Cola stock certificate can provide a colorful reminder of the importance of investing for the future.

* Collectibles. Postage stamps or coin collection kits can provide years of enjoyment and form the basis for some life-long hobbies. An interesting gift idea is an official U.S. mint proof coin set for the year the child was born.

Please call us at (518) 798-3330 if you would like to review the tax issues related to any of these financial gift options, especially if you are considering a larger amount.

PRESIDENT OBAMA SIGNS NEW TAX LAW

2011-12-20T09:05:00.002-05:00

On November 21, 2011, President Obama signed the "Three Percent Withholding Repeal and Job Creation Act" into law.

This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the "Vow to Hire Heroes Act" which provides tax credits to employers who hire unemployed veterans.

The law creates the “Returning Heroes Tax Credit” and the “Wounded Warriors Tax Credit.” Employers may qualify for a credit of up to $5,600 for hiring a veteran who has been looking for employment for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks but less than six months. Employers who hire an unemployed veteran with service-connected disabilities who has been looking for work for more than six months may be eligible for a tax credit of up to $9,600.

The credits apply to new hires after November 21, 2011, through December 31, 2012. For more information about the new law, contact our office at (518) 798-3330.

FIVE YEAR-END TAX TIPS

2011-12-16T07:45:00.001-05:00

* Early this month check the amount of 2011 tax you have prepaid through withholding and quarterly estimates. If you've underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This could prevent your being charged underpayment penalties for 2011.

* Avoid the marriage penalty. If a wedding or divorce is in your plans, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the dates of a year-end event may save taxes. Even though recent tax laws provided some relief from the marriage penalty, they did not eliminate it.

* Plan for losses. Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

* Use this year's annual gift tax exclusion. If you make annual gifts to family members or others, make sure you complete your gifts for 2011 by December 31.

* Squeeze in planned equipment purchases before December 31. Taxpayers must usually deduct the cost of business property over several years. A special election allows taxpayers to expense up to $500,000 of new and used property purchased and put into service in 2011. Also check into the 100% bonus depreciation allowance for new equipment purchases.

Property such as machinery, equipment, and furnishings qualify. Be careful with special rules that apply to automobiles and personal computers.

WATCH OUT FOR "WASH SALES" ON STOCKS

2011-12-13T07:51:00.002-05:00

Thinking of selling a security before December 31 to take advantage of a capital loss? To make sure the loss is deductible, refrain from buying a substantially identical security during the 61-day period that begins 30 days before you sell and ends 30 days after. Such a purchase would violate the "wash sale rule" and make your loss nondeductible.

CMJ, LLP VOTED BY THE BUSINESS REVIEW AS THE 2011 BEST PLACES TO WORK

2011-12-12T10:13:00.001-05:00

CMJ, LLP
Certified Public Accountants

"We have mutual respect for everyone. We operate as a team. We don't, as partners,

expect anyone to do anything we wouldn't do ourselves. We have clear values here, clear

goals and everyone understands them and supports them. And the No. 1 expectation:

Always do what's right."

Paul Curtis, Managing Partner, CMJ

"The partners continually strive to be open to recommendations from their

employees for the betterment of the firm."

CMJ employee

"CMJ is a perfect example of a great place to work. I wake up everyday

and look forward to going to work. Our employees all get along very well

and CMJ works hard to make sure new employees will fit with our goals and

work ethics. This results in a great group of people that have common goals

and are able to enjoy in the splendors of a job well done."

CMJ employee

"I've never worked for such a giving, caring, fun employer!"

CMJ employee

"State of the art technology and resources enable the staff to provide

the highest level of client service. Tremendous importance is placed on

continuing education for all employees and all expenses are paid for by the firm."

CMJ employee

"We are ALL part of a team! Everyone here goes above and beyond if someone needs

any extra help or support. TEAMWORK is truly what we stand for."

CMJ employee

RESIDENTIAL ENERGY CREDIT EXPIRES SOON

2011-12-09T08:15:00.002-05:00

Claim the last of the residential energy credit. Install certain energy efficient property in your home by year-end (such as insulation, doors, and windows) and get a federal tax credit of up to $500. That's the aggregate total credit, including amounts you claimed in prior years. The credit is scheduled to expire after December 2011.

NEW LAW PROVIDES TAX CREDITS FOR HIRING VETERANS

2011-12-08T14:46:00.000-05:00

A law signed by President Obama on November 21, 2011, creates new tax credits for hiring military veterans. A "Returning Heroes Tax Credit" of up to $5,600 per employee is available to employers who hire veterans who have been looking for work for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks, but less than six months. A "Wounded Warriors Tax Credit" provides a credit of up to $9,600 for hiring veterans with service-related disabilities who have been looking for work for more than six months. Contact us at (518) 798-3330 if you need more information.

INVESTMENT TAX TIPS

2011-11-30T10:02:00.003-05:00

As year-end approaches, take a closer look at your investment portfolio. There may be some tax-saving strategies worth considering.

For example -

* Wash sales. Thinking of selling a security before December 31 to take advantage of a capital loss? To make sure the loss is deductible, refrain from buying a substantially identical security during the 61-day period that begins 30 days before you sell and ends 30 days after.

* Worthless stocks. For capital loss purposes, securities with no value are treated as if you sold them on the last day of the year. Your loss is generally the same as your cost.

If you want to deduct worthless securities on your 2011 return, you'll need to prove the security became worthless during the year and that it truly has no value. Not sure you can meet those requirements? Selling before year-end may be a better option.

* Stock donations. Giving appreciated stock to charity lets you avoid capital gains tax and claim a charitable deduction.

In order to deduct the donation on your 2011 return, the gift must be complete. For certificates you endorse and present directly, the date of mailing or other delivery is considered the date of the gift. When your broker or the issuing company handles the transaction, the gift is complete when the stock is titled to the charity.

Please call us at (518) 798-3330 for more guidance in your year-end tax review.

CONSIDER MAKING GIFTS BEFORE YEAR-END

2011-11-28T15:36:00.003-05:00

A lifetime gifting program might trim both your estate and income taxes. First, there's the annual exclusion for gifts. Currently, you can give $13,000 annually to any number of recipients without paying federal gift tax.

Married couples can double this amount by gift-splitting; a gift of $26,000 from one spouse is treated as if it came half from each.

Gifts do more than help out children who need the money. They also reduce your estate so your estate will pay less estate tax upon your death. Apart from annual gift giving, you can currently transfer (during your lifetime or through your estate) a total of $5,000,000 with no estate or gift tax liability. On amounts above this threshold, you or your estate will be faced with taxes at the current top rate of $35%. So a consistent program of annual gift giving might create substantial tax savings.

Note that gifts to individuals do not entitle you to an income tax deduction. A gift isn't a charitable contribution. Conversely, a gift doesn't constitute taxable income to the recipient. Gifts of income-producing property may, however, reduce your taxable income. Once you've given the property away, the recipient, not you, receives the income it produces and pays any income tax due on it.

One advantage to annual gift giving is that it is relatively simple to do, especially if you're giving away cash. Another advantage is flexibility. You're not locked into anything; you can see how much you can afford to give away each year. You can give away anything - cash, stock, art, real estate. Valuation is the fair market value on the date of the gift. Subsequent appreciation, if any, belongs to the donee's estate, not yours.

Before you give away assets, be sure you will not need them yourself to provide income in later years. Consider the impact inflation will have on your resources.

Proper planning is essential in this area; get professional assistance before you do any gift giving.

CMJ, LLP FOOD DRIVE WAS A GREAT SUCCESS

2011-11-28T14:16:00.001-05:00

On behalf of the staff at CMJ, we would like to thank everyone who came through our doors with such generous donations to support the Warren-Hamilton Counties Community Action Agency. This was a welcome addition to their food pantry during this holiday season.

Again, many thanks for your generosity!

EMPLOYEE THEFT IS A SIGNIFICANT BUSINESS PROBLEM

2011-11-23T15:14:00.003-05:00

Employee theft happens more frequently than you hear or read about. It's believed that only a small percentage of cases of employee dishonesty are reported and prosecuted.Too often, the employee is just dismissed and moves on to steal from someone else. In other cases, especially where financial controls are weak, the employee may steal small amounts for years without being detected.

There are many things you can do to spot employee theft in your business. Have an inquiring mind, ask lots of questions, and never accept answers that don't make sense. Spend time each month monitoring your financial results. Look for inconsistencies, such as inventory declining in a slow sales month or excessive customer returns. Listen to customer complaints about late deliveries or missing items, and don't accept "computer problems" as an excuse. If you know your business, you don't have to be an accounting expert to sense when something is wrong.

You could also spot-check your accounting records by reviewing one category each month. For example, you might scan the check register to see just what payments are being made. Look for missing check numbers and ask to see any voided checks. Another month you might review the payroll log or look over the records of returned items. Look for multiple entries of similar items or suspicious customer names.

Finally, watch your employees for changes in behavior or spending that seems to be beyond their means. And beware of an employee who insists on doing all the detail work and never takes a vacation. It could be the sign of someone with something to hide.

For assistance with this or any business problem, contact our office at (518) 798-3330.

HEED THE RULES FOR DEDUCTING CHARITABLE CONTRIBUTIONS

2011-11-21T07:15:00.004-05:00

Sticking to the rules when making charitable contributions can save tax dollars. Here are three tips.

* Recordkeeping is vital if you want to be able to deduct a contribution to charity.

What records do you need? For starters, to claim an itemized deduction, you're required to have support for all cash contributions, no matter what the amount. A bank statement, a copy of the cancelled check, or a credit card record will usually suffice for donations under $250. For donations of $250 or more, a statement from the charity is required, giving the charity's name, the date, the amount of your donation, and the value of goods and services received for the donation, if any. In the case of payroll donations, your pay stub or W-2 can back up your deduction.

The substantiation rules for noncash donations such as household items differ depending on the type of property and its value. For instance, you'll need a contemporaneous written acknowledgment from the charity for donations of $250 or more. As a general rule, "contemporaneous" means you receive the acknowledgment before you file your return or before the due date of your return, whichever is earlier.

* Make a gift from your IRA. The break allowing a transfer of up to $100,000 from your IRA to a qualified charity is available for 2011. To benefit, you must be over age 70½, and the contribution has to be a direct payment from your IRA to the charitable organization.

* Write down your vehicle mileage for charitable driving. Written records rule, whether you claim the standard mileage deduction of 14¢ a mile or actual expenses. Make sure your log or other paperwork includes the name of the charity, the date, and the miles you drove or the total cost you incurred.

Please call (518) 798-3330 for advice on getting the most benefit from your donations, including appreciated property and out-of-pocket expenses.

NO MORE PAPER SAVINGS BONDS AFTER 2011

2011-11-18T08:05:00.009-05:00

For the past 76 years, investors had the option of buying U.S. savings bonds at a bank or credit union. After December 31, 2011, that will no longer be the case. Savings bonds can then only be purchased electronically through TreasuryDirect, sponsored on the Internet by the Treasury's Bureau of Public Debt.

Bonds have been available through TreasuryDirect since 2002, but investors have been slow to purchase bonds electronically. Only 11% of bonds purchased from October 2010 through June 2011 were bought through TreasuryDirect.

Selling bonds exclusively through electronic means will save the government $70 million over five years. The Treasury points out that investors benefit too: electronic bonds are less likely to be misplaced, and they are automatically redeemed when they mature.

The change won't affect outstanding paper bonds.

SOME TAX FACTS

2011-11-17T14:41:00.002-05:00

Some tax facts from National Taxpayer Advocate Nina Olson's annual report to Congress:

* Americans spend 6.1 billion hours preparing their taxes every year.

* There have been 4,428 changes to the tax code over the past ten years.

* Nine out of ten Americans have someone prepare their tax return or use tax software.

* The tax code is so long that no one is certain exactly how long it is.

NEW WORKER CLASSIFICATION PROGRAM ANNOUNCED BY IRS

2011-11-14T07:25:00.002-05:00

Companies that have had worker classification issues are being offered a settlement program by the IRS. The program, labeled the "Voluntary Worker Classification Settlement Program," will let employers who previously misclassified employees as independent contractors make a minimal payment to settle the tax dispute. The program will give eligible employers substantial relief from federal payroll taxes they may have owed in the past. Employers must pay just over 1% of wages paid to reclassified workers for the past year, and they must agree to treat these workers as employees going forward.

PAM CLEVELAND ATTENDS NATIONAL FORENSIC ACCOUNTING CONFERENCE

2011-11-09T13:55:00.000-05:00

Pamela L. Cleveland, CPA, CFFA, Manager of Accounting, Assurance, and Advisory Services at the Certified Public Accounting firm CMJ, LLP, recently attended the National Forensic Accounting Conference in Chicago sponsored by the American Institute of Certified Public Accountants (AICPA).

The conference offered sessions in fraud investigation, identification, reporting and deterrence, and complex analytical techniques. Speakers included leading experts in fraud and litigation services such as judges, attorneys, corporate executives, and forensic specialists.

CMJ, LLP, located in Queensbury, New York, provides tax, accounting, and management consulting services for corporations, partnerships, and professionals throughout the region. They also provide business valuation services and merger and acquisition consulting to clients both domestically and globally. More detailed information regarding the firm’s services is available through its web site: http://www.cmjllp.com.

CHECK YOUR INCOME LEVEL AND TAX BREAKS

2011-11-09T09:31:00.002-05:00

Check into all the tax credits and deductions for which you might qualify this year. Because some of these tax breaks are reduced or eliminated entirely once your income reaches certain limits, you need to be aware of the income phase-out thresholds for those credits and deductions. While it doesn't make sense to make less income just to qualify for a tax break, shifting income from one year to another may sometimes be a smart thing to do.

GET THE BEST TAX BANG FOR DEDUCTIONS

2011-11-07T07:24:00.002-05:00

Review your tax deductions for 2011. If you're close to the cutoff point between itemizing or taking the standard deduction, consider the advantage of bunching your deductible expenses every other year. You can then alternate between itemizing one year and taking the standard deduction the next, saving tax dollars by doing so. For help in your calculations, contact us at (518) 798-3330.

CMJ, LLP, CERTIFIED PUBLIC ACCOUNTANTS, INVITES YOU TO OUR FOOD DRIVE

2011-11-02T09:39:00.002-04:00

CMJ, LLP, Certified Public Accountants, invites you to “Fill our Foyer” from Monday, November 14th to Friday, November 18th to support the Warren-Hamilton Counties Community Action Agency. Their food pantry has had over 9,000 people come through their doors so far this year, plus provided over 4,000 people with emergency food baskets.

With the holidays approaching, their shelves need to be filled. Canned foods and soups, boxed dinners, instant potatoes, pasta, beans, cereal, crackers and canned fruit are in great demand. Also in need are hygiene products such as shampoo, individually wrapped bars of soap, deodorant, and individually wrapped toilet tissue.

We have a large foyer and we are confident that you will assist in filling it. Our office is located at 276 Dix Avenue in Queensbury (near Kmart and across the street from the car wash.) Call us at (518) 798-3330 if you have any questions. Thank you for your generosity!

GUIDANCE ON EMPLOYEE USE OF CELL PHONES

2011-11-01T11:32:00.007-04:00

The Internal Revenue Service has issued guidance designed to clarify the tax treatment of employer-provided cell phones.The guidance, issued as an IRS Notice, relates to a provision in the Small Business Jobs Act of 2010, enacted last fall, that removed cell phones from the definition of listed property, a category under tax law that normally requires additional recordkeeping by taxpayers.
The guidance on the treatment of employer-provided cell phones as an excludible fringe benefit provides that when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not require recordkeeping of business use in order to receive this tax-free treatment.

Simultaneously with the Notice, the IRS announced in a memo to its examiners a similar administrative approach that applies with respect to arrangements common to small businesses that provide cash allowances and reimbursements for work-related use of personally-owned cell phones. Under this approach, employers that require employees, primarily for noncompensatory business reasons, to use their personal cell phones for business purposes may treat reimbursements of the employees' expenses for reasonable cell phone coverage as nontaxable. This treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee's regular wages.

Under the guidance issued, where employers provide cell phones to their employees or where employers reimburse employees for business use of their personal cell phones, tax-free treatment is available without burdensome recordkeeping requirements. The guidance does not apply to the provision of cell phones or reimbursement for cell-phone use that is not primarily business related; as such arrangements are generally taxable.

If you have any questions regarding the use of cell phones or the tax treatment of other fringe benefits, please call us at (518) 798-3330 at your earliest convenience.

ACT SOON TO BENEFIT FROM EXPIRING TAX BREAKS

2011-10-31T16:07:00.002-04:00

A number of tax breaks are due to expire at the end of this year. Though Congress may renew some or all of them, there is no way of knowing if or when they will.

As part of your year-end 2011 tax review, consider whether any of these opportunities to cut your tax bill fit your situation.

* The option for deducting state and local sales taxes in lieu of deducting state and local income taxes.

* The above-the-line deduction for up to $4,000 of higher education expenses.

* The above-the-line deduction of up to $250 for classroom supplies purchased by teachers.

* The tax-free charitable contribution from an IRA of up to $100,000 allowed for taxpayers 70½ or older.

* 100% bonus depreciation on new equipment purchased by business.

* $500 energy credit for energy-saving expenditures for your personal residence.

* Section 179 expensing election on up to $500,000 of new or used business equipment purchases.

SOME BUSINESS MEALS ARE 100% DEDUCTIBLE

2011-10-28T08:25:00.002-04:00

Are you watching what you eat at work? Though that may not seem like a tax question, how you account for meals can affect your business tax return.

One reason why: While you can generally deduct only half the cost of meals related to your business activities, the tax code includes specific exceptions that allow a deduction of 100% of what you spend on food and beverages in certain situations.

Here are three exceptions to the general rule:

* Meals provided to your employees on a social basis. That once-a-year holiday party qualifies for 100% deductibility as a "recreational, social, or similar activity," as long as it is primarily for the benefit of all your employees.

* Food with nominal cost. Do you supply bottled water, morning-meeting donuts or office snacks for your staff? "De minimis" employee benefits -- those small items your business pays for that are not considered taxable income to your employees -- are typically 100% deductible.

* Items available to the public. Food served at seminars, promotions, or a "new office warming" reception where you invite the public is 100% deductible.

Remember that you'll still need to keep detailed records to substantiate your deductions for meals and food served under these exceptions.

We'll be happy to help you review your expenses and set up a system to account for items that qualify for a more generous deduction!

IRS ISSUES GUIDANCE ON BONUS DEPRECIATION

2011-10-25T07:29:00.003-04:00

Under the "Tax Relief Act of 2010," you may be able to write off the entire cost of business property placed in service this year, thanks to 100% "bonus depreciation.

Prior to this law, a business was able to claim 50% bonus depreciation on qualified new (but not used) property placed in service in 2010. This included property with a cost recovery period of 20 years or less, most computer software, qualified leasehold improvement property, and certain water utility property. Bonus depreciation could be coordinated with Section 179 first-year expensing and regular depreciation deductions (subject to the annual limits).

The "Tax Relief Act," signed December 17, 2010, improved and extended the tax benefits. It allows a business to claim 100% bonus depreciation for qualified property placed in service from September 9, 2010, through December 31, 2011 (through 2012 for property with a cost recovery period of ten years or more and certain aircraft and transportation property). As the law currently stands, 50% bonus depreciation can be claimed for qualified property placed in service during 2012.

The "Tax Relief Act of 2010" did not change the definition of "qualified property"; it remains the same as it was before.

Recently, the IRS issued new guidance on using bonus depreciation. It focuses on the following areas:

* Depreciation step-down. You're allowed to "step down" from 100% bonus depreciation to 50% bonus depreciation this year if it suits your needs. For example, it may not be advantageous for a business to front-load its depreciation deductions to receive the maximum amount. The IRS guidance spells out the procedure for cutting back to 50% bonus depreciation.

* Company vehicles. The first-year depreciation deduction for "luxury cars" and other vehicles is enhanced by $8,000 due to the bonus depreciation rules.

Be aware that certain heavy-duty SUVs and other vehicles weighing more than 6,000 pounds are exempt from the luxury car limits. If purchased after September 8, 2010, and before January 1, 2012, they may qualify for 100% bonus depreciation.

* Qualified leasehold property. The IRS says that qualified restaurant and retail improvement properties may be eligible for 100% bonus depreciation under the definition of "qualified leasehold property."

* Component depreciation. A business may be able to deduct certain components of a business building over a faster cost recovery period than the usual 39-year period required for an entire building. The IRS ruling authorizes an election to use 100% bonus depreciation for qualified components of a self-constructed building.

Even with the recent IRS guidance, the depreciation rules remain very complicated. For assistance in applying the rules for maximum tax benefit to your business, contact our office at (518) 798-3330.

REVIEW YOUR 2011 TAX PAYMENTS

2011-10-20T11:15:00.002-04:00

Don't let penalties for underpaid taxes increase your tax bill next April. Check the total you've paid in for 2011 through withholding and/or estimated taxes. If you've underpaid, consider adjusting your withholding for the final pay periods of 2011 or increasing your remaining quarterly estimate. If you employ household workers, be sure your calculations include the payroll taxes you'll owe for them.

SHOULD YOU UNDO A ROTH TO SAVE TAXES?

2011-10-17T09:25:00.003-04:00

Yes, 2010 was the year of the Roth, and you may have converted your traditional IRA to take advantage of the one-time option to postpone recognizing the income. As you know, half of the related tax bill will be due with your 2011 tax return.

End of story? Not exactly. You can still take advantage of a planning window that may save you money. Under the rules, you have until October 17, 2011, to change your mind about the original conversion.

The tax term for the "do-over" election is recharacterization. It works like this: Say the value of the assets you converted to a Roth during 2010 has declined. That means if you had waited until now to convert, you would have ended up paying less tax. Reversing your 2010 decision puts you back in the position you were in before the Roth conversion and wipes out your original tax liability.

Even better, you can still do another traditional-to-Roth IRA conversion after recharacterizing. While the option of splitting the income over future years is no longer available, you can achieve the same effect by reconverting over a multi-year period. Just be aware that time restrictions may apply on this strategy. For details or assistance, give us a call at (518) 798-3330.

IRS DROPS INTEREST RATES FOR FOURTH QUARTER

2011-10-13T15:31:00.002-04:00

The IRS will pay 1% less on tax overpayments and charge 1% less on tax underpayments during the fourth quarter of 2011. For the calendar quarter beginning October 1, 2011, and ending December 31, 2011, IRS interest rates will be 3% on individual overpayments and 2% on corporate overpayments, 3% on individual and corporate underpayments, 5% on large corporate underpayments, and .5% (1/2 a percent) on corporate overpayments exceeding $10,000.

FILE BY OCTOBER 17 TO AVOID PENALTIES

2011-10-10T08:30:00.002-04:00

Tick-tock. Time is almost up on that six-month extension you filed back in April to give yourself more time to complete your 2010 individual income tax return.

What happens if you fail to file your return by the extended due date?

One consequence: Unless a disaster-relief exception applies or you have a valid reason, you may be charged penalties and interest.

For example, the penalty for filing your return after October 17, 2011, is 5% of the amount of your unpaid tax, per month, up to a maximum of 25%. After 60 days, a minimum penalty of the smaller of $135 or 100% of the tax due applies.

In addition, a late payment penalty of ½ of 1% of the tax due may apply for each month or part of a month that you fail to pay the tax due until you reach the full 25%. The two penalties interact and can be combined.

You'll also have to pay interest on the tax due. During 2011, the rate on underpayment of tax was 3% in the first quarter, 4% in the second and third quarters, and back to 3% in the fourth quarter. The interest is compounded daily and can be charged on penalties.

Since the penalty and interest are based on unpaid tax, neither applies when your return shows zero tax due. Filing a return is still a good idea, however. Why? The general rule limiting the IRS to a three-year period for assessing tax begins when you file. No return means no triggering of the statute of limitations.

Give us a call at (518) 798-3330 if you think you may miss a deadline. We can help keep penalties to a minimum.

IRS PROVIDES TAX RELIEF FOR DISASTER VICTIMS

2011-10-07T15:29:00.001-04:00

If you used Form 4868 to request a six-month extension to file your 2010 income tax return, be aware that your return must be filed by October 17, 2011. Generally, the IRS does not provide filing extensions beyond that date; however, victims of recent natural disasters have been given more time to file returns and pay taxes. This tax relief is part of the federal response to recent hurricanes on the East coast, wildfires in Texas, and severe storms and flooding in other parts of the country.

For updates on relief and areas covered, go to "Tax Relief in Disaster Situations" on the IRS website (www.irs.gov).

LOOK INTO THE BENEFITS OF A SOLO 401(K) PLAN

2011-09-28T10:07:00.002-04:00

Have you heard about solo 401(k) plans? The traditional type of 401(k) retirement plan is now available for self-employed individuals. And it lets you save more than other types of plans.
In the past, 401(k) plans were typically offered by larger corporations. Employees could make pre-tax contributions by payroll deduction. The company would then usually match a percentage of those contributions. Investments grew tax-free until withdrawn at retirement. One advantage of a 401(k) plan is the relatively large amount you can contribute each year - $16,500 in 2011 with an extra $5,500 catch-up if you’re 50 years old or older.

Now you can establish the same type of plan if you’re self-employed or run an "owner only" business. That’s a business with just you and possibly your spouse, but no employees. You can save more with a solo 401(k) than with the traditional SEP, SIMPLE, or Keogh plans. That’s because you are able to make two types of tax-deductible contributions. First, you make the usual employer contribution as owner of the business. Then you can make an additional salary deferral as an employee. As a result, you could potentially shelter up to $49,000 of your 2011 self-employment earnings from tax. If you’re eligible for the over-50 catch-up, that rises to $54,500.

The solo 401(k) plans are flexible and relatively simple to administer. If you think this plan might be right for you, please contact our office at (518) 798-3330. We can tell you more about it and help show you how much you could save.

SHOULD YOU "ROBS" YOUR 401(K) TO START A NEW BUSINESS?

2011-09-26T09:59:00.009-04:00

ROBS is an acronym for a relatively new financing arrangement known as a "rollover as business startup" being touted on the Internet and arranged by some investment firms. Is it a good option for your new business?
Typically a ROBS works like this: You pay a fee to a plan sponsor to create a corporation, which sets up a profit sharing or 401(k) plan of its own. Then you roll funds from your own 401(k) plan into the newly created corporation's plan. Your next step is to use the funds in the corporation's plan to buy the stock of your new company, thereby providing working capital for your new business.

Sound too good to be true? It probably is. For one thing, profit sharing plans, while a legitimate way to reward employees by sharing profits from your business, must follow strict rules. These include filing annual tax returns and avoiding transactions that discriminate in favor of highly paid employees, including yourself. The IRS scrutinizes ROBS very closely to be sure all the rules are carefully followed.

When you're looking for capital to set up a new venture, the idea of tax-free cash is appealing. But if the IRS determines that the deal is a prohibited transaction, you can be hit with penalties and you risk losing your retirement money.

Please contact us at (518) 798-3330 before you enter into any complicated, questionable arrangement. We're here to help you make the right choices for your business.

DO YOU OWE TAXES WHEN YOU GIVE A GIFT?

2011-09-22T09:37:00.006-04:00

Some gifts are big, others are small, and the Internal Revenue Service expects you to report them all.
Or do they? Gift giving can be an important tax planning strategy. This year, a slowing economy might lead you to help family members with upcoming fall college bills or unexpected expenses. Now, before you write the checks, is a great opportunity to get a handle on the rules.
Here are two:

* Tax returns are not always required. The person receiving your gift does not have to file a return, no matter the amount.

More good news: When you give gifts of $13,000 or less to any one person within a calendar year, you don't have to file a return either. If you're married, your spouse can also make gifts of $13,000 to the same or different recipients without the need to file a return.

Other non-reportable gifts include amounts you pay for anyone's tuition or medical bills, as long as you write the checks directly to the school or health care facility. That's true even if the cost exceeds $13,000.

* When a return is required, you may not owe gift tax. Under present tax law, up to $5 million of gifts made during your lifetime can be shielded from tax. This is in addition to the $13,000 per donee annual exclusion.

Call us at (518) 798-3330 about other rules that apply to your situation. We'll be happy to discuss tax-wise strategies and help you make the most of your gift giving.

WHEN IS INCOME TAXABLE, AND WHEN IS IT NOT?

2011-09-19T09:30:00.004-04:00

You only have to examine your paycheck to realize certain income is tax-free. For example, health insurance premiums paid by your employer are generally not includible in your income.

Do you know the tax status of other types of income? Here's a quiz to test your knowledge.

1. You tell your son he'll be the sole beneficiary of your estate, and that you've decided to give him an advance on his inheritance. You hand him a check for $10,000. He wants to know how much he'll have to pay in taxes. What do you tell him?

Answer: Gifts, bequests, devises, and inheritances are generally not taxable to the beneficiary. Income produced from those sources is taxable to the beneficiary.

2. You withdraw $20,000 of the contributions you made to your Roth IRA over the past five years, but you're not of retirement age. Do you have a taxable event?

Answer: Unlike traditional IRAs, distributions from Roths are first allocated to amounts you contributed to the account. To the extent the distribution is a return of your contributions, it's not included in your income, and you can withdraw it penalty- and tax-free.

3. You purchase a piano at an auction and take it home. While cleaning it, you discover $5,000 inside. Is this money taxable to you?

Answer: Yes. Once it becomes yours, "treasure trove" property is taxable to you at fair market value.

TAX TIPS FOR INDIVIDUALS SELLING THEIR HOME

2011-09-16T07:00:00.044-04:00

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

4. If you can exclude all of the gain, you do not need to report the sale on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

If you would like more information about selling your home, please contact our office at (518) 798-3330.

TAX-SAVING TIP: PUT YOUR INVESTMENTS IN THE RIGHT PLACE

2011-09-14T08:55:00.002-04:00

To take best advantage of the lower long-term capital gains tax rates, investments that produce capital gains should be held in taxable accounts and those that produce interest income should be held in tax-deferred accounts (like your IRA or 401(k) plan). If you put capital gain investments in tax-deferred retirement accounts, you could turn income that would be taxed at lower rates into ordinary income taxed at higher rates.

USE TAX BREAKS TO CUT EDUCATION COSTS

2011-09-12T08:00:00.002-04:00

As schools get back in session, it's a good time to check the education tax breaks for which you might qualify. First, there's the American Opportunity Tax Credit (formerly called the Hope credit) for a percentage of qualified expenses paid during the first four years of higher education. Second, the Lifetime Learning Credit allows a deduction for a percentage of qualified expenses paid for any year the American Opportunity Credit isn't claimed, and it even applies to job-related classes. Third, you may qualify for a deduction for interest paid on student loans. Fourth, education savings accounts allow annual nondeductible contributions for children under 18, with tax-free withdrawals for qualifying education expenses. Section 529 plans for college expenses should also be investigated.

TAX-SAVING TIP: WATCH PHASE-OUT LEVELS

2011-09-08T07:00:00.002-04:00

Are you familiar with income phase-out levels for those tax credits and deductions you hope to take advantage of on your 2011 tax return? While it doesn't make sense to make less income just to qualify for a tax break, shifting income from one year to another may sometimes be a smart move.

Learn about the tax credits and deductions for which you might qualify. Then estimate your income for this year, and if it will be just beyond qualification range, look for opportunities to defer income until a later year. Investment income can often be shifted, or you might delay the exercise of stock options or the receipt of a bonus.

YOUR BUSINESS SUCCESSION PLAN MUST ANSWER THREE KEY QUESTIONS

2011-09-06T10:51:00.011-04:00

Succession planning is very important for a family owned business. Before you sit down with your tax and legal advisors to draw up a succession plan, you should think through three key issues: who do you want to succeed you, when do you want the transition to take place, and how do you want to structure the transition?

* WHO? The question of who will succeed you in the business can be the toughest of all, largely because there is so much emotion involved. Most owners want to pass the business on to the family. But are your children willing to take on the business, and if so, are they capable of running it? Will it cause a family squabble if one or two children want to run the business, but others are not interested? Resolving these issues may take a lot of honest, open discussion with family members to discover their true feelings. If there is not an obvious family successor, other alternatives include selling the business to an outsider, promoting an existing employee to head the business while you retain ownership, or even selling the business to the employees.

* WHEN? When you make the transition depends on a number of factors, such as your age, health, retirement goals, and the readiness of a successor. Consider whether you want to maintain some involvement with the business or make a clean break. Remember, though, you should always have a contingency succession plan in case of sudden death or disability.

* HOW? How you structure the transition depends partly on the answers to the earlier questions and partly on financial considerations. Think through issues such as whether you need retirement income from the business or whether you primarily want to minimize estate taxes. Knowing your goals for the transition will make it much easier to tailor a succession plan that fits your specific situation.

For guidance in your business succession planning, call us at (518) 798-3330.

SEPTEMBER 15TH IS A MAJOR TAX DAY

2011-09-06T10:21:00.000-04:00

Important tax deadlines fall on September 15th. Check this list to see if any apply to you or your business:

* The third quarter installment of 2011 estimated income tax is due for individuals.

* September 15th is the filing deadline for 2010 tax returns for calendar-year corporations that received an extension of the March 15th filing deadline.

* September 15th is the filing deadline for 2010 partnership tax returns that had an extension of the April 18th filing deadline.

* The third installment of 2011 estimated tax is due for calendar-year trusts and estates.

Contact our office at (518) 798-3330 if you need more information or filing assistance.

TWO FROM CMJ, LLP ATTEND AICPA TRAINING

2011-09-06T10:07:00.001-04:00

Sarah B. Lindsell, CPA, Tax Supervisor, and Sean E. Corlew, Senior Tax Associate, of the certified public accounting firm, CMJ, LLP, recently attended a week long tax training program offered by the American Institute of Certified Public Accountants (AIPCA) in Chicago, IL. As the premier tax training school for tax practitioners, highly-focused, intensive training is provided by nationally renowned tax experts. Programs focused on Partnerships, LLCs and LLPs, taxation of estates, trusts, and gifts, buying and selling corporations, and consolidated income tax returns.