Tuesday, October 26, 2010

Tax Planners Unsure What Moves to Make

October 18, 2010 (Detroit Free Press) — The beauty of year-end tax planning this year is that you don't have to feel badly about procrastinating.

What kind of moves should you be making to cut that tax bill? Who knows?
"I don't know what to do," said James Jenkins, president of Jenkins & Co., an accounting firm in Southfield, Mich. "Call 1-800-PSYCHIC; try that."
Or maybe just wait until after Election Day, Nov. 2, to see what difference that might make.
Why all the uncertainty? Because $4 trillion worth of Bush-era tax cuts expire at the end of this year if Congress does nothing. Some could be extended; others likely will not.
So you may be seeing higher tax rates on capital gains and dividends.
President Barack Obama has a plan that increases the top marginal tax rates to 36 percent and 39.6 percent - up from 33 percent and 35 percent. Obama also has long promised that he would not increase taxes for most married taxpayers with incomes below $250,000 and for single taxpayers with incomes below $200,000.
Yet much is yet to be debated.
"People are still taking a wait-and-see attitude on a lot of this," said Andy Zaleski, senior director of BDO USA in Troy, Mich. "This is really an uncertain time for individual taxpayers."
Plenty of accountants and taxpayers are frustrated because it's not clear what changes are ahead.
The old year-end theories-such as delaying a bonus into another tax year or making a slew of charitable contributions before Dec. 31 - might or might not be helpful this year.
For example, taxpayers who think their tax rate will be higher next year could actually want to delay making charitable contributions until 2011. But that's not a good strategy for those who expect their tax rate to remain unchanged in 2011, said Bob Scharin, senior tax analyst for Thomson Reuters in New York.
One big question mark for investors: Where are long-term capital gains rates headed?
Under current rules, most taxpayers pay 15 percent on capital gains if they've held the property for more than one year before selling. Some individuals even pay a 0 percent rate on long-term gains if they're in the 10 percent or 15 percent income tax brackets.
Capital gains and losses are classified as long-term or short-term. If you hold an asset or property one year or less, your capital gain or loss is short-term.
If nothing is done in Congress, the long-term capital gains rate would change in 2011 to 20 percent for most individuals on assets held up to five years. The rate would be 18 percent if the assets are held longer than five years.
And beginning in 2011, again if Congress makes no moves, the long-term capital gains rate would go up to 10 percent for assets held up to five years - not 0 percent - for individuals in the 10 percent and 15 percent income tax brackets. For assets held longer than five years by those taxpayers in lower brackets, the 2011 rate would be 8 percent.
Scharin said one move that makes sense now is for some individuals in lower tax brackets to sell before Dec. 31 if they'd qualify for that 0 percent long-term capital gains rate.
This strategy could apply to married taxpayers filing a joint return on taxable income of up to $68,000. For singles, the taxable income could be up to $34,000 in 2010 to qualify for that 0 percent capital gains rate.
Scharin noted the 0 percent capital gains rate applies only to the extent the individual's taxable income does not exceed the appropriate threshold.
For example, let's say a married couple has $50,000 of taxable income, aside from capital gains. Scharin said for 2010 they can qualify for the 0 percent rate on up to $18,000 of long-term capital gains. If they have $20,000 of such gains, $18,000 would qualify for the 0 percent rate and $2,000 is taxed at 15 percent.
Scharin said it can make sense for taxpayers to lock in that 0 percent now. But you'd want to make sure how much you're selling and what level of taxable income you'd have for 2010.
If the 0 percent rate stays in place next year - that is, if Congress extended this tax break - you'd still have avoided capital gains taxes for 2010 and you'd be able to have a chance to take additional tax-free gains in 2011.

Tuesday, October 19, 2010

Is the Online Information About Your Business Correct?

Check before you roll your eyes. A third of searchers say they give up when they can't easily find information -- and one in six say info about small businesses online is incorrect or confusing, says a new study.

Seven out of 10 consumers are more likely to use a local business if it has information available on a social media site, says a new study.
The annual study, called Local Search Usage Study: Bridging The Caps, From Search to Sales, is a joint effort of comScore and TMP Directional Marketing, a local search marketing firm. It includes an online survey of some 4,000 consumers, plus data gleaned from observing one million consumers who agreed to have their online searches monitored anonymously.
Having a page on Facebook is a start, but it's not a one-time effort: 81 percent of consumers using social media say it's important for businesses to respond to questions and complaints. And for the record, you do need to worry about reviews and ratings – 78 percent said they're important when deciding what to buy.
What else do you need to be doing with social media? Nearly four out of five (78 percent) of users want special offers, promotions, and information about events, 74 percent want regular posts about products, and 72 percent want posts about the company itself. (Wondering about posting those photos of the company office—or picnic? Two-thirds of those surveyed want to see them.)
If this all seems too daunting, the survey also suggests a simple starting place: make sure there is correct information about your business in as many places online as you can (Google, Yelp, Facebook, Twitter, etc.). Social networkers are 67 percent more likely to buy something than general searchers, but one in six searchers is frustrated by the lack of reliable information about small businesses on the Web – either it's not there at all, it's incorrect, or it's confusing or disorderly. One third of searchers give up on a business when they can't quickly find the information they're looking for.
Where are consumers looking first for local business information? Seventy percent of consumers go online first for local business information, up seven percentage points from last year. One third of the survey's respondents hit traditional search engines (up 2 percent from last year), 23 percent look to the old-fashioned yellow pages (yes, really – down 5 percent from last year, though), and 22 percent turn to Internet yellow pages (the survey includes sites such as Yelp in this category).
Then there's the 13 percent who search local sites, and 9 percent who search social networks (both up 1 percent from last year.) Keep in mind that most consumers reference multiple sources – these figures simply represent where a person looks first. It's also worth noting that, in the past, consumers were more likely to use the old-fashioned Yellow Pages to find a specific business; today, online searches are used when trying to find new businesses or products (or the best deals on those products).
Of the searches on local sites, far and away the winner was Google (Google Places) with 41 percent. Bing Maps placed second at 11 percent (up from 4 percent last year), and Yahoo! Local took 10 percent. Tied for fourth place, with 9 percent apiece: SuperPages, YP.com, and Yellowbook.com. Six percent of consumers used Mapquest, while Dexknows and Yelp each controlled roughly 1 percent of the market.

Tuesday, October 12, 2010

New Publication Highlights Major Accounting Developments of Past Year

October 4, 2010 (SmartPros) — With another SEC announcement on the use of IFRS in the US expected in 2011, PwC releases new edition of IFRS and US GAAP: Similarities and differences.

PwC US released an updated edition of its popular IFRS and US GAAP: Similarities and differences guide.  Its purpose is to improve companies’ understanding of the changes to, and major differences between, International Financial Reporting Standards (IFRS) and United States Generally Accepted Accounting Principles (US GAAP).
The 2009 edition was PwC’s most-downloaded publication.
Even without a set conversion timeline from the SEC, IFRS has been affecting US companies for some time — through business dealings with non-US customers and vendors, along with the use of IFRS for statutory purposes by some non-US subsidiaries.  In addition, US companies will experience an unprecedented change in accounting standards as key aspects of US GAAP and IFRS converge.
Amidst that backdrop, the 2010 edition of PwC's guide IFRS and US GAAP: Similarities and differences alerts companies to the timing and scope of changes that US GAAP/IFRS convergence, and the possible use of IFRS in the United States will bring about.  It also provides context, showing how convergence with, or adoption of, IFRS has ramifications far beyond companies' accounting departments.
“Regardless of SEC rulings or delays in the US adoption of IFRS, companies should educate themselves on this topic to prepare for the future of their businesses,” PwC's US Convergence & IFRS Leader Jim Kaiser said.  “Our guide helps companies navigate these issues, explaining the implications of US GAAP/IFRS differences in a comprehensive way. Similarities and differences is an important tool many companies rely on year after year,” Kaiser added.
The guide has been updated to reflect the major changes related to market conditions and accounting standards over the past year, with an overview of the new IFRS for Small and Medium-sized Entities standard. Further updates include:
  • Commentary and insight with respect to recent and proposed guidance, including developments pertaining to the overall convergence agenda;
  • Report on the US GAAP codification project;
  • More detailed analysis of current differences between the frameworks including an assessment of the impact embodied within the differences; and
  • Updates incorporating authoritative standards and interpretive guidance issued through June 30, 2010.
Guided by the 2010 edition of IFRS and US GAAP: Similarities and differences, both public and private organizations will gain a greater understanding of what their next steps should be to ensure they have allowed themselves sufficient time to prepare for transition.  For more on PwC's IFRS resources, visit www.pwc.com/USifrs.

Tuesday, October 5, 2010

Taxpayers Face Oct. 15 Deadlines

October 1, 2010 (SmartPros) — Oct. 15 is fast approaching and is a key deadline for millions of individual taxpayers who requested an extension to file their 2009 tax returns. It is also a crucial due date for thousands of small nonprofit organizations at risk of losing their tax-exempt status because they have not filed the required forms in the last three years.


“The Oct. 15 deadline is particularly important this year because it’s the last chance for many small charities to comply with the law under the one-time relief program the IRS announced in July,” said IRS Commissioner Doug Shulman. “And as always, it’s an important deadline for taxpayers who took an extension to file their returns.”

Don’t Miss Your 1040 Deadline
The IRS expects to receive as many as 10 million tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns. Some taxpayers can wait until after Oct. 15 to file, including those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters.

The IRS encourages taxpayers to e-file. E-file with direct deposit results in a faster refund than by using a paper return. Electronic returns also have fewer errors than paper returns. Oct. 15 is the last day to take advantage of e-file and the Free File program.

Free File is a fast, easy and free way to prepare and e-file federal taxes online. The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies.

File If You Are Tax Exempt
Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file the required returns for 2007, 2008 and 2009 can preserve their status by filing returns by Oct. 15 under the one-time relief program.

The IRS has posted on a special page of IRS.gov the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance. The organizations on the list have return due dates between May 17 and Oct. 15, 2010, but the IRS has no record that they filed the required returns for any of the past three years.

Two types of relief are available for small exempt organizations — a filing extension for the smallest organizations required to file Form 990-N, Electronic Notice (e-Postcard) , and a voluntary compliance program (VCP) for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.

Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form, and electronically file it by Oct. 15. That will bring them back into compliance.

Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee. Details about the VCP are on the IRS website, along with frequently asked questions.

Check Your Withholding
With little more than three months remaining in the calendar year, individual taxpayers are encouraged to double check their federal withholding now to make sure they are having enough taxes taken out of their pay.

“Now is a good time to make sure your employer is withholding the proper amount,” Shulman said. If you face a shortfall in your federal withholding, there is still time left in the year to make up the difference.”

The average refund for 2009 was $2,887, up 8 percent from 2008. Even though the Making Work Pay Tax Credit lowered tax withholding rates in 2009 and 2010 for millions of American households, some workers and retirees still need to take steps to be sure enough tax is being taken out of their checks.

Those who should pay particular attention to their withholding include:

• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work and
• Workers who do not have valid Social Security numbers.

Retirees who receive pension payments may also need to check their federal withholding.
As was the case in 2009, taxpayers who wind up owing tax because too little was taken out of their paychecks during 2010, may qualify for special relief on a penalty that sometimes applies. Depending on their personal situation, some people could have less withheld from their paychecks than they need or want. Failure to adjust withholding could result in potentially smaller refunds or in limited instances may cause a taxpayer to owe tax rather than receive a refund next year.

The IRS withholding calculator on IRS.gov can help a taxpayer compute the proper tax withholding. Worksheets in Publication 919, How Do I Adjust My Withholding?, can also be used to do the calculation. If the result suggests an adjustment is necessary, the taxpayer should submit a new Form W-4, Withholding Allowance Certificate, to his or her employer, or adjust the amount of quarterly tax paid.