Your 2010 Taxes

Thank you to everyone for helping to make our continued transformation into a Next Generation Accounting Firm a success as we formally implemented our Client Portals!  As you are now aware, all of your 2010 tax returns and the supporting documentation you provided to us is all available to you 24/7 via your own secure portal. 

Access to your portal is found under the "Client Center" on our website.  You were provided your login credentials earlier this year, and for most of you the Username is your primary email address and your password is your SSN. For our business clients, you were sent login credential upon completion of your business returns.

Once in your portal you will see different folder options such as "Document Presentation" and "File Exchange".  Your tax returns are typically found under "Document Presentation".  All documents are presented in PDF format so you can save these to your local drive, email to a third party if needed, print the pages you wish to print, etc. 

We hope you find the portals to be a great convenience and we do appreciate any feedback you have on them.

Tax Planning
 

We want to reiterate that taxes are a year-round issue that we should always be aware of.  Most tax planning strategies and decisions need to be made during the year so that we take advantage of any potential planning ideas to help minimize your tax burden come April 15th.  This requires you to be proactive and contact us when you are making changes that you think may have a tax impact. 

Also, this year we saw a lot of our existing clients wait until very late in the filing season to provide us with their documentation.  This caused us to file a record number of extensions for our clients.  While some extensions are inevitable, many can be avoided.  When information is received so late, the ability to even make rough calculations of taxes due (so payments can at least be made on time) is severely compromised and many times impossible.  Therefore, we want to urge you to keep this in mind as you organize your tax documentation throughout this year.

Health Savings Accounts 

Health Savings Accounts have become very popular over the last few years and rightfully so.  Opening one up is a great way of taking responsibility for your own healthcare costs instead of relying on an employer or the government.  The added benefit is that HSAs have tax advantages as well!

For 2011, you can make tax-deductible HSA contributions of up to $3,050 if you have qualifying self-only high-deductible health coverage or up to $6,150 if you have qualifying family high-deductible coverage.  These are increased by $1,000 if you are age 55 or older as of year-end.  There is no phaseout for higher incomes and you don't have to itemize to benefit.

However, you must have "qualifying high-deductible health policy (HDHP)" to be eligible.  For 2011, a HDHP is one with a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage. 

The HSA earnings are allowed to build up federal income tax free and you can then take tax-free distributions to cover most out-of-pocket medical costs.  However, if you can afford it it is better to leave the HSA balance untouched.  That way, you can build up a substantial tax-free reserve for future medical expenses.  Further, since you are in a HDHP, your premiums are typically lower, thus the cumulative tax and premium savings could add up to significant dollars!

2011 Changes: Starting in 2011, tax-free withdrawals are not allowed for non-prescribed over-the-counter drugs!  In other words, you now need a doctor's prescription to take a tax-free HSA withdrawal to pay for aspirin and such.  Also, the penalty for taking withdrawals  for any reason other than to cover qualified medical expenses has been increased from 10% to 20% (on top of income taxes).

Maintaining Tax Records 

A common question we get this time of year is how long should we keep our tax records.  We generally prescribe keeping most records for four years since the federal statute of limitations is three years but Colorado is four years.  However, certain records should be kept longer - such as real estate settlement statements, investment transactions, IRA contributions (especially non-deductible contributions), real property improvements, and business transactions.  We also suggest keeping the actual tax returns for as long as possible.  Utilizing our secure client portals will help with these recordkeeping tips as well.  More information on record keeping tips can be found in IRS Tax Tip 2011-71.