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Tax Tips Newsletter
Serving you since 1993
October 2011 - Vol 6, Issue 10
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Greetings!
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I've set up a new Facebook page for my company. I hope that you will visit and decide to "friend" me. I'll be sending out occasional tax tips, but promise not to bombard you with posts. We all get plenty of e-mail, phone messages and texts as it is. It is listed under Linda L. Heineman, CPA.

The phone answering system we tried last month is gone. We found some things that we liked and others that we didn't. If you're using a system that you're really crazy about, please let me know.

I hope you have a Happy Halloween!

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.

Haven't converted to a Roth yet? You still have time to decide if a full or partial Roth conversion makes sense for you this year. A potential tax-reducing suggestion: Transfer investments from your traditional IRA to a Roth during a market dip. You'll capture after-conversion growth without owing additional tax.

For details or assistance, give me a call.
Financial Worries
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 me for more guidance in your year-end tax review.
Halloween
The Tax Tip of the Week deals with the Innocent Spouse rules and how they might protect you.

The Business Tip of the Month. Have you thought about expanding your business internationally? Read up on what you need to know and do your research before deciding to venture into the international markets.

The Financial Tip of the Month. Are you thinking of borrowing from your 401K? What are the consequences and is it worth the cost?

The Fraud Alert. The scam artists are out in full force! In a down economy there are many scams out there that pull at our most vulnerable areas. Read up on some of these scams.

(This is not a link - yet)


Photos © Bigstockphotos.com, istockphoto.com, Felix Orona

Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979