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Tax Tips Newsletter
Serving you since 1993
March 2013 - Vol 8, Issue 2
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Greetings!
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Tax season is underway. Many of the brokers statements and 1099s are going out later than usual which will compress our tax season. Please get your information in as soon as possible. Do not wait to receive all of your information. If you are only missing one or two things we can always add those. Because of the late start it is very possible that I will have to strictly adhere to the March 15 cut off date.

If you have a LLC (limited liability company) that qualifies to file a California return, make sure that you file the return! The Franchise Tax Board is beginning to assess a penalty of 2,000 PER YEAR for each year that a LLC return is not filed in California. This is in addition to the 800 annual fee for doing business in the state.

In California you must file a LLC return if you are a single-member LLC or a LLC with multiple members. In addition, if the managing member LIVES in California chances are the LLC has to file a return here. Even if the activity is in another state.

The Franchise Tax Board has notified tax preparers that some estimated tax payments made in December 2012 may not have gotten posted to taxpayers accounts. If you made a payment in December, you may want to log online to see if all of your payments have been posted to your account.

Tax Breaks
The new tax law signed last month extended a number of tax breaks that had expired at the end of 2011 or 2012. These tax breaks could affect the 2012 return you'll be filing soon, and they may also lower your 2013 tax bill. Don't overlook any that apply to you or your business. Here's a quick overview.

EXTENDED FOR INDIVIDUALS: * The optional deduction for state and local sales taxes in lieu of deducting state and local income taxes. * The above-the-line deduction for up to $4,000 for qualified tuition and related expenses. * The above-the-line deduction for up to $250 for classroom supplies purchased by teachers.

* The deduction for mortgage insurance premiums. * Allowing taxpayers 70½ or older to make tax-free contributions of up to $100,000 from an IRA to a charity. * The exclusion from income for cancellation of mortgage debt of up to $2 million on a principal residence.

EXTENDED FOR BUSINESSES: * An increase to $500,000 in the Section 179 first-year expensing option for the purchase of new or used business equipment, with an investment limit of $2,000,000. * 50% bonus depreciation on purchases of new business equipment. * The research tax credit and the work opportunity tax credit. * 15-year depreciation for leasehold improvements, restaurant property, and retail space improvements. For assistance in identifying and applying all the deductions and credits that lower your taxes - both for 2012 and 2013 - please contact my office.
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HOME-OFFICE DEDUCTION SIMPLIFIED. Starting this year, taxpayers who use a portion of their home regularly and exclusively for business may opt to use a simplified method for computing their home-office deduction. Instead of complex calculations for allocating expenses, the simplified method allows $5 a square foot for up to 300 square feet for the home office. The deduction is capped at $1,500 a year. Under the simplified method, no depreciation of the home is allowed, but all business expenses not related to the home (such as advertising, supplies, and employee wages) are still fully deductible.

EXTENSION OF MARCH 1 DEADLINE. Farmers and fishermen aren't required to make quarterly estimated tax payments if they file their tax return and pay taxes due by March 1 of the following year. Because this year's tax filing has been delayed while the IRS makes changes necessitated by the late passage of the recent tax law, the Service has extended this March 1 filing deadline to April 15.

The filing extension will apply to all farmers and fishermen, not just to those who had to wait for late-released IRS forms. To qualify as a farmer or fisherman for 2012, at least two-thirds of a taxpayer's gross income for 2011 or 2012 must have come from farming or fishing. For details or assistance, give me a call.
Winter Reflection
Tax Tip of the Week: What expenses are deductible as business start-up expenses? This article will give you more information.

Business Tip of the Month:If you are required to keep track of inventory for your business, its really important that your inventory count is accurate. This article explains the problems when the inventory figures are wrong.

Financial Tip of the Month : No cost refinances sound like a great idea and a no-brainer. This article describes what that really means and the potential hidden costs you need to ask about.

Fraud Alert: Online dating services offer easy targets for scammers. Read this article for the tip-offs for online dating scams.

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Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979