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Tax Tips Newsletter
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April 2013 - Vol 8, Issue 4
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Greetings!
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Whew! I am happy that April 15th is behind us. This tax season was a little rough with the IRS not being able to process returns right away, late brokerage statements and late K-1s. Hopefully Congress won't pass 2013 legislation on December 31st again.

If your returns are on extension, please note that we are working on other deadlines between now and the end of the month. In May we are all taking vacations, so we will get back to processing returns around the beginning of June.

At the moment our main printer is down. We hope to have it replaced shortly. Our faxes come in through the main printer, but we will check our electronic file for incoming faxes during the day. If you are faxing something urgent, please call and let us know so we can be on the lookout for it.

A client of mine forwarded an interesting article regarding keeping all of your tax returns. I recommend keeping records for 7 years, but this article presents some really good reasons for keeping records longer. Check it out. Never throw away your tax returns

Just a quick reminder that the State of California has a website where you can look for unclaimed property for free. Do not be duped by the letters you receive in the mail offering to do it for you. It's FREE! One of my clients recently found over $20,000!! Here is a link to the website: State Controllers Office for Unclaimed Property

Many thanks for your referrals. I appreciate your confidence in my staff and me.

Tax Breaks
The "Taxpayer Relief Act" signed on January 2, 2013, permanently sets the estate and gift tax exemption at $5,000,000 and the top tax rate at 40%. The exemption amount is adjusted annually for inflation, which puts the 2012 exemption at $5,120,000 and the 2013 exemption at $5,250,000. The annual gift tax exclusion for 2013 is set at $14,000 per recipient.

Now that the rules have been made "permanent," take the time to review your estate plan to make sure it still accomplishes your wishes. With the higher exemption amount, fewer estates will be subject to tax, and perhaps yours falls short of the tax threshold. But regardless of the size of one's estate, everyone needs the following basic documents - updated for the current rules and your particular circumstances:

* A will that specifies who is to inherit your assets and who is to be the guardian of any minor children you have. * A power of attorney naming someone to handle your financial affairs if you become disabled or seriously ill. * A health care directive (living will) stating your wishes should you become terminally ill or permanently unconscious.

* A financial inventory listing such things as bank accounts, income sources, insurance policies, and other assets. Your estate plan review should include checking your exposure to state inheritance taxes and an update, if needed, to beneficiary designations on such things as IRAs and insurance policies. For help in getting your estate plan in order, please contact me and your attorney.
Filinf the form
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.

For details or assistance, give me a call.
Collecting Taxes

Getting a big tax refund or owing the IRS a lot of money for 2012 could mean it's time to adjust your income tax withholding.

Many people like to receive a refund from the IRS, thinking of it as a form of forced saving. If you're of this opinion, that's fine. But too big a refund means you're wasting your money, giving an interest-free loan to the government.

On the other side, if you underpay your taxes by more than $1,000 and don't meet certain exceptions, you could be hit with a penalty.

Adjusting your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Or you can increase withholding by specifying an extra dollar amount to be withheld from every paycheck.

When reviewing your 2013 tax payments, keep a couple of general rules in mind. Generally, you must pay (through withholding or quarterly estimated payments) at least 100% of last year's tax liability (110% if your adjusted gross income is over $150,000), or at least 90% of what you'll owe for this year.

However you do it, you should adjust your withholding to match the taxes you expect to owe. If you need assistance figuring out your 2013 tax payments, give me a call.
Financial Navigation
As you start your 2013 tax planning, you may have to deal with the loss of certain deductions you've become used to taking.

PERSONAL EXEMPTIONS. A previous tax rule based on adjusted gross income (AGI) has been reinstated for 2013: the phase-out of the deduction for personal exemptions. Your deduction for yourself, your spouse, and your dependents (each worth $3,900) will be reduced if you're married, filing a joint return and your AGI is greater than $300,000. For singles the threshold amount is $250,000.

For every $2,500 of AGI over the threshold amount, exemptions are reduced by 2%; at $422,500 for joint filers, the exemptions are completely phased out.

ITEMIZED DEDUCTIONS. Itemized deductions for higher- income taxpayers will again be limited in 2013. They will be reduced by 3% of that portion of AGI exceeding the thresholds mentioned above ($250,000 for singles and $300,000 for couples). The amount of your itemized deductions won't be phased out completely, however. They can't be reduced by more than 80%, and certain deductions are not affected (medical expenses, investment interest, theft and casualty losses, for example).

With these changes to the tax rules, an early start on tax planning for 2013 is essential. Contact me for guidance.
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Tax Tip of the Week: It's finally here for 2013 - the effects of the new health care law! There will be significant changes no matter what tax bracket you are in. Read this article for more info.

Business Tip of the Month: Employee theft will affect the bottom line on your business. Read this article on how you can safeguard your business by reducing employee theft.

Financial Tip of the Month : Here are some good financial tips for your college graduate. Some things are just not taught in school so before your child racks up debt, give him/her some help in how to budget. This article has some good tips!

Fraud Alert: Most of us will hang up on telemarketers but with the billions of dollars that are fraudalently bilked out of consumers, some people are actually listening and partaking of these "great offers." Check out this article for five fraud indicators or "red flags."

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Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979