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Tax Tips Newsletter
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October 2013 - Vol 8, Issue 10
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Greetings!
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Thanks to all of you for making our 2012 tax season such a success. This tax season was very challenging beginning with all of the tax forms being delayed. That caused the software companies to be delayed and we were not able to file returns until almost March. That did cause us to have more extensions than normal, but at the end of tax season everything was fine.

I have been hearing about a new IRS scam that is going around. It involves clients getting phone calls from an "IRS agent". This person instructs the taxpayer to go to 7 Eleven and take out a money order. Then the client is instructed to call the "agent" and give them all of the pertinent information from the money order or the "agent" will:

1. Have the Sheriff arrest you for Fraud on Monday

2. Void your driver's license

3. Bring felony charges for fraud

4. If you contact an attorney I will send the sheriff for sure

5. Its automatic you will do six months in jail if arrested

6. Money has to be submitted today.

The calls that people seem to be getting are either in the 415 area code or the caller has tricked the system and has put the IRS phone number in as caller ID. The "agent" has a thick Indian accent.

If you get a call like this , DO NOT give them any information. DO NOT get a money order. This is not an IRS employee.

Please DO get their name, badge number, case ID number and phone number. Tell them that you will have your CPA get in touch with them.

Call me immediately and give me their information. I will find out if they are legitimate. If they are not, I would like to report them to the correct department of the IRS. Apparently they have been extremely active during the government shutdown.

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

Time to give to charity
Time is running out for making 2013 tax-free gifts. You have only a few more months to use your annual gift tax exclusion for this year, or it's gone forever.

Each year you can make gifts up to a certain dollar limit to an unlimited number of people, free of any gift tax. For 2013, the dollar limit per recipient is $14,000. These gifts do not reduce your lifetime exemption from gift and estate taxes.

Why would you want to make annual tax-free gifts? There are a number of possible reasons. Tax-free gifts are often used in estate planning as a way of steadily reducing the value of a taxable estate during the owner's lifetime. Another strategy is to transfer income-producing assets to children or other family members who are in a lower tax bracket. If done carefully to avoid the "kiddie tax," the result can be a lower overall tax bill for the family unit.

If you fail to use this year's exclusion, it is not carried over to future years. To qualify as a 2013 gift, the transaction must be completed by December 31, 2013. If you are writing a check as a 2013 gift, do so in time for the recipient to deposit it before year-end.

Check with me if you would like more information about making tax-free gifts in your situation.
Pig with money in background
Have you started a new business? Planning to start one? If so, the tax difference between a business and a hobby could turn out to be very important to you.

If the IRS considers your new venture a business, you can deduct losses against other income. But if it's classified as a hobby, losses are generally deductible only to the extent of hobby income (with the additional limitation imposed on them as miscellaneous itemized deductions subject to the 2% of adjusted gross income floor).

The tax law presumes that an activity is a business, not a hobby, if it is profitable in three out of the last five consecutive years (two out of seven consecutive years for activities involving horses).
Some factors used by the IRS to determine whether you have a hobby or a business include the following:

* Whether you conduct the activity in a businesslike manner.

* Whether you have the necessary expertise to run such a business.

* How much time and effort you spend on the activity.

* Whether there is a reasonable expectation that the business will be profitable or that its assets will appreciate over time.

* Whether losses in the activity continue beyond the normal time to bring such an operation into profitable status.

* Whether the occasional profits in relation to losses and your total investment are realistic.

* Whether you have a successful track record with other business ventures.

* Whether you have substantial income from other sources.

* Whether the activity has elements of personal pleasure or recreation.

If you hope to deduct any losses resulting from your business, be certain that you are doing all that is necessary to meet the IRS requirements. For details or assistance, contact my office.
Halloween
Tax Tip of the Week: As we approach the year end it's time to look at your tax liability for 2013. Is there any way to reduce it from now till the end of the year? Check out this article for some tips!

Business Tip of the Month: Do you perform a regular physical exam on your business? It's a good idea to check the health of your business by knowing these 3 ratios. Read this article and see where your business stands.

Financial Tip of the Month : Are you thinking of taking early withdrawals of your 401K? Check out this article to see if you're in the "penalty-free" bracket.

Fraud Alert: The fraudsters are out in full force targeting cat and dog lovers! Beware of these schemes that any animal lover could fall for if it involves their beloved pet. Read this article to be aware of these schemes.
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Let me know if I can help you with any Quickbooks problems.

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Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979