Focus CPA Group, Inc. (562)281-1040

As we all know, the magic tax date is April 15th each year when tax returns must be filed. Well, at least that is what we are told. In truth, the magic period for taxes occurs in the months of November and December. Well, that is if you want to limit the amount of tax you pay on April 15th.

The subject we are talking about is, of course, tax planning. It doesn’t exactly sound appetizing, but it is. The key to limiting the pain of paying Uncle Sam every year is to plan ahead and configure your finances in a manner that maximizes tax credits and deductions. It sounds obviously, but millions of Americans leave so much money on the table each year that it is ridiculous.

Tax planning can actually be relatively simple. Let’s look at the green revolution for an example. You’ve noticed the water heater in your home is getting pretty creaky and rusting. It could go at any time. Should you wait for it to blow up and flood the home? No! Instead, you can go buy an Energy Star rated water heater. The Energy Star designation indicates the water heater meets certain efficiency criteria and qualifies for a tax credit. The tax credit with water heaters is 30 percent of the cost up to $1,500.

Let’s assume you buy and get a tax credit of $1,000. Do you realize the value of that? Tax credits are much more valuable than tax deductions. Why? Tax credits are a dollar for dollar deduction from the amount you owe Uncle Sam instead of just a way to reduce your gross income. Let’s put it in a way that is simpler to understand. You would go ahead and do your taxes just like always. Once done, you’ll owe the government some figure and would normally send in a check. Ah, but not now. Instead, you would deduct the $1,000 tax credit from that amount. It makes a huge difference!

Let’s be brutally frank. You have no right whatsoever to complain about the taxes you pay if you don’t do any planning in November or December. If you want to pay less in tax, make some effort to do so! The key is to finding a proactive CPA that can help you put together a plan that is going to slash your tax bill. This is the only real way to cut your taxes.

I am wondering what the most widely used business accounting software is? Or which programs would be the best to know?

I work for a company that has been using QuickBooks for years and years. However, we are very dissatisfied with the 2009 version and the payroll service. QuickBooks is now making people pay to call and ask a question with out a support service plan. How ridiculous. Which small business accounting software have you used? Did you like it? Why/why not? Which do you recommend.
We run an insurance company so we are basically just income and expenses. Only one employee for payroll. Need payroll

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QuickBooks Premier Nonprofit Edition 2009

The estate of a deceased person is subject to estate tax levied by the government. This tax is levied on his taxable estate, the value of which is arrived at by reducing his gross estate by something known as allowable deductions, where the gross estate is the total value of all the assets owned by the deceased at the time of his death. The allowable deductions are funeral expenses of the deceased that are paid out of his estate, marital deductions, deductions for payment to charity as expressed by the deceased, estate administration expenses, and outstanding debts at the time of death. The determination of the taxable estate is done by the IRS.
To arrive at the value of the assets, the fair market value is taken as the standard. The fair market value is the price that the assets fetch if sold in the open market. An option is given to the representative of the benefactor of choosing the date of the evaluation. It can either be the date on which the benefactor died or a date six months thereafter. The purpose is to give the benefit of a lower tax liability. The liability of estate tax arises with the death of the benefactor, and has to be paid within nine months of the date of death. It is incumbent upon the representative of the benefactor to file various forms related to the assets of the benefactor and the income derived therefrom.
Amongst these, two forms are very important: one is Form 706 that contains the details of all the assets, which cumulatively form the estate of the benefactor, and the second is Form 1041, which is meant to give the details of the income derived from the estate. However, all estates do not come under the estate tax net. At the moment, any estate that is less than the gross value of $2,000,000 is not subject to estate taxation. Looking at the structure of estate tax for the forthcoming years you will find the estate tax burden being reduced progressively each year, to be eliminated in the year 2010, and reinstated in 2011. The details are as under:
If the benefactor dies within 2006 to 2008, the exemption limit is $2m. For 2009, the exemption limit is raised to $3.5m, whereas 2010 will be an estate tax free year. In 2011, estate tax will be reinstated with a basic exemption limit of one million dollars and a maximum tax limit of 55%.
Estate tax is mandatory under law. However, the burden can be reduced through intelligent estate tax planning. There are several techniques that can be employed legally to allow a greater part of your assets to be transferred to your loved ones instead of serving to fill the coffers of the government through estate taxes. When you have decided whom you wish to benefit from your estate and by how much, instead of waiting for you demise, you could start gifting them amounts which do not attract gift tax in your lifetime. At present, a single individual can gift up to $12,000 in a year to one person without attracting gift tax. There is a lifetime exemption of $1m on gifts.
This means you can make unlimited numbers of $12000 gifts to various people in one calendar year. You just need to make sure that the gift(s) to a single recipient does not exceed $12000 in a year. The gifts can be made to one or more persons within the total limit of $1m in your lifetime without attracting gift tax. Apart from cash, the exemption limit also covers gifts in the form of a percentage of real estate, business, stocks etc.
Another way is to transfer assets to your spouse during your lifetime. According to the law, such transfers are free from gift or estate tax, irrespective of the value of the transferred asset. This tax benefit is permissible under a provision known as marital deduction, which is considered when the estate tax is calculated after your demise. But the assets will be subject to estate tax (if in excess of the exemption limit) on the demise of the surviving spouse, unless he/she remarries and transfers all assets to the new spouse. Another way would be to create a bypass trust in which the property is held in trust for minor children until they grow up, while continuing to provide for the surviving spouse. Bypass trusts can include insurance trusts, irrevocable trusts etc.

I have worked for a Fortune 500 company for the past 2.5 years, but not in the accounting department. I am ready for a change and want to move to public accounting. Any suggestions on where or how to find an open accounting job? Looking for Ryan M to answer now that I have updated to let him know I have a 4 year degree.

Many people view April 15th as the end of tax season and enjoy the idea that they don’t have to deal with their taxes for another year. I look at April 15th a little differently. I see April 15th as the time to start planning your taxes for the next year (and the next year and the next year).

The best potential to create massive tax savings comes from planning your taxes not only throughout the year, but years in advance.

This doesn’t mean you have to treat your tax planning like a part-time job (although I’ve seen tax savings that yield more than a part-time job!). It simply means take a few hours now to create a tax strategy that is specific to you, then integrate your strategy into your daily routine and take a few hours a month to keep it on track.

I think most people dread tax planning because it’s something they have found to be boring and confusing (and sometimes painful) in the past. Traditional tax planning can be all of this!

This is why I’ve made it my mission to make taxes more understandable. I’ve just recently taken the hundreds of strategies I use with clients and broken them down into 5 secrets that cover the scope of how to create massive tax savings.

5 Secrets to Massive Tax Savings

Secret #1 Rules the IRS Won’t Tell You

Secret #2 Creating Permanent Tax Savings

Secret #3 Forming Your Personal Tax Strategy

Secret #4 Tax Saving Entity Structures

Secret #5 Reducing Your IRS Audit Risk

I’m so excited to share this information!

I’m going to share more about each of these secrets over the next few weeks, but before getting into those details, this week I want to share the common theme behind each of the secrets.

Behind Every Secret is… Knowledge! Now, I’m not referring to the type of knowledge that will have you quoting Internal Revenue Code sections – that falls into the category of boring and confusing. The knowledge I’m referring to is the type of knowledge that makes you aware of what creates massive tax savings so you begin to see your daily routine a little differently.

Here is an example most people can relate to:

Have you ever noticed that right after you buy a new car, you see that same car everywhere and you don’t remember ever seeing that many before? The reality is the cars have always been there, it just takes awareness to see them. Once you become aware of the car, you see it everywhere.

The same is true for tax savings! The opportunities are there, it’s just a matter of being aware of them.

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I have automatic withdrawals that happen on the same time every month but they’re not a check so I don’t want a check number put in. I am using Quickbooks Premier 2006.

What If You Did It Like This?

Year End Tax Planning Help-Your Corporation

A greeting to you all my friends, it is time to write another year end tax planning article. What shall we discuss? What can I tell you all that will offer some sort of financial revelation helping with both your income tax and strategic financial management?

Well, times are difficult but some of you might still be in need of some practical tax planning. How about a C corporation taxpayer (a corporation that is not a subchapter S and pays tax as though operating as an individual) that has a sizeable profit, a father-son ownership team, and reports for tax purposes on the cash basis method of accounting. Suppose that Daddy has aspirations of retiring in the not too distant future. Try this one on for size. For the current year, why not allow the Company to pay tax on $75,000 of income. By leaving this amount of taxable income inside of the C Corporation, the 15% and 25% tax brackets will be exploited. The father ?son owners have a much higher marginal tax rate facing them-35%. By doing it this way, we save money within the corporate structure allowing it to stockpile additional capital to manage operations going forward. The earnings exceeding the $75,000 of desired taxable income will be paid out to father-son in the form of bonus or other compensation. In addition, the Company will make a profit sharing plan contribution on their behalves. This is a great tactic for this Company?s year end tax planning as the lower corporate rates are used for maximum benefit and the owners (father and son) get tax sheltered income in the form of retirement plan contributions. The business now has working capital as we approach another year of operations.

As for a strategic financial consideration, if Father is considering retirement in the not too distant future, why not consider gifting the stock to qualified small business trust, where sonny is the beneficiary, in January (the next year of operations). The Company would then make a corresponding S corporation election (due by March 15th for calendar year corporations-use form 2553). A gift tax return will have to be filed by father and a valuation will need to be performed on the gifted shares. The valuation of these shares will consider the time frame of the gift to the trust and its earnings potential. If father will strip most or all of the earnings and the gift term is say ten years (the recognition period for the S corporation, when it is converted from a C corporation, in order to avoid liquidation tax), the value of the gift will be significantly reduced thus preserving the estate tax exemption for other assets in his estate. The gift tax return is filed on form 709 and is due by the filing of Father?s personal income tax return.

For those of you more advanced, when converting a C corporation to an S corporation, income is recognized at the corporate level to the extent of unreported receivables and payables, the 481(a) adjustment, because of using the cash basis method of accounting for tax reporting purposes. Remember, a major trait of the S corporation involves the flow-through of profits to the shareholders, thus avoiding corporate level tax. Regarding cash basis C corporations converted to S corporations, the would-be taxable income of the entity would have to be eliminated to avoid a corporate level tax. This would be true for the entire ten year recognition period. Because it would be the goal of the corporation to eliminate taxable income, in order to reduce the exposure to gift tax consequences, we have effectively killed two birds with one stone. There will be no corporate level tax; the corporation can continue to use the cash basis method of accounting, and Father will have a limited exposure to estate and gift taxes. Wait a minute, that?s three birds with one stone. Nice.