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Solomon & Hoover CPAs, PLLC Blog

Financial Guidance to Help Your Business Succeed

Archive for the ‘IRS’ Category

Please note that the Internal Revenue Service will never send you an email.  A few of our clients have been receiving an email with a subject: NOTICE OF TAX RETURN FOR YEAR 2012.  This email is not legitimate, nor is any other email you may receive from someone claiming to be the Internal Revenue Service.  DO NOT RESPOND to these emails and DO NOT CLICK OR REGISTER links of any kind.

Unfortunately Identity Theft is a growing concern that we must all take precaution against.

If you receive an email or a notice and aren’t sure if action should be taken or you have any questions at all, please call your accountant for advice.  We are happy to help lead you in a safe direction.

Have a safe 2013.  We look forward to doing business with you in the future.

© 2013 Michele M. Hoover, CPA. Alexander & Hoover, P.A., Certified Public Accountants, specializes in providing a wide range of diversified accounting, tax, finance, and consulting services to individuals and businesses. 

To learn more, contact Michele M. Hoover, CPA at 239.481.4114 or visit http://www.alexanderhoover.com

Tax Planning: Recognize Capital Gains This Year

Posted by admin On November 13th

Right now the maximum federal tax rate on LT Capital gains is 15%.  Absent Congressional action, starting next year, the maximum rate on LT capital gains will increase to 20%.  Also starting next year, there will be a new 3.8% Medicare contribution tax that will apply to the lesser of:

  • Net investment income (including capital gains)
  • Modified Adjusted Gross Income (AGI) in excess of $200,000 ($250,000 for MFJ and $125,000 for MFS)

This means that wealthy taxpayers may end up paying 23.8% tax on their garden-variety LT capital gains starting in 2013.

Investment moves should not be made solely to capitalize on the current low capital gains rates. However, if you think that the LT capital gains rates will increase next year and you are planning to sell sometime in the near future anyway, here are some tax planning strategies to consider:

If you own appreciated LT capital gains securities (that you have held for more than a year) that you intend to sell within the next few years, you might consider selling them during the remaining months of 2012 to recognize those gains at a 15% tax rate.  If you think a security will continue to appreciate, you can immediately buy it back.  This will step up your tax basis to the current value at a low 15% tax rate.  Only gains beyond this value will be taxed at the anticipated higher rate.

If the rate increases as scheduled next year, installment sales of certain LT capital gain property (such as a piece of raw land you have held for over a year) provide a number of opportunities to capitalize on the 15% LT capital gain rate for 2012.  In fact, installment sales that originate in 2012 offer a rare chance to use 20/20 hindsight in that you have until the extended due date of the 2012 Form 1040 to decide if you want to report the full gain in 2012 and pay taxes at the current 15% rate or instead report the gain when you receive payments on the installment note and pay taxes at whatever rate applies during that year.

The current low tax rates combined with the current low applicable federal interest rates makes 2012 an especially good year to consider making installment sales of capital assets to family members.

In the case of a pre-2012 installment sale (for which it is too late to elect out of installment treatment) it is still possible to accelerate the remaining gain into 2012 if you take certain actions before the end of the year.

With careful planning, we can help you determine whether you would benefit from putting LT capital gain planning strategies in play this year.  Please give us a call if you have questions or want more information.

© 2012 Thomson Reuters/Practitioners Publishing Company.  All Rights Reserved.

© 2012 Michele M. Hoover, CPA. Alexander & Hoover, P.A., Certified Public Accountants, specializes in providing a wide range of diversified accounting, tax, finance, and consulting services to individuals and businesses.
 
To learn more, contact Michele M. Hoover, CPA at 239.481.4114 or visit http://www.alexanderhoover.com

Identity Theft and the IRS

Posted by admin On September 26th

More and more we are seeing clients become victims of identity theft for tax reporting purposes.  We submit the client’s return electronically and the system rejects it due to identity theft.

  • What does this mean? 
  • How did this happen? 
  • What steps can be taken to prevent this? 
  • What happens next? 

These are all very good questions and we have the answers!

Identity theft occurs when one person submits a tax return using another person’s social security number.  The user creates a fictitious return using fictitious income and expenses in order to generate a refund for their self.  The return is generally simple and unassuming so that no “red flags” are tripped and the refund is processed without question.

In order for the thief to be successful in his or her quest, an alternative social security number to their own is needed, and the fake return needs to be accepted before the legitimate identity holder’s return is accepted.  Filing your return early and safeguarding your personal information are excellent ways to prevent this from happening to you.

If you are unfortunate enough to have had this happen to you, the IRS has a process in place to fix the problem.  Notify the IRS immediately of the incident. They have a specific department designed to handle these issues.  Call the IRS Identity Protection Specialized Unit at 1-800-908-4490. Your accountant should be able to do this for you.  The electronic filing database will not accept duplicate social security numbers, so you must mail your return in.  Included with your return should be a filled out copy of the IRS Identity Theft Affidavit (Form 14039 – obtain it here) along with at least one copy of the following:

  • Driver’s License
  • Passport
  • Social Security Card
  • Other valid U.S. Federal or State government issued ID

If you are a victim, the IRS will issue you a PIN number that is required to be entered on page 2 of subsequent tax returns filed (near where you sign).  The PIN will be mailed to you and will not be reissued so DO NOT LOSE this number.  This is very important.  This is the only way the IRS will know that a return filed with previously stolen information has been submitted by the legitimate owner.

If you haven’t been victim, but you think you are at risk, you can be proactive in preventing a problem from occurring.  For example, if you lost your wallet or your purse was stolen.  Maybe your computer was hacked or you let your firewall protection service expire.  Call the IRS Identity Protection hotline or file the Identity Theft Affidavit.  There is a specific area for those who may be at risk.  It is always better to be over prepared than under prepared.

As always, consult your CPA for more tips and precautions regarding Identity theft.

© 2012 Michele M. Hoover, CPA. Alexander & Hoover, P.A., Certified Public Accountants, specializes in providing a wide range of diversified accounting, tax, finance, and consulting services to individuals and businesses.
 
To learn more, contact Michele M. Hoover, CPA at 239.481.4114 or visit http://www.alexanderhoover.com

The IRS now has a system to aid with the Free Application for Federal Student AID (FAFSA)!  Using a Data Retrieval Tool, college-bound students will be able to transfer information from their tax returns directly to the FAFSA application form.  This tool is free, easy, and secure.  Hopefully, in the near future, it will dramatically reduce errors as well as the need for schools to request information verification.

Who can use it?

This tool is available for use on the 2012-2013 FAFSA form.  In order to be eligible, students must have filed their most current tax return.  A Federal Student Aid PIN will be required to operate the tool.  This can be obtained through the FAFSA website here.  Students that have changed their marital status since December 31, 2011, have amended their 2011 return, filed married filing separate for 2011, or filed a 2011 Puerto Rican or other foreign tax return are not eligible to use the tool at this time.

What if I’m not eligible?

Students that are not eligible to use the Retrieval Tool may need to obtain an official transcript from the IRS.  These transcripts are not available until the IRS has processed the applicant’s tax return.  Transcripts can be ordered via IRS.gov by selecting “Order a Transcript”, just clicking here or by calling the Transcript line at 1-800-908-9946.

Don’t Forget!

 Be sure to contact your CPA for tips regarding deductions and tax credits available for college students.

 

© 2012 Michele M. Hoover, CPA. Alexander & Hoover, P.A., Certified Public Accountants, specializes in providing a wide range of diversified accounting, tax, finance, and consulting services to individuals and businesses.
 
To learn more, contact Michele M. Hoover, CPA at 239.481.4114 or visit http://www.alexanderhoover.com