MyGeorgiaAccountant.com

Happy Holidays!

As we are about to enter the last week of 2013, I thought it best to point out a few tax-saving strategies that can still be implemented before the 2013 tax year ends. I know that with all of the excitement of the holidays and family being in town, taxes are the probably the last thing on your mind, but it only takes one of the strategies listed below to help to lower your 2013 tax bill.

As always, please contact someone at our firm should you have any questions about the information below and how it applies to your individual tax situation.

Year-End Tax Planning for Individual Taxpayers

• Prepay your mortgage payment that is due on January 1, 2014 by December 31, 2013. You can deduct the interest on your 2013 tax return.
• Charge deductible expenses like medical bills, state and local taxes, real estate taxes and charitable donations to your credit card. By charging these expenses now, they become deductible in 2013 even if you do not pay the credit card bill until next year.
• Pay your state estimated tax payment that is due on January 15, 2014 no later than December 31, 2013. This will count towards your itemized deductions on your 2013 tax return.
• Sell stock losses before the year ends. This will help to offset any capital gains and possibly enable you to take a loss of up to $3,000 on your 2013 tax return.
• Maximize your charitable contributions and donate unwanted items before the year is over. Please try to document the items that were donated and take pictures as well if possible. Also, hold on to the receipts that you receive when donating.
• Exhaust all of the funds contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2013 through March 15, 2014, but please verify this with your employer as this is at their discretion. Any remaining funds after the spending deadline are forfeited.

Year-End Tax Planning for Business Owners

• Cash-basis taxpayers, pay any outstanding bills by December 31,2013 (this includes mailing the check on December 31, 2013). This will allow you to deduct the expense in the current tax year even though the payments may not hit your account until January 2nd or 3rd or later.
• Also for cash-basis taxpayers, remember that all payments that are received and deposited to your bank account on or before December 31, 2013 are taxable in the current year.
• For accrual-basis taxpayers, write off any non-collectible accounts receivable before the year ends.
• Also for accrual-basis taxpayers, remember that your revenues are calculated based on what you invoice and bill between January 1, 2013 and December 31, 2013. Any invoices created after December 31, 2013 will be included in income for the 2014 tax year.
• If you are planning on upgrading your computer or any other office equipment, try to do so before year-end. This will allow you to take advantage of any holiday promotions that are in effect and in most cases you can write off the entire purchase amount (against profits) for the 2013 tax year.
• Write off any obsolete inventory as of year-end.
• Purchase equipment (computers, vehicles, etc.) before year end. You can write-off up to $500,000 (subject to certain limits) in equipment purchases in 2013. If you are facing a profitable year and therefore, higher taxes, this could offer an instant last-minute deduction for your business.

There are quite a few important tax breaks that are set to expire at the end of this year and there are a few new tax laws that are set to take effect. Luckily, most of the tax breaks that we pointed out last year that were set to expire this year have been extended through 2016, though some have not been extended as of the time of this writing. Below is a summary of some of the tax laws that are currently set to expire on December 31, 2013.

For individual taxpayers:

• The income tax exemption for debt forgiven on home foreclosures and repossessions will expire, thereby making any income realized on a foreclosure or repossession a fully taxable event
• A deduction for tuition and fees of up to $4,000 is currently available to parents and students paying for college. This can still be taken advantage of by paying tuition that is due in January 2014 by December 31, 2013
• Previously, medical expenses over 7.5% of a taxpayer’s adjusted gross income were deductible on Schedule A for taxpayers that itemize deductions, this minimum will now increase to 10% of adjusted gross income for all taxpayers under the age of 65
• The Educator’s Expenses deduction, which allows teachers to deduct up to $250 of personal funds spent on classroom supplies even when not itemizing will no longer be available after 2014.
• The itemized deduction for mortgage insurance premiums paid on a primary residence will expire.
• The Energy Efficiency tax credit of up to $500 for energy efficient home improvements – including new windows and doors – is set to expire at the end of 2013
• Retirees older than 70-and-a-half have traditionally been able to make non-taxable charitable donations of up to $100,000 directly from their IRA disbursements. This tax break is expiring, meaning they will need to take the disbursement first, which will be considered part of their taxable income.

For businesses:

• The Affordable Care Act will be an important issue for businesses with over 50 employees in 2014. The reporting and enforcement of this act has been delayed until 2015, but employers of this size need to understand the potential increased costs that they will face due to enforcement of the act beginning the following year.
• The maximum annual Section 179 depreciation deduction on newly acquired fixed assets will decrease from $500,000 to $25,000 – This is even more reason to purchase any expensive equipment before the year ends because you will lose the ability to write off the entire purchase in one year, and will need to write off equipment purchases over a multiple year period using regular depreciation – which is typically 5 years or more.
• 50% Bonus and Special Depreciation on new fixed asset purchases will no longer be available except for production period property and noncommercial aircraft
• The 15 year amortization(write-off) period for qualified leasehold improvements, qualified retail improvements, and qualified restaurant buildings and improvements will revert to the previous term of 39 years.
• The research and experimentation tax credit will expire.

Please remember, the information above contains general tax-savings information and it may or may not apply to your particular situation. It is advised that you contact Shurek Accounting & Tax or your own tax adviser before making any of the moves listed above if you are not sure as to their deductibility.
Shurek Accounting & Tax would like to thank you for your business this past year and we hope that you and your family have a safe and enjoyable holiday season