The Winning Strategy
Issue 2 A Newsletter from Smith & Company, CPAs Winter 2010/2011 2010 Taxes and the “Two-Minute Drill”
In football they have the ―two-minute drill,‖ the steps to take in the last two minutes of the first half or at the end of the game to either protect your lead or quickly score when you are behind. "In the two-minute, it's bam, bam, bam, bam -- there's no time to think," New York Jets wide receiver Braylon Edwards recently told ESPN. "There's no time to drop back and think and assess." Last month, the two-minute drill helped Penn State coach Joe Paterno win his 400th game. The Nittany Lions were down 21-0 late Hello, in the first half when, as Penn State Live reports, backup quarterback Matt McGloin ―re-energized the team with a two-minute drill that Thank you for all the excellent feed- ended with a 7-yard touchdown catch by Brett Brackett with 3 se- back we received on our first issue. We conds left in the half.‖ That re-energized team went on to win 35-21. are glad you enjoyed it and hope this For business owners and individual taxpayers, this year has its issue is equally informative. own version of the two-minute drill. As of late November, we still End of the year tax planning is don’t know: always important, but it is even more What the income tax rates will be for next year. Will the Bush so this year. There have already been tax cuts be extended for some, all or none? significant tax law changes, with many Whether the bonus depreciation for equipment purchases will more yet to be decided on by Congress expire as scheduled at the end of the year. and the President. This means you Will the tax on capital gains rise from the current 15% (or 0% have to be ready for any contingency. for those in the 5% and 10% brackets) to 20% for all? Will the estate tax, currently at 0%, be taxed at 35%, 45%, The strategy you normally use may 50% or 55% in 2011? not apply this year. For example, given It is typical that this time of year people come into our offices the possibility of large increases in for end of the year tax planning so you can take the steps needed to income tax rates on January 1, you minimize your tax liability. This year, given all the uncertainty on may want to accelerate income and what actions Congress and the President will take, you have to be delay payments so that income is taxed prepared to change direction instantly depending on what gets at the lower 2010 rates. signed into law. Your strategy needs to be laid out in advance so you As always, it has been a pleasure to can instantly respond to whatever provide you with accounting services comes out of Washington. You this year. We hope we have helped to don’t want to wind up sounding like Baylor coach Kevin Steele did make it a prosperous one for you, and after he violated the two-minute we look forward to continuing to serve drill. In a game against UNLV, he you in 2011 decided to run up the score instead of protecting his lead. In the last 20 Dwain Smith, CPA seconds, UNLV recovered a fum- ble on the one yard line, returning Late Breaking News the ball 99 yards for the victory. "I know what the textbook A tentative agreement has been reached says," said Steele after the game. on tax rates. Contact our office to find "There's no defense for it. It was Be prepared to quickly respond out how this affects your own taxes. just stupid on my part.‖ to last minute tax changes.
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2 forms will have to include - Lisa and Bertram Elsner have ―As a public accountant, I dealt After working for twenty years, ―I have known Dwain for a very As part of the health care bill, bill, care health the part of As Also Also beginning on January 1st, with his ethics,‖ she says. ―I think he with ethics,‖ ―I she his says. for.‖ to work guy is a great been for married nine and years their son, Benjamin, is now seven. In her free time, she enjoys knitting sewing and and has a handbags. making small business with a lot of IRS notices able and to was get solved matters for favorably my re- clients,‖ ―Then, as she a controller, says. I never the any make IRS adjustments had to our returns.‖ she decided to take time off with her to newborn son. Once be he was school age, she came to work for us, fulltime during tax season and part year. the rest of the time long time and felt very comfortable the full value of health employer. the by provided file must businesses in 2012, starting the ag- where vendors all for 1099s $600 over total transactions gregate at a week spend $12 you If per year. track to have will you Depot, Office a 1099. file and expenses those all all W
Prepare to switch from paper to electronic filing. IRS Reporting Changes IRS Reporting Effective Effective January 1, 2011, the As As she was growing up, Lisa Meet Lisa Elsner, CPA Elsner, Meet Lisa
Those who do not pay electronically will pay a 10% penalty. There is no EFTPS. the using for charge IRS willIRS no longer Fed- be accepting eral Tax Deposit 8109). All coupons firms with (Form quarterly tax liabilities greater than $2500 have to will use the Electronic Tax Federal Payment System (EFTPS) another electronic or payment system. stances stances she had an outstanding rec- IRS. the with dealings her ord in father suggested she look into public accounting. She followed his advice, receiving a Bachelor of Science de- gree in business administration and accounting, with a minor in manage- ment information systems, from In- diana University of Upon Pennsylvania. graduation, she first spent 10 years performing public accounting for regional accounting firms, then and followed it up with working as 11 a controller. years In both in- ing ing and manufacturing all work to- gether in a business, and how affects that the types of accounting sys- tems they need to have in place decisions.‖ accurate make to always enjoyed working with num- bers. So, when she was considering what major to pursue in college, her
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– ―Having ―Having managed the account- In In 2009, we were fortunate to if appointments are not mad not are appointments if From February 1st, 2010 to February From April 15th, we will be open will be 15th, we April Visa, MasterCard and Discover. Friday Friday (Closed for dinner 5:00 dinner for (Closed M information is not received inmail notinformation the received by is to set up your tax appointment. to set up your Saturday Saturday have have broader experience than public just accounting,‖ she know first says. ―I business and personal finances. and personal business ing department for a company, I decades decades of experience in both public and private accounting, which uses she to help our clients with their persuade persuade Lisa Elsner firm. to A Hanover join native, she brings our For your convenience,we now accept We will filed notWe timely guarantee
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What Changed What
counter drugs prescribednot physicians by are no qualifiedlonger expenses. - term careterm insurance program financed though deductions.payroll All working -
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— existing medical conditions couldwho otherwisenot obtain coverage. - employed, rate the increases 2.9% from to 3.8%. - employed could avoid penalties by paying 90% prior of their tax. year’s This backit is year - company iscompany subject toper penalty a $2000 employee, excluding the 30first employees. Companies 200with or areemployees more required to automatically enroll employees into in- surance plans, employeesbut optcan out. Currently theCurrently Medicare only tax covers Beginningwages. in 2013, alsoa 3.8% tax must be paid investment on net income (not including 401(k) plans) for individuals adjustedan with gross ofincome $200,000 anor couples $250,000.of with AGI Maximum contribution to a flexible spending account reduced to $2500. citizensAll and legal residents required to insurancepurchase a qualifying plan. The IRS will track individualswhether have such coverage. If not, they awill exact penalty equal to the great- er (a)of $695 for individualan or $2085 or for a family; (b)2.5% over of income the tax filing threshold Federal government providewill credits/subsidiestax for purchasesinsurance to individuals and families incomeswith of 133% to 400% federal of the poverty line. 50If or employees, if evenmore one time full employee is receiving a premium credit, tax the grants totaling $200 over million a five periodyear to companies with up to 100 employees that start new wellness programs for employees. their The on disbursementstax a health from savings acount or Archer savingsmedical account that are used not for qualified medical expenses raised is to ,the20% up from 10%current and 15% Overlevels. taxpayersCurrently takecan a deduction for unreimbursed medical expenses exceeding 7.5% of adjustedtheir income.gross Starting 2013, in raisedis that to 10%. For 65 older,those or the 10% limit into effectgoes 2016. in For individual employees earning more than $200,000 and than couples $250,000,more the Medicare ratetax increases 1.45%from to 2.35% over income of any thresholds.those For the self Businesses fewerwith than 25 andemployees an averagewith of wage no than $50,000more receive can a credittax of up to 35% employer’s of the contribution toinsurance the premium. Elimination lifetimeof coverage limits. coverageAnnual limits as only approved the Secre- by Healthtary of and Human Services. Federal government to establish a national high prewith National long areadults included unless they opt out. Companies up to with 100 receiveemployees can grants to offset costs of new wellness pro- grams for employees.their The Department of Health and Human Services is authorized to give Provide coverage dependent for adult children up to 26age all individual in and group policies. provideMust coverage without cost preventivetions, care for minors and certain preventive care and screenings for women
Of Healthcare Reform Of Healthcare
The Who, WhenWhat, The Who, Who tax credittax of up to $1000 on 2011their for new taxes workers stay employedwho for at least a year. 2008In businesses and 2009, small allowedwere to deduct losses taxesfrom paid the in previous three to five 2010,In years. are limitedthey to carrying losses back two only years. 2009,In self the up to 100%. You can You benefitcan a taxfrom credit of up to $1500 for making energy 30 percent cost of the of qualified insulation, windows, outside doors, fuel stovesbiomass and high furnaces, heaterswater and central air conditioners. The exemptsHIRE Act businesses paying from employer the Socialshare of Security taxes (6.2%)quali- for new fying hires made between February 3, 2010 and December businesses 31, 2010. alsocan Small receive a for itemized deductions and personal exemptions for high 2010, arebut scheduled to in return 2011. Section 179 allows Con- smallbusinesses to deduct September, In 100% of the cost business of new property. raisedgress the SectionThe 179 deduction limit to thededuction reduces $500,000if total 2010 for 2011. and cost of all Section 179 property exceeds $2,000,000. also extended Congress the depreciation‖―bonus allow- businessesing to deduct 50% cost of the of qualified property placed service into by the end 2010.of $45,000joint filers. for The deduction rate for using your personal vehicle for business has dropped 55¢2009 in from 50¢ tofor The bracketstax for all income levels startwill at about 4% than higher the 2009 brackets. Personal exemptions for 2010areas same the 2009,The $3650. standard deduction returns tax for joint is alsosame the as last $11,400.year, single but deductcan filers extraan $250.There phase outsare normally subject to additionalan 3.8% tax. Starting in 2010, can individuals convert their traditional IRA to a Roth IRA and spread the con- on the tax overversion two years. Individuals whose income toois high toa use IRA canRoth circumvent that limit by contributing to an IRA and then converting it to IRA.a Roth The Minimum Alternative Tax exemption amounts have dropped to $33,750 year this for individuals and 20% rate. areDividends taxed as capital gains in 2010 to15%), (0% be will treatedbut incomeas normal next ratesyear up towith 39.6% This change doesn’t go into effect until 2013, need you but to plan ahead for it. For couples earning over $250,000, income unearned such as interest, dividends, rents, royalties, annuities and capital gains (including income sellingfrom house)your be considered will as ordinary income for purposes of calculating Medicare Thistaxes. means that, addition in tocapital the gains rate rising 15%from to 20%, income alsowill this be Unless Congress acts, the ratestax return to the 2001 10 the levels: percent bracket be eliminatedwill and the top rate backgoes to 39.6%,all brackets inand between willa higher pay rate. tax You should be prepared to additionalget income in hand before end the or the and expenses,year, delay case in taxthe rates go up in 2011. 2010,In in10% the taxpayers and 15% brackets are exempt payingfrom capital gains taxes, those in while taxhigher brackets pay 15%. Next those the year, in lowest racket pay a 10%will and tax others pay a will Insurers/ Insurers/ Investors Taxpayers Taxpayers Taxpayers Taxpayers Uninsured Employers Employers Employers Employers Employers Employers Employees Individuals Individuals Employers/ Health PlansHealth
Major Tax Changes to be to Changes Tax Major Aware of for 2010/2011Aware
Saving
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AMT Rates ments 2014 2013 2011 2010 Roth IRA Roth Dividends Deductions Tax Law When Tax Conversions Personal Tax Tax Brackets Energy and Equipment
Home Home Improve- Exemptions and Medicare on tax New EmployeesNew Estimated Taxes unearned income Business MileageBusiness Deducting Losses Capital Gains and Business PropertyBusiness Smith & Company, CPAs 126 Carlisle Street Hanover, PA 17331
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MD Hampstead,
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changes in the tax laws and lets lets and laws tax the in changes getting are expenses the where Dr. Whitney at his recent induction into into induction recent his at Whitney Dr.
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What Our Clients are Saying are Clients Our What