Fall is around the corner! It’s time for sweater weather, football, and Halloween! But before getting ready to indulge in haunted houses, hot chocolate, and corn mazes, don’t forget some of these important reminders!
As shareholder-employees of your S corporation, you need to determine a reasonable salary for yourself. Shareholder-employees earn wages and therefore, are subject to employment taxes. Distributions can be re-characterized by the IRS as salary if distributions are paid in lieu of reasonable compensation (RR 74-44).
It is important as a shareholder, you track stock and debt basis in your corporation. The list below tells you what you should know about your stock and debt basis:
1. When the S corporation allocates a loss and/or deduction item to you. To claim this loss or deduction, you need to show you have adequate stock and/or debt basis.
2. When the S corporation makes a non-dividend distribution to the shareholder. You need to demonstrate you have adequate stock basis to determine if the distribution is non-taxable.
3. When the S corporation repays a reduced basis loan to you. You must know your debt basis to determine if there is a gain on loan payment.
4. When you dispose of your S corporation stock, you must know your stock basis to determine the gain or loss upon disposition of your stock.
On a separate note, the deadline for individual taxpayers to file their personal tax return for 2014 is fast approaching! The extension due date is October 15th so make sure your tax returns are completed.
Have a warm and cozy start of fall and en-joy the beautiful festivities with your loved ones!
You can call Jaya Naiken CPA to answer your tax questions.
I hope all of you had a great Memorial Day weekend. My wife and I spent a day at the Indianapolis Speedway and took in a few events that lead up to the “Greatest Spectacular Auto Race Event”.
Now on the topic of income taxes, we are approaching the due date for the 2nd installment to pay estimated taxes on or before June 15, 2015. Estimated tax is method used to pay tax on income not subject to withholding. This includes income from self employment, interest, dividends, alimony, rents, gain from sale of assets and prizes. Also you have to pay estimated tax when the withholdings on salary, pensions and other income is not enough. If you don’t pay enough through withholding and estimated taxes you maybe be charged a penalty. If you don’t pay enough by the due date of each payment period you may be charged a penalty even if you are due a tax refund when you file your tax return.
If you are filing as a sole proprietor, partner, S Corporate shareholder and as a self employed individual you should used Form 1040ES to pay the estimated taxes. IRS also allows for direct pay via online or through the telephone.
Estimated tax due dates for individuals are:
For Period Due Date
Jan 1– Mar 31 April 15
April 1– May 31 June 15
June 1– Aug 31 Sept 15
Sept 1– Dec 31 Jan 15 next year
State estimated taxes are also due. Each state will have the forms and the method of payment listed on their website.
If you are filing as a C corporation you should use form 1120-W to compute the estimated taxes. Corporations must use the federal electronic tax payment system to pay and deposit estimated taxes. Calendar year end Corporations must deposit tax payments as follows:
For Period Due Date
Jan 1– Mar 31 April 15
April 1– May 31 June 15
June 1– Aug 31 Sept 15
Sept 1– Dec 31 Dec 15
If we can be of assistance, please contact Jaya Naiken CPA to answer your tax questions.
In the meantime enjoy the summer.
Now that the mid term elections have passed, our hope is that Congress may go back and retroactively reinstate some of the expired tax deductions from 2013.
Nevertheless, there is still time before December 31, to reduce your tax bill. A good starting point is to sit down with your CPA and review your prior year income tax return to develop some tax savings strategies for yourself.
Outlined below are some areas to consider:
- Harvest capital losses to offset capital gains.
- Consider earning municipal interest income to regular interest income.
- Harvest passive gains such as rental property income to offset passive losses.
- Beware at what levels social security income is taxable. For married filing joint taxpayers, 85% of social security benefits is taxable when modified adjusted gross income is at $44,000.
As a taxpayer some of the steps you can do now:
If you report on a cash basis consider deferring income to the following year and accelerating business expenses and purchases in the current year.
- Maximize your 401k, IRAs and Simple retirement plan contributions.
- Donate goods and cash. You must have receipts for contributions in excess of $250. When performing services for tax exempt entity as a volunteer you can deduct your personal mileage.
- Consider opening and funding a health care savings account (HSA).
- Other tax deductions to review are the education credits, tuition deduction and student loan interest.
- Take advantage of an employer sponsored cafeteria and flexible spending plans for child care, health care and medical reimbursements.
In 2014 if you are not enrolled or covered in a health insurance plan you may have to pay additional income tax. Health care open enrollment period runs from November 15 to February 15.
When it comes to business and individual tax planning, please reach out to Jaya A. Naiken CPA to answer your tax questions.
Have a happy holiday!
On or before September 15, 2014, 3rd quarter estimated tax payments are due for the self employed and for individuals who received income that has not had any withholding taxes. Examples of such income would include rent, interest, dividends, profits from an LLC and S corporation, partnership income, and taxpayers with realized gains from the sale of assets.
Tax return extensions for calendar year corporations and partnerships will expire on September 15. Tax returns that have an extension must be filed on or before September 15 to avoid being non compliant.
It is a good idea for individuals and business owners to start looking at current year income to plan for ways to reduce income taxes.
The key is for businesses to have updated financial statements which provides a road map to determine current profits and losses. For individuals, we suggest you begin by compiling a summary of your income and review your most current payroll statement.
The next step we suggest is for you to meet with your accountant to review your current financial information and to compute an estimate of your taxes.
Discuss and prepare a plan with your accountant on ways you can reduce your current estimated taxes if applicable.
Due to the passage of the Affordable Health Care Act at the end of 2013 some of the tax benefits and deductions have expired.
Therefore it is critical you take the time to review your situation before December 31 to make the necessary adjustments.
If this is too burdensome for you , please let us help to guide you and plan to simplify your tax planning process.
Frequently I am asked by clients should I have a will, trust or both. As an estate planner my answer is “it depends”.
The Will is a legal document that contains your instructions for disposing your assets upon your death. Generally the Will is presented in court via a process called probate to determine its validity, pay debts and distribute the net assets to the named beneficiaries. After ones death, and when the estate gets closed the Will then ceases to exist.
The Trust also is a legal document which continues to exist after your death and contains your instructions for disposing your assets. Assets titled and place in name of the trust can avoid going through the court probate process. Assets transferred outside probate to beneficiaries generally avoid delays which tends to minimize legal fees. Another advantage of having a trust document is your control of assets still exists after your death through the instructions in the trust.
Trusts are advantageous for the protection of underage and adult children, disable and incapacitated family, second marriages and for asset protection.
Remember, when you think about Estate planning, it is more about protection for yourself, family and siblings versus how much of equity you have.
If you currently have a Will, Trust or both, when was the last time you had the document reviewed and updated. Has itbeen more than 3 years? Where there any major changes in your life such as a marriage or children.
Let us help and guide you to plan and simplify the estate implementation process.
www.jayanaikencpa.com
Northside neighbohood Indianapolis/Carmel professional CPA firm located near Nora Plaza and the Monon Trail.
If you need to amend your tax returns after you e-filed or mailed the tax return due to an error, missed deduction, credit or a revised tax reporting form, here are points the IRS wants you to know.
1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended income tax return.
2. Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. An amended return cannot be e-filed; you must file it by paper.
3. Generally, you do not need to file an amended return to correct math errors as the Center will automatically make that correction.
4. You must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
5. If the changes involve another schedule or form, you must attach that schedule or form to the amended return.
6. If you owe additional tax, file Form 1040X and pay the tax before the due date to limit interest and penalty charges that could accrue on your account. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
If you have any of the above situations, please reach out to us. Our CPA firm team will be happy to resolve your amended tax returns.
We had taken a sabbatical from publishing our monthly news letter for the last two months as most of you understood we were busy with the 2011 tax filing season.
As we wind down and gear up for 2012, we would like to share some potential changes that may affect you.
Taxpayers face expiration of the current major tax cuts in place as we did in 2010 unless Congress decides to extend the cuts pass year 2012.
Items of concern are whether Congress would allow tax rates to rise as scheduled that affect income, capital-gains and estates or come up with other alternatives.
Below is the 2012 tax rates.
Taxable Income
Rate Couples Filing Jointly Single Filers
10% $17,400 and below $8,700 and below
15% 17,401 – 70,700 8,701-$35,350
25% 70,701 – 142,700 35,351-85,650
28% 142,701 – 217,450 85,651-178,650
33% 217,451-388,350 178,651-388,350
35% above $388,350 above $388,350
Have any questions, please call or e-mail us. We are a neighbor hood firm near Nora Plaza in the Indianapolis/Carmel area. Our clients like talk accounting, tax, bookkeeping, payroll and Quick Books while strolling the Monon Trail.
| Purpose |
Rates 1/1 through 6/30/11 |
Rates 7/1 through 12/31/11 |
| Business |
51 |
55.5 |
| Medical/Moving |
19 |
23.5 |
| Charitable |
14 |
14 |
I trust all of you had a wonderful Xmas and a pleasant New Year. My family and I spent the holidays with friends and family and spent many hours tracing the family tree. The neat part was we were able to trace family ties back to Mauritius and India.
Now for the heavy lifting. The income tax filing season has begun and your important tax documents should be arriving in your mailbox. Although your personal tax return is not due until April 17 this year, you can make tax time easier on yourself with an early start. Here are some tips to ensure a smooth tax-filing process.
1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.
2. Be on the lookout for W-2s and 1099s which will be coming soon; you’ll need these to file your tax return. Be alert for the new Form 8949 to report your capital gains and losses from brokerage statements.
3. Have a question? Call or email me at Jaya Naiken CPA, LLC. to help you to find answers to your tax questions about credits, deductions, general filing questions and more.
Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure as the documents arrive to organize and keep in a separate folder. Double check to make sure you have the correct documents by tax year, account numbers, titles and Social Security numbers as these are the most common errors. Don’t panic! If you run into a problem, remember Jaya Naiken CPA is here to help. Start with visiting www.jayanaikencpa.com to answer questions about credits, deductions, general filing and more.
For 2011, you may need to report stock sales and other capital gain transactions on a new IRS Form 8949. The totals from the new form 8949 then flows to Schedule D of your tax return.
Are you confused, then call Jaya Naiken CPA, LLC to answer your tax filing questions and assist you with your tax filing requirements. You can contact me through my website www.jayanaikencpa.com or call me at 317-218-3318.
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