August Newsletter

ill additional Health Care Reform laws be delayed? Will student loan rates get a permanent fix from the recent doubling of interest rates? While we wait for these answers, the 2013 tax year steams into the dog days of summer. This month’s newsletter provides some ideas to help reduce this year’s tax bite, discusses a recent error in IRS announcements, and provides some hints on becoming a smarter renter.

As always, should you know of someone who may benefit from this information, please feel free to forward this newsletter to them.

Oops. You Owe the IRS More Interest

The IRS is having a bad year. First it was the acknowledgement of mishandling non-profit applications for groups with “Tea Party” and “Patriot” in their name. Then it was the bad publicity around lavish spending at IRS internal conventions and meetings. The latest oops is the admission that notices sent out to taxpayers in July miscalculated the amount of interest owed. Here is what you need to know:
Important Did you receive a CP2000?If you receive a notice from the IRS using form CP2000 saying you owe additional tax, there is a good chance the interest calculation on the notice is incorrect. Unfortunately, the amount stated in the incorrect notices is too low. You will owe more.
A dozen tax planning triggers
Important How do I know? The incorrect notices were sent in early July. Notice dates prior to and after July 2013 should be correct.
Important New Notices. The IRS has stated they will be sending out corrected notices to affected taxpayers.
Important What should you do? Since your incorrect notice will not be labeled as such, what should you do? It is always best to respond to IRS notices in a timely fashion. So respond to the notice as appropriate using certified mail. Corrected payments can be made at a later date.

Becoming a Smarter Renter

Renting an apartment or condo, leasing a piece of equipment, renting business property, or leasing a car all involve the common practice of renting something that is owned by others. This experience can easily become a nightmare with a bad landlord or lack of understanding of your obligations. Here are some hints to become a smarter renter.
3 Read all agreements. Read the lease agreement thoroughly prior to signing. Ask for clarification of anything you do not understand. Look for clauses in the agreement that might suggest this property owner has problems with its current tenants. If it seems unfriendly, don’t sign it.
3 Negotiate up-front. Be ready to negotiate your lease terms up front. If anything is unclear in the lease, have it clarified and put in writing. Do not depend on word of mouth. Be very clear about security deposits, first and last month rents, and services included in the lease.
Protecting Your Kids from Identity Theft
3 Follow the terms. Be the tenant that pays a little early, not the one that always pays late. That way if you ever need a little extra time to pay, you have established the necessary trust to do so.
4 Pro-active disclosure. If you think you will need a temporary exception to part of the lease, try to include it in your upfront negotiations. If this is not possible, consider pro-actively disclosing the exception to your property owner. This will help build trust and a reputation as being a good tenant.
5 Keep the property clean. This is especially important if you have a pet in an apartment. When landlords come into your apartment, you will build confidence if the place looks like you treat it as if you owned it. The same is true with rented equipment. Always return it cleaner than you received it.
5 Know the owner & neighbors. Building a relationship with the property owner and your neighbors helps. If your neighbor has a problem, wouldn’t you rather have them come to you than to your landlord? Establishing a good working relationship with a landlord will help you when you need something out of the ordinary or you are in need of support with a problem in your apartment or with the equipment you rent.
5 Leave with a smile. This is especially true for apartment and vacation rentals. When you leave, have the property cleaned and hassle free for the landlord. Request a reference from the landlord for future rentals.

Taxes are up. What Can You Do?

Tax rates are up. Itemized deductions and personal exemptions are being phased out. Long-term capital gains and ordinary dividends maximum tax rates are up 5%. What action can you take to reduce the potential tax bite? Here are five ideas.
1 Take full advantage of capital gains tax law. Remember losses on investments can be used to offset any investment gains. The best-case scenario for tax savings is to offset losses with short-term capital gains that could be taxed as high as 39.6%. In addition, you may take up to $3,000 in excess losses against your ordinary income. A dozen tax planning triggers
1 Maximize Tax-deferred Retirement Savings. Numerous retirement plans allow you to defer paying income taxes until funds are withdrawn. Primary examples are 401(k)s, Individual Retirement Accounts (IRAs), and 403(b)s. The pre-tax money you contribute reduces your taxable income this year. Funds are not taxed until you withdraw the contributions, usually during your lower income retirement years.
1 Consider Utilizing Home Equity. Interest on most debt, except home mortgage interest, is no longer tax deductible. But since interest secured by your primary home is deductible, you can often leverage the equity in your home via a home equity loan and deduct the interest expense. This can effectively move non-deductible interest to deductible interest. Some caution should be taken here as non-payment could put your house in jeopardy. Limits apply.
3 Shift income and expense. Remember for most of us, taxes use the cash versus accrual method of reporting. That means your income and deductible expense is based upon when you receive the funds or when you pay them. So pre-paying an obligation due the following month can move that expense into the current tax year. Delaying receipt of a bonus from December to January will lower your income in the current year.
4 Take advantage of tax credits. The bad news? There are thousands of pages in our current tax code. The good news? Included in those thousands of pages are numerous tax credits that can reduce your tax obligation. From Child Credits to Foreign Tax Credits, the options are vast. Understanding them all is almost impossible, but a quick planning session could help identify some tax savings opportunities for you.

Should you wish a review of your situation, please call.

I Need a Copy of My Tax Return

Retaining copies of your federal tax return is important. Not only will you need the return in case of audit, but the tax return is often used to secure student aid, obtain loans, purchase a home or business, plus much more. What can you do if you cannot find a copy of your tax return?

Important E-filed tax returns have their data stored in software. This means, if necessary another digital copy could be produced.
Important IRS requested transcript. The IRS can provide you with a transcript of your current tax return or from the prior three years. You can request a transcript of these tax return’s data from the IRS using their online tool at: using their “order a transcript tool“. Information will be provided to you within approximately 5 to 10 business days.
Creative Summer Jobs
Important Request an actual copy. If you require an actual copy of your tax return, one can be provided for $57 by filling out Form 4506. But plan accordingly as this can take up to 60 days to process.

As always, should you have any questions or concerns regarding your situation please feel free to call.

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