In this issue:

• Last-Minute Tax Moves - There's still time
• Remember the Nanny Tax - Do you have a household employee?
• Word of the Year - Are you current with the New English?
• The Extension that Never Ends

The Month of December:

    Take final year-end actions:
    • Gifts
    • Capital gains/losses
    • Charitable giving
    • Dividend income
    December 24th: Last day of Chanukah
    December 25th: Christmas Day
    December 26th: Kwanzaa Begins
    January 15th: 4th Quarter Estimated Payments Due

15 Year-end Tax Tips

At the end of each year there are a number of things to consider that may have a positive impact on your tax obligation. Here is a list of fifteen ideas that may be worth a quick review.

1. Make last minute charitable donations
2. Review and maximize use of the $14,000 annual gift giving limit

Surprise! The Mutual Fund Tax Trap

Too often taxpayers receive a tax surprise at year-end due to actions taken by a mutual fund they own. What can add insult to injury is the unsuspecting taxpayer who recently purchases the shares in a mutual fund only to be taxed on their recent investment. How does this happen and what can you do about it?

Tax surprises

Reducing the Savings Account Tax Burden

Money you place in traditional savings accounts is already taxed by both the Federal and State governments. These after-tax deposits lower the amount you have available for savings. Lower deposit amounts also mean lower earnings potential. Then Interest earned on your savings is also taxed. What can you do to lessen this tax burden?

In this issue:

• Preview of Some Key 2015 Tax Figures
• A Cheaper Hotel Stay
• Business Use of your Home
• A tax deduction under your nose?
• No Such Thing as a Free Lunch?

The Month of May:October 1st:

•     October 1st:  SIMPLE IRA plan establishment due
•     October 15th:  Extension tax return filing deadline
•     October 31st:  Halloween

Let the tax man help with child care costs

Are you a working parent looking for ways to ease the burden of child care expenses? There are several tax-saving strategies available to you.

First, there's the dependent care tax credit, a direct reduction to your tax liability.

There are tax breaks when you do charitable work

If you do volunteer work for a charitable organization and have not kept track of your out-of-pocket expenses, you might be passing up an excellent opportunity to lower your tax bill. To qualify, your unreimbursed expenses must relate directly to the charity, and you must itemize your deductions on your tax return. Here is a brief rundown of some possible deductions.

Lifestyle Audits. A thing of the past?

The word “audit” is enough to raise anyone’s blood pressure. If the IRS agent then tells you they want to see bank accounts and personal records you may need a heart monitor. Should this happen to you, you could be in a process known as a lifestyle audit.

Background

The lifestyle audit was a tool used by auditor’s to ascertain if the income you claim on your tax return can support how you live.

Delay paying taxes with a like-kind exchange

Sitting on a piece of investment property that you would like to sell? By structuring the transaction as a tax-deferred exchange, you can delay paying taxes on the full amount of the gain realized.

Also known as a "like-kind exchange" or a "1031 exchange," these transactions are only available for investment or business assets.

2014 Capital Gain Refresher

As you investigate opportunities for managing your investment portfolio in 2014, remember to pause and plan for the effect of tax laws. Here are some important rules to consider.

Capital gain tax rates. For 2014, the tax rate you'll pay on gains from sales of assets depends on your taxable income and how long you've owned the investment. Gains on assets owned a year or less are taxed at the same rate as your ordinary income.

Thought Provoking Shorts - August 2014

• If there's a wedding in your summer plans, take a look at how marriage could affect your tax bill.
• Business Tip: Customer service is not in the SAYING…..it's in the DOING.

In the Military? Special Tax Benefits May Apply

There are special tax benefits to members of the U.S. Armed Forces. If you or someone you know is in the military, prior to filing a tax return it makes sense to review your situation. Outlined here are some of the more common.

Combat Pay Income Exclusion.

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?

Save you Vacation Home Deduction!

You can enjoy a vacation home and cut your taxes - with some careful planning and a little discipline.

The IRS rules can be complex and potentially restrictive, so a word of caution is in order as you plan the use of your vacation home.

Know the tax rules for selling online

Selling items on eBay and other online auction Web sites has become a very popular way to get rid of unwanted household stuff, as well as a way to turn a little profit. Many users have even started full-time businesses auctioning merchandise on the Web. But like any business venture, selling items in the virtual world has tax implications that are all too real.

From a tax standpoint, casual selling on eBay is essentially the same as holding a garage sale. If you sell an item for less than you paid for it, you cannot deduct the loss. When you sell something for a profit, however, you must report it on your tax return. Long-term gains on the sale of collectibles, such as artwork, antiques, or rare coins, are taxed by as much as 28%.

Profit is the difference between the selling price and your "basis" in the item. In most cases, basis is simply the amount you paid for it. Inherited items generally have a basis equal to their fair market value at the time of receipt. If the basis cannot be documented, it becomes zero, and you pay tax on the entire selling price.

Selling vacant land could bring a tax break

You probably know that you can exclude up to $250,000 of gain ($500,000 for most joint filers) when you sell your principal residence. IRS regulations may now allow you to apply this gain exclusion when you sell vacant land that is adjacent to your home.

The Child & Dependent Care Credit provides a reduction in taxes to offset the cost of daycare when you are employed. The maximum amount of the credit is $3,000 for one dependent or $6,000 for two or more qualifying persons.*

To take advantage of the credit here is what you need to know.

1. Qualified dependent(s). Your dependent must be under the age of 13. A spouse or older dependent who is physically or mentally unable to care for themselves can also qualify.
2. Earned Income. You must have earned income to support the credit.
3. Qualified daycare expenses. You must actually incur the care expense for the qualified dependent.
4. Financial support requirement. You must maintain the home and financial support for the qualified dependent (more than half the cost and more than half the year).

Here are some tips;

• Partial expense coverage. The credit only covers a percentage of your qualified care expenses. The amount depends on your income with a high of 35% of qualified expense down to a low of 20% of the daycare expense.
• Obtain proper ID. Most daycare organizations will provide you with an expense summary at the end of each tax year. This form will tell you how much you spent in care and will provide you with the proper tax id for their organization. If you have someone else caring for your dependent, make sure you receive their tax information. It will be needed when you file for the credit on your tax return.
• Not equal. If you have two or more qualified dependents, the daycare expenses do not have to be equal for each of them. For example, you could use $5,000 for one dependent and $1,000 for the rest of them.
• Education expenses. Pre-school, nursery and other educational programs can qualify if levels are lower than kindergarten. Full-day kindergarten fees DO NOT qualify.
• Leverage summer. Summer day camps and similar activities can qualify for the credit. So too can hiring a nanny to care for the kids while you are at work and the kids are out of school.

Other details apply. Please ask for help if you wish to review your situation.

*Note: If your employer provides daycare reimbursement as a benefit on your W-2, the employer benefit is limited to $5,000 or $2,500 if married filing separate or single. You can still use excess daycare expenses to maximize your credit to the full $3,000/$6,000 amount.

Call us if you have questions about the tax consequences of employing family members.

DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here.  All rights reserved.

Hiring family in the family business can cut taxes

As the summertime school vacation season approaches, young family members may be looking for a job - and having a hard time finding one. Hire them in your family business, and you get a double benefit: helping the kids gain valuable experience and garnering tax breaks for your company.

Here's what you need to know.

Leaving a Job? Don't Take a Tax Surprise with You

An inevitable part of life is a changing jobs. Now a recent Supreme Court decision clarifies that severance payments you receive when you leave your job are wages and subject to employment taxes. So how might this impact you?

Background

All employees and employers pay FICA taxes. There are two components;

Many employers who pay a severance check to employees when they leave have classified these checks as other, non-wage, income. This allows both the employer and employee to save on paying these FICA taxes.

In this issue:

• Tax Quiz
• How well do you know tax facts?
• Kids Say the Darndest Things
• But the impact today can be far-reaching
• Why's Everybody Picking on Me?

In the News:

• Severance Pay is Subject to Employment Taxes

For the month of April:

    April 15th: Tax Returns Due
    April 15th: 1st Quarter 2014 estimated tax payments due

appy tax filing month. To help celebrate, this month's newsletter includes a fun tax quiz. In addition, there are articles outlining state revenue department's new strategy of harassing out-of-state businesses to collect their sales/use tax for them and an article outlining the risks children can place on parents with their internet behavior.

Should you know of someone who may benefit from this information please feel free to forward this newsletter to them.