Summer is almost here. Although the official beginning of Summer is a couple weeks away, many college and high school students are already have found summer employment and are hard at work. Others will be starting their summer jobs in the weeks to come.
Now is a good time to help these hard working young people get their retirement savings off to an early start. Parents and grandparents (uncles and aunts too) can contribute up to $5,500 to a young worker's Roth IRA. If properly invested, the funds can grow into hundreds of thousands of dollars by the time these youngsters retire at age 65 or 70. The funds can be withdrawn from the Roth account tax free after age 59 and a half.
This is an uncommon little loophole in our tax system that rewards people for working.
Contributions to Roth IRAs are subject to a dollar limit ($5,500 for 2014 for singles under the age of 50) and an earned income limit: Roth contributions cannot exceed the student's earnings from employment (including self-employment).
Most students probably need the money they earn in the summer for their education expenses. Without a little help from their families few students are able to take advantage of this tax planning opportunity. Once they are established in their careers, many of these young people are going to find that their incomes exceed the earnings thresholds under which contributions to Roth accounts are allowed, so now is the time to start thinking about this.
- Mark S Gleason CPA
www.lakes-cpa.com
Showing posts with label Downtown CPA. Show all posts
Showing posts with label Downtown CPA. Show all posts
Wednesday, June 4, 2014
Tuesday, March 25, 2014
Retroactive Minnesota Tax Law Changes
The CPAs that participate in an email tax forum I belong to are whining about changes to the tax law enacted last week. The tax cuts included in this new law affect 2013 tax returns that have already been filed.
Many tax preparers are not happy about this. I think the CPA's should be happy that taxes have been cut for their clients.
The MN Department of Revenue is having a little hand-holding session to comfort the upset tax preparers and "provide you with more information". So the upshot of all this (according to the MN Department of Revenue) is:
If your client has already filed, and the return is affected by the changes, they will receive notification from us. Please tell them not to do anything until they receive direction from us.
One of three things will happen with the return. The department:
1. Will fix the return and send the taxpayer a letter explaining how it was fixed.
2. Will send a letter to the taxpayer requesting more information and use that information to fix the return. They will receive a letter explaining how it was fixed.
3. Will not be able to fix the return. If this happens, the taxpayer will receive a letter explaining the return can’t be fixed. If this happens, they will need to file an amended return to get the benefits of the law changes that apply to them.
If your client has not filed…
Please wait to file their return. We are working to get new forms and instructions to you by April 3.
Note: If you use a desktop version of a software product, please be sure to watch for software updates from your software company.
We appreciate the job you do helping taxpayers file their returns and appreciate your patience as we review and implement the law changes.
Meaningful tax savings will be had by very few taxpayers including those suffering the tax consequences of a real estate foreclosure or who incurred adoption expenses. I don't think any of my clients will incur retroactive tax relief of over $50. Some of my clients will be effected by the mortgage insurance deduction, student loan interest and classroom expenses.
The Minnesota Society of Certified Public Accountants has released the following summary of things we tax preparers need to learn all about immediately:
Provisions enacted federally for 2012 and 2013 only and adopted for Minnesota retroactively to tax year 2013:
Deduction in adjusted gross income of up to $250 for classroom expenses paid by a K-12 grade educator
Exclusion for discharge indebtedness income on a principal residence
Itemized deduction for mortgage insurance premiums on a principal residence
F,or taxpayers 70-1/2 or older exclusion from gross income up to $100,000 of IRA distributions made directly to charitable organizations (the amount excluded is not allowed as a charitable deduction)
Increased maximum exclusion for employer provided commuter vehicle or transit pass fringe benefits from $125 per month to $245 per month to obtain parity with the exclusion of fringe parking benefits
Allowed expensing for the first $15 million of production costs of films and television shows
Allowed depreciation of leasehold improvements and qualified restaurant property, including new restaurant property and improvements to retail property over 15 years (rather than 39 years) for property placed in service through 2013
Allowed accelerated depreciation of qualified Indian reservation property for property placed in service through 2013
For contributions made in taxable years beginning through 2013, extension of basis adjustment to S corporation stock when the S corporation donates appreciated property, which is equal to the tax basis of the property rather than the fair market value
Allowed depreciation of certain motorsports entertainment complex property over 7 years rather than 15 or 39 years for property placed in service through 2013
Allowed expensing of 50% of the cost of advanced mine safety equipment for equipment placed in service through 2013
Special rule for charitable contributions of real property for conservation purposes for contributions made in tax years beginning in 2013
Allowance for companies other than C corporations to take a deduction for contributions to a charity equal to the cost basis plus one-half the normal price mark-up of food inventory for contributions made through 2013
Provisions enacted at the federal level for tax year 2013 and future years to which Minnesota would conform retroactively to tax year 2013 and for future years:
Increased contribution limits from $500 to $2,000 per year and allowed use of education savings accounts for elementary and secondary school expenses
Increased income limits and allowance of unlimited time period for the deduction of student loan interest
Exclusion from gross income for amounts paid or expenses incurred (up to $5,250 annually) by an employer in providing educational assistance to employees under an educational assistance program
Exclusion from income for awards under the National Health Service Corps scholarship program and related awards for health-care professionals
Exclusion for employer provided adoption assistance
Forgive the sloppy formatting of this post. I am short of time today and this is what happens when cutting and pasting long quotations. My comments in this post are bold, the rest of this has been cut and pasted from the sources I identified.
- Mark S Gleason CPA
www.lakes-cpa.com
Many tax preparers are not happy about this. I think the CPA's should be happy that taxes have been cut for their clients.
The MN Department of Revenue is having a little hand-holding session to comfort the upset tax preparers and "provide you with more information". So the upshot of all this (according to the MN Department of Revenue) is:
If your client has already filed, and the return is affected by the changes, they will receive notification from us. Please tell them not to do anything until they receive direction from us.
One of three things will happen with the return. The department:
1. Will fix the return and send the taxpayer a letter explaining how it was fixed.
2. Will send a letter to the taxpayer requesting more information and use that information to fix the return. They will receive a letter explaining how it was fixed.
3. Will not be able to fix the return. If this happens, the taxpayer will receive a letter explaining the return can’t be fixed. If this happens, they will need to file an amended return to get the benefits of the law changes that apply to them.
If your client has not filed…
Please wait to file their return. We are working to get new forms and instructions to you by April 3.
Note: If you use a desktop version of a software product, please be sure to watch for software updates from your software company.
We appreciate the job you do helping taxpayers file their returns and appreciate your patience as we review and implement the law changes.
Meaningful tax savings will be had by very few taxpayers including those suffering the tax consequences of a real estate foreclosure or who incurred adoption expenses. I don't think any of my clients will incur retroactive tax relief of over $50. Some of my clients will be effected by the mortgage insurance deduction, student loan interest and classroom expenses.
The Minnesota Society of Certified Public Accountants has released the following summary of things we tax preparers need to learn all about immediately:
Provisions enacted federally for 2012 and 2013 only and adopted for Minnesota retroactively to tax year 2013:
Deduction in adjusted gross income of up to $250 for classroom expenses paid by a K-12 grade educator
Exclusion for discharge indebtedness income on a principal residence
Itemized deduction for mortgage insurance premiums on a principal residence
F,or taxpayers 70-1/2 or older exclusion from gross income up to $100,000 of IRA distributions made directly to charitable organizations (the amount excluded is not allowed as a charitable deduction)
Increased maximum exclusion for employer provided commuter vehicle or transit pass fringe benefits from $125 per month to $245 per month to obtain parity with the exclusion of fringe parking benefits
Allowed expensing for the first $15 million of production costs of films and television shows
Allowed depreciation of leasehold improvements and qualified restaurant property, including new restaurant property and improvements to retail property over 15 years (rather than 39 years) for property placed in service through 2013
Allowed accelerated depreciation of qualified Indian reservation property for property placed in service through 2013
For contributions made in taxable years beginning through 2013, extension of basis adjustment to S corporation stock when the S corporation donates appreciated property, which is equal to the tax basis of the property rather than the fair market value
Allowed depreciation of certain motorsports entertainment complex property over 7 years rather than 15 or 39 years for property placed in service through 2013
Allowed expensing of 50% of the cost of advanced mine safety equipment for equipment placed in service through 2013
Special rule for charitable contributions of real property for conservation purposes for contributions made in tax years beginning in 2013
Allowance for companies other than C corporations to take a deduction for contributions to a charity equal to the cost basis plus one-half the normal price mark-up of food inventory for contributions made through 2013
Provisions enacted at the federal level for tax year 2013 and future years to which Minnesota would conform retroactively to tax year 2013 and for future years:
Increased contribution limits from $500 to $2,000 per year and allowed use of education savings accounts for elementary and secondary school expenses
Increased income limits and allowance of unlimited time period for the deduction of student loan interest
Exclusion from gross income for amounts paid or expenses incurred (up to $5,250 annually) by an employer in providing educational assistance to employees under an educational assistance program
Exclusion from income for awards under the National Health Service Corps scholarship program and related awards for health-care professionals
Exclusion for employer provided adoption assistance
Forgive the sloppy formatting of this post. I am short of time today and this is what happens when cutting and pasting long quotations. My comments in this post are bold, the rest of this has been cut and pasted from the sources I identified.
- Mark S Gleason CPA
www.lakes-cpa.com
Saturday, March 22, 2014
April 15 is Your Last Chance to Claim Your 2010 Federal Income Tax Refund
The IRS announced today that there are $760 million in refunds for people who didn't file their 2010 income tax returns. "Refunds totaling almost $760 million may be waiting for an estimated 918,600 taxpayers who did not file a federal income tax return for 2010. However, to collect the money, a return for 2010 must be filed with the IRS no later than Tuesday, April 15, 2014."
As a matter of fact, I am meeting with someone next week to talk about preparing her 2010 income taxes. We believe there is a refund to be claimed.
This reminds me of Gleason's four rules of tax procrastination along with some of and their corollaries:
1. If you procrastinate long enough, the need to perform the task may go away. Corollary: You may die suddenly, and whatever it was that you didn't get around to doing, now just isn't going to get done.
2. The need to file a tax return doesn't go away, even if you die. Corollary: Someone else will have to take care of it for you.
3. Tax returns are never easier to prepare or file after they are long past due. Corollary: It's more difficult and time-consuming to gather the information to prepare a complete and accurate return years after the fact than it is right after the end of the year.
4. Filing your taxes late is illogical and more inconvenient than filing them on time.
- Mark S Gleason CPA
www.lakes-cpa.com
As a matter of fact, I am meeting with someone next week to talk about preparing her 2010 income taxes. We believe there is a refund to be claimed.
This reminds me of Gleason's four rules of tax procrastination along with some of and their corollaries:
1. If you procrastinate long enough, the need to perform the task may go away. Corollary: You may die suddenly, and whatever it was that you didn't get around to doing, now just isn't going to get done.
2. The need to file a tax return doesn't go away, even if you die. Corollary: Someone else will have to take care of it for you.
3. Tax returns are never easier to prepare or file after they are long past due. Corollary: It's more difficult and time-consuming to gather the information to prepare a complete and accurate return years after the fact than it is right after the end of the year.
4. Filing your taxes late is illogical and more inconvenient than filing them on time.
- Mark S Gleason CPA
www.lakes-cpa.com
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