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Valerie C. Middlebrooks, CPA has been elected President of Jewish Family Services of Delaware.  Previously serving as the organization’s Vice President of Finance, Valerie will serve a two-year term. Jewish Family Services of Delaware (JFS) is a health and human service agency serving families within the Delaware community regardless of religious preference.  Their primary services include outpatient behavioral health counseling and the Brandywine Village Network for adults 50+.

Valerie is a Partner at Gunnip & Company CPAs.  She is involved in all areas of taxation including strategic planning, research, analysis and preparation for the firm’s clients, including individuals, small and large privately held companies, public corporations and not for profit organizations.  She is active in the community.  In addition to her role at JFS, she serves as Treasurer for the Delaware Society of Certified Public Accountants and Treasurer of the Fund for Women. 

To learn more about Val, click here.

 

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Worthless Stock

In the last few years, you may have purchased stock in a company that's now out of business, or in another one whose share price is now just pennies. Does this mean you can take a tax loss for a worthless security? Here's a quick look at the rules.

First, the stock must be completely worthless before you can claim a loss. For example, if it's a publicly traded company and the share price is as low as a penny, it still doesn't qualify as worthless. (If this is the case, you may be better off selling it to your broker for a penny and taking a regular capital loss.)

If it is worthless, you must be able to identify an event that caused it to become worthless and a date for that event. For example, even if a company declares bankruptcy, the stock may not be worthless if there's a chance it will reorganize and emerge from bankruptcy. But if it becomes clear at a bankruptcy hearing that the creditors will own the reorganized company, you can consider your stock worthless at that time.

You must claim a worthless security's loss in the tax year it became worthless. Because this is sometimes not obvious until later, the IRS allows you to go back seven years to file an amended return claiming the loss.

Because these are general rules and because it is often a judgment call to decide that a stock is worthless, we encourage you to contact our office with any questions you have.  (302) 225-5000 or info@gunnip.com.

 

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Are you a grandparent who wants to help pay for a grandchild's college education? You'll find several ways to do this, each with its own limitations and tax consequences.

GIFTS. The simplest way is to make an outright cash gift to your grandchild each year. In 2014, you can give up to $14,000 without any gift tax liability. If your spouse joins in the gift, you can jointly give each grandchild up to $28,000 each year.

DIRECT PAYMENTS. You can give unlimited amounts without gift tax consequences if you make the payments directly to a qualified education institution on behalf of your grandchild. Payments can only be for tuition, not for dorm fees, meals, books, etc.

EDUCATION ACCOUNTS. You could set up a Coverdell education savings account or a Section 529 plan for your grandchild. These plans offer tax-free growth of amounts you contribute to them. Age, income, and contribution limits apply, however.

To discuss the options best suited to your circumstances, contact our office at info@gunnip.com or 302.225.5000.

 

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Individual taxpayers seeking new jobs may incur a variety of expenses, including costs directly associated with moving to a new job location or those specifically related to the job search. Many of these expenses are deductible, but the rules are strict, and expenses must be carefully documented and substantiated. You may be able to take advantage of these deductions, if you plan carefully.

Any moving expenses you may incur, including expenses of traveling to the new location and transporting household goods and personal effects, are deductible so long as you meet certain requirements relating to when you begin work at the new position and how far the new job is from the old job and your old residence. These expenses are deductible even if you are seeking employment for the first time or in a completely new field. Also, qualified moving expenses reimbursed or paid by your employer are considered nontaxable fringe benefits.

You also may be able to deduct the expenses you incur in searching for a new job, including the costs of a headhunter or employment service, and the expense of preparing your resume. These expenses are deductible so long as the job being sought is in the same line of work as the old job, even if you are unemployed at the time of the job search. Further, the job search does not have to be successful in order to qualify for the deduction. However, job hunting expenses for a first job, or related to changing to a new career, are not deductible.

Although these are just a few examples, there are many more tax issues that you should consider. We would like to meet with you to discuss your overall tax planning strategies and how you can benefit from these deductions. Please contact our office at your earliest convenience to make an appointment.

 

 

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Taxpayer Bill Of Rights

The IRS has just issued a "Taxpayer Bill of Rights" that you should be aware of.  The Rights are divided into ten main categories. According to this "cornerstone" document you have The Right:

*  to be informed
*  to quality service
*  to pay no more than the correct amount of tax
*  to challenge the IRS's position and be heard
*  to appeal an IRS decision in an independent forum
*  to finality
*  to privacy
*  to confidentiality
*  to retain representation
*  to a fair and just tax system

 

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Small business owner working in a warehouseMany small business owners share one problem, especially in their early days. It's being over-reliant on a single customer or supplier for much of their business. If you're in that position, your business is operating with higher risk. Just as with investments, you don't want all your eggs in one basket. Your goal should be a well-diversified portfolio of customers and suppliers.

That's in an ideal world. In the real world you may have to live with the situation, at least short-term. But there are steps you can take to understand your risk and, over time, to change it.

Measure the problem. Work with your managers and accountant to quantify how your sales break out by customer. You only need do this for the top five or ten customers to see whether you have an over-reliance problem. If you're a manufacturer or retailer, take a similar look at your principal suppliers. Quantify how dependent you are on the top few.

Understand the risks. List the factors that could jeopardize your business with your chief customer or supplier. These will vary with your specific circumstances. They might include a natural disaster that interrupts your customer's business or that prevents you from shipping or receiving goods. It could be a change in the marketplace or a new technology that cuts demand for your product. It could be actions by your competitors. It might even be problems in your own operation, such as a drop in quality, delays in shipping, or poor inventory control. The list may be daunting, but until you understand the risks, you can't develop solutions.

Look for ways to minimize your risks. Brainstorm with your managers on long-term steps to reduce each risk. It might be to enter new markets or to tweak your product design. Think through contingency plans to address possible disasters or find alternative suppliers. Discuss how you would respond to changes in the marketplace. Try to set measurable goals for change and clearly assign responsibility. Changing the situation won't be simple, and it may take a long time. But that's what strategic business management is all about.

For assistance with this issue or with any of your business concerns, give us a call.

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When your financial situation leaves you no other choice but to borrow from your 401(k), there are a few things you can do to make the situation better. Consider withdrawing the funds from the cash or fixed-rate portion of your plan's portfolio. This may leave higher-earning investments at work. Try to pay off the loan as quickly as possible, and continue making regular plan contributions in order to take full advantage of your employer's match.

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Post It written 2014 Tax Planning

Successful tax planning includes a review of your available deductions and the impact of your filing status on your option to itemize. It is important that all of the technical requirements for your deductions are met. In addition, certain items are deductible only to the extent they exceed a percentage threshold. By reducing your adjusted gross income, you increase the amount of itemized deductions you can claim, because the floor limitation amounts are reduced accordingly.

A strategy commonly used in year-end individual tax planning is to determine the best timing for claiming itemized deductions. Generally, it is beneficial for taxpayers to defer income and accelerate expenses. This strategy may enable you to itemize your deductions if you claimed the standard deduction in the past.

Due to permanent changes and modifications made by the 2012 Taxpayer Relief Act, you can optimize current tax benefits while planning for the future with some certainty. However, the following tax incentives expired at the end of 2013. Unless extended retroactively by Congress, they will not be available for 2014:

  • Above-the-line deduction for educator expenses
  • Above-the-line deduction for qualified tuition and related expenses
  • Election to deduct state and local general sales taxes in lieu of state and local income taxes
  • Mortgage insurance premium deduction
  • Tax-free IRA distributions to charity

Tax planning for higher-income taxpayers is more complicated because otherwise allowable itemized deductions are reduced if adjusted gross income exceeds a specified threshold amount. Personal exemption deductions are phased out in the same manner. In addition, the failure to take the alternative minimum tax (AMT) into account may negate many itemized deductions.

You may benefit from planning strategies designed to take advantage of the current tax laws. Maximizing your itemized deductions is an important aspect, but there are other issues that you may need to consider in light of your overall tax scenario. We hope to provide you with planning options that enable you to achieve the greatest tax savings possible. Please contact our office at your earliest convenience to make an appointment. 

 

 

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The Gunnip CPAs softball team officially started the season on June 11 with a 32 - 5 victory.  Way to go Team Gunnip!
 

Gunnip CPAs Softball Team 2014

 

 

 

 

 

 

 

 

 

 

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young girl working as cashier

Since the summertime school vacation season has arrived, 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.

Whether your sole proprietorship business operates around the kitchen table or in the fields of your farm, wages you pay your under-age-18 children are not subject to social security, Medicare, or federal unemployment taxes. Note: You'll have to pay social security and Medicare taxes when your children are age 18 or older. They're exempt from federal unemployment taxes until they reach age 21.

Wages you pay your children are deductible from your business income, meaning potential savings for the business on self-employment tax and federal and state income tax.

The wages must be paid for legitimate work at a reasonable rate. Be aware of nontax issues too, such as your state's youth employment rules, which can be more stringent than federal labor laws. If your business is a family farm, keep apprised of newly proposed regulations that may limit the parental exemption for employing young farm workers.

Wages do not impact "kiddie tax" calculations. In addition, your child can earn up to $6,200 of income during 2014 before owing federal income tax.

The payroll tax exemption is different from the self-employment rules, and applies to wages you report on Form W-2 at year-end. Income earned as contract labor, which is generally reported on Form 1099-MISC, is subject to self-employment tax.

Call us at 302.225.5000 if you have questions about the tax consequences of employing family members.

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