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April 15 - tax dayIf you can't file your 2013 tax return by the April 15 deadline, file for an extension to get until October 15, 2014, to file. You can request the extension on paper, by phone, or online. You don't need to explain why you need more time, but be aware that an extension doesn't give you more time to pay taxes you owe. To avoid penalty and interest charges, taxes must be paid by April 15.

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investment strategyAs 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.

The rate for qualified dividends and sales of most assets you own longer than a year can vary.

* The rate is 0% when you're married filing a joint return and your income is $73,800 or less ($36,900 when you're single).

* When your income is between $73,800 and $457,600 ($36,900 and $406,750 for single filers), the maximum rate is 15%.

* A 20% rate applies when your taxable income is more than $457,600 ($406,750 when your filing status is single).

* The 3.8% Medicare surtax applies to your income from capital gains, interest, and dividends when your adjusted gross income exceeds $250,000 ($200,000 when you're filing single).

Analyze your options. Planning strategies for tax-efficient investing should complement your overall financial goals. For example, purchasing stocks and other securities that offer long-term growth potential instead of current income from dividends can help reduce the amount of income subject to the net investment Medicare surtax. Yet, if you need cash flow from your investments, you might choose an alternative tax-saving strategy, such as adding tax-free municipal bonds to your portfolio. A mix of the two could be preferable if you're subject to the alternative minimum tax.

The same analysis applies to investment accounts. Say you own bonds or other investments that generate taxable interest income. Holding these assets in a taxable account means you'll pay federal income tax based on your ordinary tax rate. Including them in tax-advantaged accounts such as IRAs might be a better idea because you could delay the tax bill until you begin making withdrawals.

Please give us a call to discuss the tax consequences of your investment decisions. We can help you create the best plan for 2014.

 

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If you are involved with a tax-exempt (nonprofit) organization, be aware of this approaching deadline: An annual report must be filed with the IRS on the 15th day of the fifth month after the organization's year-end. For calendar-year organizations, the deadline for 2013 reporting is May 15, 2014. Organizations with gross annual receipts below $50,000 can file an E-postcard rather than a longer version of Form 990.


Tax Refund Alternative You can receive your income tax refund in several ways:

1. Direct deposit into a single checking or savings account

2. Direct deposit split into up to three different accounts in up to three different U.S. financial institutions

3. Via a paper check, or

4. Purchasing up to $5,000 U.S. Series I savings bonds. Split deposits need not be in equal amounts, though buying savings bonds must be done in multiples of $50. You can't split your refund between a direct deposit and a paper check. For direct deposits, verify that your financial institution accepts such deposits, and verify account and routing numbers.

 

 

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File folder showing the words Income TaxThere are several sources of revenue that are not subject to income tax. Here are the most common sources of money that are not taxed on your federal income tax return:

  * Borrowed money, such as from banks or personal loans.

  * Money received as a gift or inheritance from family or friends.

  * Money paid on your behalf directly to a school or medical facility.

  * Most life insurance proceeds.

  * Cash rebates from businesses when you buy an item.

  * Child support payments.

  * Money you receive for sustaining an injury.

  * Scholarships for tuition and books.

  * Disability insurance proceeds from a policy purchased with after-tax dollars.

  * Up to $500,000 of profit for a married couple selling their personal residence.

  * Interest received on municipal bonds.

If you have included any of these as taxable income on your income tax return for the past three years, you can amend your return for a tax refund.

If you would like assistance in determining what to include on your income tax return, please contact us. We are here to help you

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Business man holding a chalkboard that reads ExpenseNow may be a good time to evaluate the expenses you incur as an employee in connection with your work. While your employer may be reimbursing you for some of these expenses, there may be others for which you are bearing the cost yet not utilizing the tax benefit. Through proper substantiation, it is possible that you may be able to obtain greater reimbursement from your employer. Alternatively, you may be entitled to deduct such expenses as miscellaneous itemized deductions.

In order to be reimbursed and/or deducted, trade or business expenses must be ordinary, necessary, and reasonable. They also must be properly substantiated. Examples of qualifying expenses include:

  • Travel, transportation, meal, or entertainment expenses
  • Safety equipment, small tools, or supplies
  • Uniforms required by your employer that are not suitable for everyday wear
  • Required protective clothing
  • Dues to professional organizations
  • Subscriptions to professional journals
  • Certain job hunting expenses
  • Certain expenses for the business use of your home
  • Computer costs
  • Work-related educational expenses

You may also benefit from a review of the business expenses related to the use of your home. If you qualify for the home office deduction, you may be able to deduct part of your home’s normal operating expenses, such as utilities and insurance. The tax-savings opportunities available to you are dependent not only on the type of work you do at home, but where in your home you perform it.

The rules for deducting these expenses, as well as substantiating your deduction, vary according to the type of expense involved. It is important to retain all records and receipts that document the time, place, and business purpose of each expense. Please call our office at 302.225.5000 or email us at info@gunnip.com your earliest convenience to schedule an appointment. 

 

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Every week reporters publish stories about companies that have lost thousands, even millions of dollars because of fraud. They recount the dreadful details of business owners who learned – too late – that a lack of basic controls left their companies vulnerable to pilferage, embezzlement, and other types of misappropriation.

How do these lessons apply to small businesses? After all, small firms generally can't afford to hire internal auditors or set up separate divisions to break up incompatible duties. While it's true that a small company can't always protect itself in ways larger firms might, management can establish controls in certain high-risk areas, such as the following:

Cash disbursements. If at all possible, the owner/manager should sign checks. This control has a dual purpose: management sees how the company is spending its money, and the cash disbursement function is kept separate from bookkeeping or accounting. If the same person signs checks and enters disbursement transactions in the accounting records, embezzlement is harder to prevent. Requiring two signatures on checks above a certain amount also provides greater control.

Customer collections. Consider having the owner/manager open the mail, especially if customer collections are a regular part of your business. Alternatively, you might ask someone separate from the accounting function to open the mail and prepare the deposit slip. Of course, the practice of making daily deposits is also a good control.

Personnel practices. By taking care to perform background checks before hiring key employees, especially those who will be handling cash or other high-risk assets, you can prevent problems later on. Of course, financial pressures, addictions, and other factors can corrupt even good employees. That's why managers might consider discreetly monitoring employee lifestyles (without invading anyone's privacy, of course). An observant manager might note that certain lower-level employees are living well beyond their means, or that warehouse staff are carrying off company materials to remodel personal residences.

Perhaps a small business's greatest control is the "tone at the top." If management sets a high standard, employees generally follow. However, if a manager is perceived as lax – for example, he or she doesn't respond quickly when evidence of misappropriation surfaces – employees might conclude that theft isn't such a big deal.

Remember this: A company that fails to establish minimum controls is providing a golden opportunity for fraud. If you'd like help reviewing your firm's controls, give us a call.

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The new IRS regulations on capitalization vs expensing are complex. But the part of the regulations that concerns most small businesses makes it easier for them to comply.

Here's an overview of the safe harbor rules for small businesses. If your average annual gross sales are $10 million or less, you may choose to write off the cost of improvements made to an "eligible building." An "eligible building" is one that is owned or leased by the qualifying taxpayer and the unadjusted basis of the building is $1,000,000 or less. Also, to be able to deduct the expenditures on your current-year's tax return, the yearly total paid for repairs, maintenance, and improvements cannot exceed the lesser of $10,000 or 2% of the building's unadjusted basis.

As with any part of the tax law, there are many details to be followed for the best tax treatment. Please contact us at 302-225-5000 or info@gunnip.com if you would like more information on these new tax regulations.

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Home office

You now have a choice in how you deduct the expense of a home office. Starting with your 2013 tax return, you can either deduct the actual expenses connected with your home office, or you can use the simplified method of deducting $5 per square foot of the part of your home used for business, up to a maximum deduction of $1,500.

Remember, the deduction isn't available just because you do work at home; you must use part of your home regularly and exclusively as your principal place of business or where you meet customers, clients, or patients in the normal course of business.

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Check your records to be sure you have the paperwork you need for charitable contributions you want to deduct on your 2013 tax return. Cash, check, and other monetary donations of any amount can be deducted only if substantiated by a bank record or written documentation from the charity. The rules require you to obtain the necessary records before you file your 2013 return.

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