However, noncash donations (i.e. the Goodwill runs) are the donations that are the most painful deductions to donate.  Fortunately, there is a simple, on-line program that can help you track your donations and provide you a basis for the deduction you are entitled to take. This program, It’s Deductible, is a free on-line donation tracking system.  All you need to do is make a list of the items heading to the thrift store (7 shirts, 12 pairs of shoes, 3 board games and a partridge in a pear tree), then input those into the It’s Deductible system.  The program will total up your donations and give you a list of what you donated and an approximate value.  Attach that print out to the receipt you get from the charity and your documentation is good to go!

I used this system and it was really easy from an user’s perspective.  As a CPA, I feel far more comfortable with an itemized list with values attached to it, especially when the deduction starts adding up when you have kids going through clothes faster than you can imagine.  Take a look at the program and see if it’s a good fit for you and your way of keeping your tax deductions organized!

That said, today’s blog post focuses on another piece of that program – being a generous member of your community.  The speaker, Virgil Dugan, is probably one of the smartest individuals I’ve met in my life and he really boiled down charitable giving into something far more than just writing checks and a warm and fuzzy.

Virgil challenged the crowd to implement a personal giving strategy.  This isn’t something that needed to be developed with a high priced consultant.  He suggested “10 – 1″ – 10% of giving from your annual income and 1% of your invested assets.  He even said that if you don’t like the 10 – 1, try “x – y” where “x” could be 3% and “y” could be “0.50%”, but have a number you can shoot for and eventually grow.  Maybe you do “3% of income; 0.25% in assets” for 2012; then move it to “3.5% of income; 0.50% of assets” in 2013.  You’ll find the joy of helping others may encourage you to increase those figures more and more!

Charitable giving has a major impact in our communities.  Nonprofits can take a small dollar amount and some time and dramatically change lives in a positive way.  I think that many people think that donating to a charity is some sort of privilege reserved for the wealthy – “Oh, I don’t give because I don’t have tons of money in the bank.” or “I don’t give because I don’t itemize deductions, so I don’t get a tax benefit for it.”  Even if you give $20 a year, that’s $20 that is going to help your community.

Giving is not about tax write offs – in fact, that’s the least important aspect of the gift itself.  The gift should represent your desire to help others and in a way that reflects what is important to you.  For example, I have a client who really enjoys video gaming…he has been a gamer the whole time I’ve know him.  He found a great charity called Child’s Play, who helps kids in hospitals by providing video games for them to play with.  Video games + helping kids = positive impact.  If you’re going to give, give to an organization that shares your passions.  You’d be surprised how many organizations exist that aren’t huge household names and do huge work in your community.

If you are interested in talking more about giving and ways you can do it in a smart way, give us a call – we’d love to help you help your community!

Thanks,

Jason Deshayes, CPA

As you receive your W-2s, 1099s, get your business accounts reconciled and all of the wonderful moments that mean tax time is quickly approaching, you have to ask yourself this question: Are you ready to tackle the beast AGAIN?

Many American taxpayers are fully capable of doing their own return, if they are willing to take the time to do it and able to take the risk that they are comfortable enough with the tax code that they feel like they got their return correct.  The 2011 instructions for a Form 1040 say that the average return will take an average taxpayer 22 hours (that’s 1,320 minutes; or approximately an entire season of Law and Order SVU) to complete.  Do you have a business?  Oh, that’s about 32 hours…almost a full time work week.  Have BOTH?  Yikes – you’re looking at almost 55 hours of time just in prep…and that’s not even accounting for a “quality review process.”  I don’t know about you, but I have enough stuff going on that I would love to offload almost a week and an half’s worth of time to someone else.

I have had a lot of clients over the years work on their own tax return prior to coming to us for help.  Turbo Tax always seemed appropriate enough for their tax system and dang it, the numbers seemed right at the time.  Unfortunately, there is a phrase we like to use when it comes to number crunching – Garbage in, garbage out.  Programs like Turbo Tax are only so smart (Siri, they are not) and do not know all of what you have going on.  CPAs are more than just data input clerks – we ask questions directed at gaining more information that will enable us to provide you far better professional advice.

I had a new client come in last year who complained that they always seemed to owe money and that was never a problem for them before this year.  Within about a minute of looking at his W-2, I realized the problem – they weren’t withholding enough and the reason why is that not only was the gentleman in my office highly compensated, but so was his wife.  The basic withholding allowance tables just weren’t keeping up.  This allowed us to proactively plan for increasing their withholding over the year to avoid a large balance due (and possible underpayment penalties).  While we were looking at that, the two of us had a conversation about the tax implications of side consulting, alternatives to retirement saving and charitable giving.  All topics that have a direct impact on their financial lives and way more value-added than the advice Turbo Tax would have produced.

Let’s not forget that CPAs are required to have 120 hours of continuing professional education every three years.  That means we take an average of a full work week to just improve our technical skills and stay abreast of all of the changes made to tax law.  2012 was a huge year for tax law changes, as a number of deductions disappeared and new rules regarding income reporting and small business kicked in to add more compliance to your plate.  Did you know that, starting in 2011, if you have a rental property as an individual and you paid a contractor more than $600 to work on that property, that you have to file a 1099 for them?  Nope – then you better read our previous article on that!

Is there a cost to hiring a CPA – yes, indeed.  If you look beyond the compliance piece (popping out a tax return) and see the extra value that you are getting from a true financial advisor, you’ll may find that writing that check may be one of the best financial moves you make  each year.

If you’re ready to tackle the beast by your lonesome, have at it and good luck to you!  If you are ready to send in your Financial Gladiator, give us a call or shoot us an e-mail and we’ll be by your side to help you face off with the Tax Beast!

Always at your service,

Jason Deshayes, CPA
505-821-0893

You know it is the beginning of a new tax year when your CPA starts sending you the annual tax organizer meant to help get your “system” ready to prepare a tax return from.  I have seen a range of “systems” – one client has a fantastically organized set of files that will make a librarian blush.  Another client has a giant paper bag of which, using a Ouija Board, a tax return can eventually be divined for purposes of filing with the folks at the Internal Revenue Service.

That said, what can you do to help get your various pieces of “tax stuff” ready to make your tax return preparation much easier?  Here’s a few tips that you can use to help out:

1) Get a file system – this doesn’t have to be anything fancy.  Grab a few folders and label them based on some basic categories: Income, Deductions, Miscellaneous.  If you can at least separate things based on these three very basic categories, that will give you a bit more organization than you are used to.

2) Track your spending – Keeping paper receipts can work, except that there are eventually lost deductions because you lost a receipt.  Start using an electronic tracking system, like Quicken or QuickBooks, to track your expenses.  This will help you have information ready for tax time, but also help you track your spending for that four letter word called a budget.

3) Use that Tax Organizer! – While this wonderful packet of paper seems like a tool only an accountant could love, just take a few minutes to review and fill in what you know.  If you see what you had last year, maybe you can fill in the blanks for what you should have this year.  I can tell you that filling out the organizer PRIOR to coming to your CPA for your tax interview will help reduce your fee and help focus the interview on what you really need to fill in the blanks.

A little bit of organization goes a long way during tax time.  Speaking for CPAs around the country, we really do appreciate the little extra time to make sure your files are in a sense of order!  And for you, knowing what you have going on will truly help you have a better understanding of your own personal situation.

If you have any questions, give us a call – 505-821-0893!

Thanks,

Jason Deshayes, CPA

Most folks perform the annual “obligation” to have some sort of New Year’s Resolution that tends to end up failing around mid/late January.  You can see this often at your local gym, where droves of people have decided they WILL workout 8 days a week (in a very realistic fashion) and they WILL spend 2+ hours each time going.  Of course, this type of unrealistic and overreaching type of goal is unattainable and quickly gets dropped like a bad habit.  Physical fitness isn’t the only wellness resolution folks have – people and businesses are often trying to improve their financial lives!

This year, don’t fall into the resolution pitfall!  Start looking at your financial life with a critical eye and decide what you could be doing differently.  Here are some suggestions:

1) Are you actively contributing to your retirement?  If so, consider increasing your contributions this year compared to what you were doing last year.  If you’re not contributing, you need to start.  Even if it’s a small amount, the time value of money will mean more bucks in your retirement account when you need them.

2) On the topic of retirement, if your company offers a match to your contributions, make sure you contribute at least what it would take to maximize that match.  It’s one of the best investments you can make as it’s a 100% return!

3) Budgets have become the equivalent of four-letter words – figure out a spending plan for yourself.  The first few months will require you to track your spending so that you can start crafting a plan.  If the plan doesn’t work in the first month or two, that’s OK!  Tweak the plan and make it realistic for your lifestyle.  Just don’t give up if you don’t end up making it work out perfectly the first time.

4) Consider increasing your charitable giving – Charities can stretch a dollar further than anyone I can think of, plus their spending goes directly to help others.  Your generosity can help reduce your tax burden, but more importantly – it goes to helping your community.

5) Use your professional advisors!  I see many clients who have full access to lawyers, investment advisors, financial planners and CPAs, but never call them for a variety of reasons (fear of a bill, desire not to outsource something they could do on their own, etc…) .  If you were having trouble losing weight, you’d go to a personal trainer.  If you are having trouble getting your financial house in order, go to a financial professional.  We are here to serve YOU and improve YOUR situation.

If you are looking to make some positive changes to your financial and business lives, give us a call and see how we can help you make 2012 (and on!) better for you than your past!

Happy New Year,

Jason Deshayes, CPA

When you file your 2011 tax return, there will be a bunch of new questions and line items if you file a Schedule C (because you’re self-employed), a Schedule E (because you own a rental property – residential or commercial) or any business return (1120, 1120S or 1065).  One in particular is going to make you very mindful of your compliance requirements with paying individuals as independent contractors: “Did you make any payments in 2011 that would require you to file Form(s) 1099?”  Let’s not forget the follow up question “Did you file the 1099s?”

“What does that even mean?”, you ask.  Well, let’s say I own a little duplex that I rent out to some folks.  If I paid Joe the Plumber more than $600 to help fix the toilets and other plumbing, I have to file a 1099 for him.  That means, I need his official name, address and social security number.  Sound fun?  Probably not.  And if you think you can just answer no and outsmart the tax man, you’ve willfully lied to the IRS.  Nothing like a $250 penalty for intentionally not filing the 1099s on top of the $30 – $100 PER 1099 penalty!  For illustrative purposes, if you had to file 3 1099s but intentionally didn’t, your penalty will range between $340 and $550.  Talk about an effective budget bolsterer!

How do you avoid getting drained dry by non-filing penalties?  Do your personal due diligence and actually file the 1099s!  Some contractors are reluctant to give you the information necessary to file the 1099s, so make it your personal policy to require a Form W-9 (link below) to be filled out prior to paying them.  When you’re holding a couple of hundred bucks from someone, it’s amazing how motivated they are to pay you.

http://www.irs.gov/pub/irs-pdf/fw9.pdf

Even if you don’t have to issue someone a 1099, at least now you will have the information to do so without having to scramble at the last minute.  And if you’re unsure how to even file a 1099, give us a call and we’d be happy to help you out.  We don’t want to see our clients unnecessarily penalized because of paperwork compliance requirements!  Give our office a call and we can have a conversation about other way we can help proactively improve your financial life!

Merry Christmas,

Jason Deshayes, CPA
505-821-0893

1) Accelerate some payments – if you pay your real estate taxes personally (rather than out of escrow), you could prepay your 2nd half payment by the end of the year and deduct that in 2011.  You can also prepay your fourth quarter state estimated tax payment by the end of year and deduct it too.  This example means just pushing up your payment a mere two weeks from its normal due date!

2) Business equipment purchases – we still have bonus depreciation and a lofty Sec. 179 limit this year.  We have no idea if these benefits will be extended beyond 2011, so if you’ve been thinking about upgrading your computer system or purchasing a new company vehicle, now may be the time to pull the trigger and receive the enhanced tax deduction now.

3) Capital gains and losses – the stock market has been volatile, but many individuals have still seen short term appreciation in their stocks and mutual funds.  It may make sense to sell some of those short-term winners and secure the gain.  Think about balancing those gains with stocks you have unrealized losses on in order to limit your tax bill, while diversifying your portfolio.

4) Charitable Giving – Many charities are actively requesting special year end gifts to help cover any revenue deficients.  Think about accelerating or making special gifts before the end of the year to help those in need, but also reduce your bill to Uncle Sam.  Some churches, businesses with United Way campaigns and other nonprofits have matching programs that will see your gift effectively doubled ($1 from you + $1 from the organization = $2 for the charity)

5) Open Enrollment time – If your employer provides you a Flexible Spending Account, around now is the time that your open enrollment is available to you.  Strongly think about utilizing this FSA, as medical deductions are notoriously difficult to deduct.  A FSA works by putting money pre-tax into an account in your name that you can use to pay medical expenses.  Key point is that any unspent money in the account is forfeited, so we recommend that you don’t get overzealous with how much you put into the FSA.  Examine your medical spending from the past year and use that as a guideline, then take into account any planned medical procedures (LASIK, surgeries, pregnancies, etc…)

6) Year-End Payroll – For many single member S-Corporations, the owner isn’t taking regular payroll – instead, they are taking S-corporation distributions.  You are required to have reasonable compensation in the form of a W-2 as a officer of the business.  A year-end bonus can meet this requirement, as well as add appropriate federal and state withholding to cover your tax bill without the need for estimated tax payments.

We’d love to sit down with you and talk about other opportunities for year-end planning.  Feel free to give us a call at the office and schedule an appointment – 505-821-0893.