Swap properties to postpone taxes
Postpone taxes by swapping real estate instead of selling it. This may enable you to trade up to property with a higher value. A tax-deferred exchange is a great tax-cutting strategy, but the rules are complex. Be sure to seek professional guidance. Call the team at Simons Bitzer at 317-782-3070 for more information.
Don’t fall for this #1 tax scam
Crooks wanting to steal your identity are using bogus e-mails and websites designed to look like genuine IRS communications. You might expect the April 15 filing deadline to mark the end of these scams, but they, in fact, are expected to continue for months.
An example of these bogus e-mails: You receive a message confirming IRS receipt of your tax return, but the IRS needs more information to process your return. The e-mail looks official and completely legitimate. But it isn’t. The IRS does NOT contact taxpayers asking for personal and financial information. These e-mails should be deleted immediately. Fake IRS websites are also created by scammers to lure victims into filling out forms providing information that results in identity theft.
Check your 2013 tax withholding
If you have a sizable refund of your 2012 taxes, it may be time for you to check your withholding. After all, when you overpay your taxes, you’re making an interest-free loan to the government.
Reducing your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Don’t forget to allow for other taxable income besides wages, such as dividends or investment gains.
If you’re concerned about underpaying taxes and exposing yourself to penalties, there are a few rules you should know. Generally, you won’t face a penalty if you pay for 2013, through withholding or quarterly estimated payments, at least 100% of your 2012 taxes (110% if your adjusted gross income is over $150,000), or if you pay at least 90% of what you’ll owe for 2013.
Certain Roth conversions are final
Under the new tax law, it is now easier to convert your employer-sponsored retirement plan such as a 401(k), 403(b), or 457 into a Roth IRA account. This is similar to converting your traditional IRA into a Roth IRA, but with one very significant difference.
When you convert a traditional IRA into a Roth IRA, you can change your mind and undo this conversion (also known as a recharacterization) by October 15 of the following year. This may make sense when the value of the account has dropped since you did the conversion, because you do not want to pay tax on a higher value than the account currently has.
When you convert an employer-sponsored retirement plan, you do not have the option of undoing the conversion by October 15. Once you convert your employer-sponsored retirement plan into a Roth IRA, it cannot be undone.
If you decide to convert your entire 401(k) into a Roth IRA, the entire balance will be taxable in the year of the conversion.
If you want to take advantage of this new provision, please contact the team of Simons Bitzer at 317-782-3070 first because there are some very important tax planning consequences to consider. If done without proper tax counsel, you may be paying more taxes than you should. In light of the new tax law, there are now more variables that need to be considered in your tax planning.
IRS announces second quarter interest rates
Interest rates charged by the IRS on underpaid taxes and paid by the IRS on tax overpayments will remain the same for the second quarter of 2013 (April 1 through June 30). Therefore, for the first six months of 2013, the rates will be the following for individuals and corporations:
For individuals:
* 3% charged on underpayments; 3% paid on overpayments.
For corporations:
* 3% charged on underpayments; 2% paid on overpayments.
* 5% charged on large corporate underpayments.
* ½% paid on the portion of a corporate overpayment exceeding $10,000.
With questions or for more information, please contact Simons Bitzer & Associates at (317) 782-3070.
Don’t treat the IRS as your banker
When cash flow is tight, you may be tempted to pay your suppliers first and your payroll taxes last. The IRS will take steps to minimize the liability as quickly as possible. They also have a powerful weapon available to collect such taxes. Whether or not you own the company, you could be determined to be a “responsible person” held personally liable for 100% of any payroll tax deficiency. For help with this or any other tax isssue, call the team at Simons Bitzer at 317-782-3070.
Filing reminder for nonprofit organizations
Nonprofit organizations are required to file annual reports with the IRS. Those with gross receipts below $50,000 can file an E-postcard rather than a longer version of Form 990. The deadline for nonprofit filings is the 15th day of the fifth month after their year-end. For calendar-year organizations, the filing deadline for 2012 reports is May 15, 2013. For additional information, please contact the team at Simons Bitzer at 317-782-3070.
Many tax deadlines fall on April 15
April 15, 2013 is a major tax day, with the following IRS deadlines falling on that date:
* Individual income tax returns for 2012 are due.
* 2012 partnership returns are due.
* 2012 annual gift tax returns are due.
* Deadline for making 2012 IRA contributions.
* First installment of 2013 individual estimated tax is due.
* Deadline for amending 2009 individual tax returns.
* Deadline for original filing of a 2009 individual income tax return to claim a tax refund for that year.
Contact our office at 317-782-3070 if you need details or assistance with any tax filing.
If you need more time to file your tax return, just ask.
If you can’t file your 2012 tax return by the April 15 deadline, file for an extension to get until October 15, 2013, to file. You can request the extension on paper, by phone, or online. You don’t need to explain why you want more time. Be aware that an extension just gives you more time to file; it does not give you more time to pay taxes due for 2012.
With questions or for assistance in filing your extension, please contact Simons Bitzer at (317) 782-3070.
Should you directly deposit your tax refund to an IRA?
It sounds like a great idea: Have the IRS directly deposit your tax refund into one or more individual retirement accounts (IRAs). In fact, the IRS touts this option as a way to speed up retirement contributions. The whole process is automated and simple.
It’s hard to argue with the theory. After all, if your tax refund goes directly to a retirement account, it’s not available to spend on that new leather sofa or Hawaiian vacation. (Of course, a big tax refund also may indicate that you’re withholding too much from each paycheck and giving the government an interest-free loan. But that’s another issue.)
Still, things sometimes go awry. Following are four potential obstacles that can derail your tax refund on its way through the direct deposit process:
* Wrong account number. Let’s say you transpose a couple of digits on your tax return, and those digits happen to indicate which financial institution or which account will receive your refund. If this wrong account number belongs to another customer, that mistake could take weeks or even months to correct. By the way, don’t expect the IRS to come to your rescue. They’ve made it abundantly clear that correct input of financial information on the tax return is the taxpayer’s responsibility — not the government’s.
* Correction fluid and cross-outs. If the IRS gets your tax return and finds that the routing numbers have been manually revised, your direct deposit request will likely be rejected. You may get an old-fashioned refund check in the mail.
* Wrong type of account. It’s up to you to verify that your financial institution will accept direct deposits into an IRA. Some banks, for example, will reject direct deposits to anything other than a savings account.
* Refund adjustments. Sometimes the IRS corrects a taxpayer’s math or makes other adjustments that can affect the refund amount. In some cases, these adjustments may result in a direct deposit that exceeds the allowable IRA contribution amount. If so, you could be stuck with a penalty for excess contributions.
Direct deposit of your tax refund can be a hassle-free way to make an annual IRA contribution. But proceed with caution. Double check your return and verify that your bank or credit union will accept direct deposits to an IRA. For more information or tax planning assistance, please contact the team at Simons Bitzer at 317-782-3070.
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