e-YWM Alert #12 - Last Minute Tax Ideas & Tax Ideas for the New Year

As year-end quickly approaches, we wanted to send you some last minute tax ideas as well as some moves you can make in the New Year to reduce your 2011 tax liability:

• If you aren't currently fully funding your 401(k) account, consider increasing your contributions in 2011. The maximum contribution allowed in 2011 is $16,500 plus $5,500 for those 50 and older. Beyond the benefits of decreasing your taxable income, many employers are beginning to reinstate 401(k) matching programs which were suspended during the recession.


• Similarly, if you qualify to make an IRA contribution, you may max out your contribution to your Roth or Traditional IRA. Unlike a 401(k) contribution, this money may be contributed any time before April 15, 2011 and still be claimed on your 2010 tax return. The maximum you can contribute for both 2010 an 2011 is $5,000 with an additional $1,000 allowed for those 50 and over. This contribution can be made on behalf of yourself as well as any non-working spouse. If you have any questions regarding your eligibility to make this contribution, please contact our office prior to making any contributions.


• Lastly, many employers allow employees to contribution to flexible spending accounts on a pretax basis. These accounts may be offered for health care, transportation, or child care expenses and the maximum allowed varies by employer. Open enrollment is typically the only time to make changes to your plan and that is usually in November. However, you may be able to make changes if you have experienced a "qualifying life event," such as a marriage or divorce, a new child, a change in your employment or you go on family medical leave. These plans can help to lower your taxable income and are a great way to lower your tax liability.

These are just a few strategies available to you, a list of these suggestions as well as several other strategies can be found at: Tax Tips . If you have any questions on any of these or any other strategies available to reduce 2011 taxes please do not hesitate to contact us at 303-792-3020.

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.

e-YWM Alert #11 - Overview of the 2010 Tax Relief Act

The recently enacted "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" is a sweeping tax package that includes, among many other items, an extension of the Bush-era tax cuts for two years, estate tax relief, a two-year "patch" of the alternative minimum tax (AMT), a two-percentage-point cut in employee-paid payroll taxes and in self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. Here's a look at the key elements of the package:

•The current income tax rates will be retained for two years (2011 and 2012), with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.

•Employees and self-employed workers will receive a reduction of two percentage points in Social Security payroll tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.

•A two-year AMT "patch" for 2010 and 2011 will keep the AMT exemption near current levels and allow personal credits to offset AMT. Without the patch, an estimated 21 million additional taxpayers would have owed AMT for 2010.

•Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 will be retained. Specifically, the new law extends the $1,000 child tax credit and maintains its expanded refundability for two years, extends rules expanding the earned income credit for larger families and married couples, and extends the higher education tax credit (the American Opportunity tax credit) and its partial refundability for two years.

•Businesses can write off 100% of their equipment and machinery purchases, effective for property placed in service after September 8, 2010 and through December 31, 2011. For property placed in service in 2012, the new law provides for 50% additional first-year depreciation.

•Many of the "traditional" tax extenders are extended for two years, retroactively to 2010 and through the end of 2011. Among many others, the extended provisions include the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes; the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers; and the research credit.

•After a one-year hiatus, the estate tax will be reinstated for 2011 and 2012, with a top rate of 35%. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years. Estates of people who died in 2010 can choose to follow either 2010's or 2011's rules.

•Omitted from the new law: Repeal of a controversial expansion of Form 1099 reporting requirements.

•Also not included: Extension of the Build America Bonds program, which permits state and localities to issue federally-subsidized municipal bonds.
We hope this information is helpful. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to call.


All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.

e-YWM Alert #10 - Holiday Party Deduction

As we get further into the holiday season, we'd like to inform you all of a little known exception to the 50% meals and entertainment limit that may help to brighten your holidays and lessen your tax burden. Expenses related to recreation, social, or similar activities incurred primarily for the benefit of employees (i.e. a company holiday party) are 100% tax deductible.

Additional deductions may be allowed for small gifts or tokens of appreciation given to employees during the holidays. The value of these gifts must be reasonable, but if they are kept to a nominal amount the business may give these gifts and claim deductions for non wage work business expenses. These gifts are deductible at 100% if they are nominal in value.

Finally, gifts given to clients and customers also have certain tax consequences. A $25 gift deduction is allowed for each client/customer each year. Gifts in excess of this amount can certainly be given, but the full cost cannot be deducted.

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020. Additional resources are always available at our website, www.ywmcpa.com.

e-YWM Alert #9 - Framework for Bipartisan Tax Agreement

e-YWM Alert #9 - Framework for Bipartisan Tax Agreement


Late on Dec. 6, President Obama announced that the Administration and the Republicans had arrived at a "framework for a bipartisan agreement" that would extend the Bush-era tax cuts and give workers a 2% reduction in Social Security tax for 2011. The President held a news conference yesterday to defend his decision to compromise with Republicans but it is uncertain at this time how the agreement will be received by Congressional Democrats. Although details of the agreement have yet to be released, its major components, as described in a Fact Sheet released by the White House, are as follows:
• The EGTRRA/JGTRRA income tax rates would be retained for two years for everyone. Presumably, current law's favorable tax treatment of long-term capital gains and qualified dividend income would be retained as well.
• A two year alternative minimum tax (AMT) "patch," which would prevent exemption amounts for individuals from dropping and allow personal credits to offset AMT.
• Retention of "key tax cuts" for working families (earned income tax credit, child tax credit, American Opportunity Tax Credit).
• Allowing businesses to write off 100% of their equipment and machinery purchases during 2011.
• A two-year extension of the R&D tax credit and other tax incentives to support business expansion. (It is not clear at this point whether the bipartisan agreement will extend all of the business and individual tax breaks that expired at the end of 2009.)
• Reducing the workers' share of Social Security tax for 2011 from 6.20% to 4.20%.
• Extending unemployment benefits for 13 months.
Reportedly, the bipartisan agreement also would reinstate the estate tax with a $5 million exemption amount and a 35% top tax rate.

The"Fact Sheet on the Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance: A Win for Our Economy, Jobs, and Working Families," released by the White House on Dec. 7, 2010 can be viewed by clicking this at http://www.whitehouse.gov/the-press-office/2010/12/07/fact-sheet-framework-agreement-middle-class-tax-cuts-and-unemployment-in

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.

e-YWMnews-December 2010 WEBSITE UPDATE

Newsletter Updates- The following articles can be found at our website at http://www.ywmcpa.com/newsletter . This month our articles include:

• Tax rates in turmoil as 2010 draws to a close
  
• Year-end planning: Last minute tips for individuals
  
• Deficit commission's tax proposals spark debate
  
• FAQ? Obtaining certification for energy-efficient home improvements for tax
• How Do I: Substantiate business gifts to clients?
  
• December 2010 tax compliance calendar

If any of these articles are of interest to you be sure to visit our site during the month of December as these articles change monthly.

YWM Office News- As the new tax season approaches we'd like to offer you some tips on ways you can increase the efficiency of your tax preparation:

• For our business clients, please answer every question on the PBC list sent this month. If a question is N/A please indicate as such. We will have to follow up on all non-responses which will increase the amount of time required to complete your return.
  
• For our individual clients, please fill out the provided organizer. The organizer is designed to correspond to our tax software, having all of the numbers summarized in one place greatly increases our efficiency in preparing your return.
  
• Submit all of your information at one time. Receiving piecemeal information greatly increases the amount of time required to prepare your return as we have to revisit and analyze where we're at with the return each time we work with it.
  
• Get your information in early. Getting us your information prior to mid-March will increase the turn around time to prepare your return.
  
• If you can't get your information in early consider having us extend your return prior to the deadline. You can then take your time to organize your data as we have suggested above.

These tips should help to increase the efficiency of your return. If you have any questions please let us know.

As we approach year end, many of our business clients may be assessing their current payroll and HR service providers. If your payroll or HR (insurance and workman's compensation) needs are not being met please let us know as we may be able to assist you in resolving your problems or in choosing a new provider. For help, please contact Troy Coon in our office at troy@ywmcpa.com or at the number listed below.

During the month of November Manager Troy Coon and his wife took a trip to Ethiopia with The Cunningham Foundation. The Cunningham Foundation is a non-profit organization headquartered here in Denver and was founded by Noel and Tammy Cunningham. The trip focused on visiting various sites The Cunningham Foundation has financially supported in the past. The trip focused on three main areas close to the capital Addis Ababa. They visited an HIV orphanage that is cared for by the Sisters of Mother Theresa, though the group spent the majority of their time during the trip at a site called Project Mercy. Project Mercy is a community based organization that focuses on education, healthcare and community around an area called Yetabon. During the last part of the trip the group visited a school and library in the Awasa. The library was funded by the Colorado DECA organization. "This was a trip of a lifetime. Although people of Ethiopia do not have much in terms of opportunity or material belongings they are a truly generous and enjoyable people. I cannot say enough about the adventure," says Troy of the experience. If anyone would like to learn more about the Cunningham Foundation or Troy's adventures in Ethiopia feel free to give him a call.



A group picture taken at the Project Mercy site. Troy is in the back in red.

As always, if you have any questions or comments to make our site even better, please don't hesitate to contact us. All information on our website is generic, to determine how this affects your specific situation please give us a call at 303-792-3020.

e-YWM ALERT #8- Congressional Lame Duck Session Begins

Congress convened this past week as time is running out on the current Congress and as many tax issues were left hanging earlier in the year. This session takes place in the wake of the historic Congressional elections that recently took place but the newly elected members will not be sworn in until January 3, 2011 as a part of the 112th Congress. That means the members of the 111th Congress remain in control and will be the ones called on to make some of these difficult decisions.

In the meantime, Congress will adjourn for the Thanksgiving holiday and is expected to begin consideration of many of these proposals upon its return on November 29th.The difficult issues include:

Extension of the Expiring Bush Tax Cuts
If Congress fails to act by January 1, 2011, many Internal Revenue Code provisions expire, and return to what they were in 2001. A few of the affected items include:
1. Increasing all income tax rates, dividend tax rates, capital gains tax rates,
eliminating marriage penalty relief in all brackets
2. Increased Federal withholding taxes-Should Congress fail to extend the
Bush tax cuts the
higher tax rates would normally require the IRS to issue
new withholding tables for employers.
3. Reinstatement of itemized deduction limits
4. Reinstatement of personal exemption phase-out
5. Reduction in child tax credits
6. Reductions in IRA contribution limits

Reinstating the Estate Tax
If Congress does not act the estate tax is automatically reinstated but at the rates and exemption levels that were in the law in 2001. The rates that existed in 2001 included a top estate tax rate of 55%, and a personal exemption level of $1 million, significantly lower than the $3.5 million exemption that was in effect in 2009 and the maximum rate of 45%.

Expiring Provisions and Extenders
Expect that votes in the House and Senate will take place but also expect the early votes to be more for politics than substance. Success on extending these issues and enacting a bill the President will sign is uncertain as of this date. Following is a partial list of expiring provisions and extenders that either expired at the end of last year or will expire at the end of this year. In some cases the credit or deduction is reduced.
1. Alternative Minimum Tax Indexing- currently not indexed for 2010
2. Education Tax Credits
3. Employment Tax Credits
4. Deduction for State and local Sales taxes in lieu of property taxes
5. Energy tax credits
6. Bonus depreciation rules

Extension of Unemployment Benefits
Congress must act to extend unemployment benefits for the long term unemployed, meaning those who have been unemployed for 99 weeks. Congress must act on this by December 1, 2010 as that is the date that benefits begin to run out under current law.

Enacting a Federal Budget
Congress has yet to enact any of the appropriations legislation necessary to allow for the continued funding of the federal government. The usual deadline for this is September 30 of the year, but Congress was unable to act and so deferred this deadline until December 3, 2010. Failure to either enact the appropriations bills or extend the continuing resolution would have a severe impact on every activity of the federal government.

1099 Burdens
In the past year Congress enacted legislation that requires the IRS to impose a significant expansion of the rules to determine when a business owner must provide a 1099 to a business, incorporated or not, when providing goods and or services to a business. This included requiring providing 1099s to corporations for the first time, and for owners of rental property to provide a 1099 for each service provider or repair service. Recently legislation has been introduced to repeal this requirement but it is unclear whether the revenue would have to be raised somewhere else.

Extending the Medicare Reimbursement Rates
The Health Care act enacted by Congress earlier in the year was unable to agree on a way to extend the medicare reimbursement rates for seniors and it was extended through November 30. A permanent solution for this may not take place until next year.

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.

e-YWM ALERT #7- Energy Credits Expiring on 12/31/10

You can weatherize your home and be rewarded for your efforts. But time is running out.

Last year's Recovery Act expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit.

Nonbusiness Energy Property Credit - This credit ends December 31, 2010

This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return. Due to limits based on tax liability, amounts spent on eligible energy-saving improvements in 2009, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.

Residential Energy Efficient Property Credit - this credit ends in 2016

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit equals 30 percent of the amount spent on solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when figuring this credit. Also, except for fuel cell property, no cap exists on the amount of credit available.

Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer's tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer's website or with the product packaging. Normally, a homeowner can rely on this certification.
The IRS cautions that the manufacturer's certification is different from the Department of Energy's Energy Star label, and not all Energy Star labeled products qualify for the tax credits.

Currently neither of theses credits are allowed to the extent it puts you into or increases your alternative minimum tax, but Congress may change this before year end.

Subject to the above limitations, eligible homeowners can claim both of these credits when they file their 2010 federal income tax return. Because these are credits, not deductions, they increase a taxpayer's refund or reduce the tax owed. An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure and claim these credits.

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.