Anderson ZurMuehlen Blog

Free Lunch and Learn Training on Microsoft Excel 2010 on Tuesday, February 25th

Plan to attend a Lunch and Learn training on Microsoft Excel 2010 on Tuesday, February 25, 2014. This interactive training will be led by Molly Casey, Training and Development Manager, and it is best suited for beginners and intermediate users. The online class will be held from 11:00 a.m. -12:00 p.m. MST, and there is no charge to attend. For more information, or to register, contact Molly Casey by email or at 406.442.1040.

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Don’t miss deductions that are still available for 2013

As temporary tax breaks expire and are re-extended, it is sometimes confusing to remember which ones are effective for a particular tax year. Here are several deductions that are still available for your 2013 federal income tax return.

  • Teacher expenses. If you’re an eligible educator, you can deduct up to $250 of out-of-pocket expenses for classroom supplies and materials. The deduction is above-the-line — meaning you don’t have to itemize to claim it.
  • Tuition. Another above-the-line tax-saver available for 2013 is the tuition and fees deduction for higher-education expenses you pay for yourself, your spouse, or your dependents. The maximum deduction for 2013 when you’re married filing a joint return is $4,000. Income limits apply.
  • State and local sales tax. You can benefit from this itemized deduction by choosing to claim state and local sales taxes that you paid during 2013 instead of state and local income taxes. You have the option of claiming the actual amount based on receipts, or using an amount from IRS-created tables. If you use the IRS tables, you can add the sales tax you paid for certain large purchases such as vehicles.
  • Asset expensing. Under a tax provision called the Section 179 deduction, you can choose to expense the full cost of new or used assets you placed in service during the year. For 2013, the maximum Section 179 deduction is $500,000 when total asset purchases for the year are $2 million or less.
  • Bonus depreciation. New equipment with a depreciable life of 20 years or less, certain leasehold improvements, and computer software are eligible for an additional, or “bonus,” first-year depreciation deduction. For 2013, you can write off up to 50% of the cost of a qualified asset used in your business.

Do you need information about other tax deductions not mentioned here? Please give us a call for the latest details.

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Just in time for Valentine’s Day, there’s still time to get substantiation for 2013 donations

To support a charitable deduction, you need to comply with IRS substantiation requirements. This generally includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.

“Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So if you made a donation in 2013 but haven’t yet received substantiation from the charity, it’s not too late — as long as you haven’t filed your 2013 return. Contact the charity and request a written acknowledgement.

And don’t take the substantiation requirements lightly. In one U.S. Tax Court case, the taxpayers substantiated a donation deduction with canceled checks and a written acknowledgment. The IRS denied the deduction, however, because the acknowledgment failed to state whether the taxpayers received goods or services in consideration for their donation. The taxpayers obtained a second acknowledgment including the required statement, but the Tax Court didn’t accept it because it wasn’t contemporaneous.

Additional substantiation requirements apply to some types of donations. We can help ensure you meet them so you can enjoy the deductions you’re expecting. For more information contact Suzanne Severin by email or at 406.442.1040.

© 2014 Thomson Reuters

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Aja Rail Receives the 2014 United Way Volunteer of the Year Award

The United Way of the Lewis & Clark Area announced that Aja Rail, Administrative Professional, was awarded the 2014 United Way Volunteer of the Year Award. Aja was honored at the agency’s annual meeting on February 12th in Helena for her passion and dedication in both advocating and giving back to the community. Pictured from left Brian Johnson, Executive Director of United Way, Aja Rail, Anderson ZurMuehlen, and Carol Lockwood, President of United Way.

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Financial Tip of the Month: Tips for cutting medical bills

Tips for cutting medical bills

With the burgeoning cost of pharmaceuticals, doctor visits, and hospital stays, staying healthy has become an increasingly expensive proposition. In addition, health insurers are passing along more and more of their costs in the form of higher deductibles, increased premiums, and larger co-payments. Out-of-pocket costs for even one hospital stay can break a household budget, and it may take years to recover.

That’s the bad news. The good news? You can control some of these ever-increasing health care costs by following a few simple strategies:

  • Negotiate, negotiate, negotiate. You haggle when buying an automobile. Why not use a similar tactic when discussing items on your hospital bill? In fact, out-of-pocket costs for a surgery may even exceed the cost of that shiny vehicle sitting in the driveway. Fortunately, health care providers are often amenable to reducing invoiced amounts, and some may offer discounts for upfront payment. You might also research the cost of similar services in your area and use those figures as a starting point for negotiation. One place to start is
  • Scrutinize the bill. Hospitals are notorious for double billing and mischarges. When you receive the itemized bill, pore over it — line by line. Look for charges that don’t make sense ($50 charges for hospital supplies that are available for a dollar at the local department store); charges for services you didn’t receive (physical therapy that never happened); or more than one charge for the same item (separate charges for the hospital room and standard amenities like bed sheets). Examine the rates for these items as well. Your insurer may have negotiated lower rates, but you may have been charged more-expensive uninsured rates. And make sure all eligible out-of-pocket expenses are credited toward your deductible.
  • Comparison shop before you buy. Unless you’re being treated for an emergency, you may have time to locate more cost-effective health care alternatives. For example, using a stand-alone MRI imaging center may cost significantly less than the same test if offered by a hospital. A walk-in clinic or urgent care facility is generally cheaper than a visit to the local emergency room. Switching to generic drugs, when available, can save you up to 60% over name-brand equivalents.

If in doubt, call your insurer’s hotline to ask for help. Remember: insurance companies have a vested interest in your good health.

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Excel I Training, February 20, in Helena

Are you learning Excel? Anderson ZurMuehlen is offering Excel I training on Thursday, February 20, 8:30 a.m.-12:30 p.m. This interactive class will be taught by Molly Casey, Training & Development Manager.  The cost is $75 and there are only three seats left. Please contact Molly Casey  by email or call 406.442.1040 for more information or to register.

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Tax Tip of the Week: A capital gains review for your 2013 tax return

A capital gains review for your 2013 tax return

Wondering what capital gain rates will apply to your 2013 federal income tax return? The rate you pay on gain from the sale of stocks or other assets depends on the length of time you owned the asset, the type of asset, and your taxable income.

  • Length of time. The “holding period” determines whether an asset is classified as short-term or long-term. As you probably know, short-term is presently defined as a year or less, and short-term assets are typically taxed at your ordinary federal income tax rate. In contrast, the capital gain rate for assets held more than a year is generally lower than your ordinary rate.Measuring the holding period can be straightforward. For example, when you purchase publicly traded stocks, the holding period is measured by trade date. You start counting the day after you purchase the stock and stop on the date of sale.

    Assets you acquire in other ways, such as by gift or inheritance, follow different rules. For gifts, your holding period can include the ownership period of the person who gave you the gift. Inherited assets have a long-term holding period, no matter how quickly you sell them.

  • Type. Special capital gain rates apply to specific assets, such as art or coin collections, certain small business stock, and some depreciable real estate.
  • Income. When you’re in the 10% or 15% income tax bracket, the maximum rate you’ll pay on long-term capital gains is 0%. For 2013, the 15% bracket ends at $72,500 when you’re married filing jointly ($36,250 when you’re single).If your income exceeds $450,000 ($400,000 for singles), the maximum capital gain rate is 20%. When you’re in between, you’ll generally pay 15% on gains.

Please call if you sold investments or other assets in 2013 and have questions about the tax issues.

© MC 2014

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Estimate start-up costs for your new business

Building a business from scratch involves hard work, long hours, and, statistically speaking, a high probability of failure. Yet as researchers Stanley and Danko noted in their landmark book, The Millionaire Next Door, “self-employed people make up less than 20% of the workers in America but account for two-thirds of the millionaires.” For those businesses that survive, the rewards can be substantial.

Unfortunately, many businesses die before they get started. That’s because entrepreneurs often fail to estimate start-up costs with reasonable accuracy. As a result, the company cash account dwindles to zero before sales catch up.

If you’re preparing to launch a new business, take a hard look at the following:

  • Assets. Your company’s requirements will vary depending on the industry and market for your goods and services. But you should be able to construct a list of assets necessary to keep the business up and running for at least a year. If you’re establishing a company in a brick-and-mortar location, you’ll need to factor in equipment, furniture, point-of-sale cash registers, incorporation fees, licenses, signage, rental and utility deposits, and remodeling costs. A service-oriented firm may not carry substantial inventory, but a product-based company should estimate initial inventory costs as well. Equipment and furniture vendors should be able to provide reasonable cost estimates for such items.
  • Expenses. Costs to launch a company will also include items not found on the balance sheet — outlays to keep the company running from day to day. These might include legal fees, website development costs, expenditures for office supplies, marketing materials, and rent and utility deposits. If you hire folks to help get the company off the ground, their salaries should be included in the expense estimate as well.
  • Cash. Once you know how much your company will need for assets and expenses, it’s time to develop a budget. Estimate revenue and collections for at least three months. Be conservative. Add up the cost of assets and expected expenses, then deduct cash in the bank and projected revenue. The difference will be your cash shortfall. This is the amount you’ll need to garner from other sources, including bank and personal funds.

The more accurately you estimate the above items, the more likely your company will survive long enough to become profitable.

© MC 2014

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Home Office Deduction 101

If your use of a home office is for your employer’s benefit or because you’re self-employed, you may be able to deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space. Or you may be able to take the new, simpler, “safe harbor” deduction.

Beginning with 2013 tax returns, taxpayers can use the safe harbor deduction in lieu of calculating, allocating and substantiating actual expenses. Other rules — such as the requirement that the office be used regularly and exclusively for business — still apply. The safe harbor deduction is capped at $1,500 per year, based on $5 per square foot up to a maximum of 300 square feet.

Also be aware that, for employees, home office expenses are a miscellaneous itemized deduction. This means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses exceed 2% of your adjusted gross income (AGI). If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income.

Questions about deducting home office expenses? Contact us; we’d be pleased to answer them.

© 2014 Thomson Reuters

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You’ll see higher standard deduction and exemption amounts on your 2013 tax return

You’ve probably heard of the consumer price index, or CPI, a government statistic that measures the change in the price of certain items over a specified time period. But you may not realize the CPI affects your tax return.

That’s because the CPI is used as a measure of inflation, and the tax code calls for mandatory inflation adjustments to many numbers, including the standard deduction and exemptions.

Here are the inflation-adjusted figures for your 2013 federal income tax return.

  • Standard deduction. The standard deduction is the flat dollar amount you can use to reduce your taxable income when you do not itemize. For 2013, when you’re single or married filing separately, your standard deduction is $6,100, an increase of $150 from 2012. If you’re married and file a joint return, or are filing as a surviving spouse, the 2013 standard deduction went up $300 from 2012, to $12,200.
  • Exemptions. Two types of exemptions are available. You can claim the personal exemption for yourself and your spouse. The dependency exemption is for qualifying children or relatives.For 2013, each exemption will reduce your taxable income by $3,900, an increase of $100 from the 2012 amount.

Inflation adjustments also increased the upper limits of tax brackets for 2013, as well as other exclusions, deductions, and phase-outs.

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