Another Year Bites The Dust

It is New Year's Eve and goodbye 2011. Time to get ready for 2012 to poke up its head and begin a New Year. With that, tax filing is around the corner. What can you do today to help come April?

First, and easiest, tomorrow morning write down your car's odometer reading. Subtract the number you wrote down last New Year's and you have the total miles you drove for the year. That will help determine your auto deduction come April. If you didn't write down last year's number, you are now set for next year.

Second, pay any January business expenses you may have. Or buy the equipment that you need for your business today. Make a donation to your favorite charity. Any payments charged to your credit card today will be deductible on your 2011 tax returns.

Keep checking back to my blog as I will have helpful hints/rumor busters for your 2011 tax returns. As always, please do not hesitate to write or call if you have any questions. I am here to help.

Alternative Minimum Tax (AMT)

AMT affects an increasing number of taxpayers, especially in high tax states like California. AMT provides for a separate calculation of income tax liability by adding back to income certain common deductions, called "preference items". Common items such as state and property taxes, medical expenses, certain interest on lines-of-credit, business related items, large capital gains and employee business expenses are common preference items that can throw a taxpayer into AMT.

It is difficult to determine which combination of factors will make you subject to the AMT. But it is best to estimate these before the end of the year, since normal year end planning will change if AMT is rearing its ugly head. Please contact us to assist in determining if AMT will affect you before it is too late.

Financial Thoughts

Only 29% of parents describe themselves as excellent financial role models. 58% are saving less today for their children's future than 2 years ago. 31% have withdrawn from college savings accounts to pay current bills. This is a sad effect of current financial situations.

If you are one of these parents, don't dispare. Saving for future education is great if you have the resources. Otherwise, the "pay as you go" plan has worked for millions of people over the years. Somehow parents have found the cash flow to pay for education, weddings and other expenses as the need arises. While not the preferred method, this form of payment assesses the current opportunities with current cash availability. Necessity can assist in finding grants, scholarships and loans when needed.

As always, if you need assistance in budgeting and planning for future occurrences, please call or email. We are here to help.

Reducing Your Debt

There are various ways to tackle too much debt. But here are a few suggestions to get your started:

Understand your expenses - Produce a list of expenses. Then categorize them into fixed (mortgage, car payment, etc); Necessary but not fixed (utilities, phone, fuel); Not Necessary (clothes, dining out, etc.)

Create a budget - Include all items you just listed. Unlike government, you cannot exceed your income.

Lower expenses - Think about how to pay down more debt. Cut down on the Not Necessary items and put the extra to reducing debt.

Increase your income - although not easy, consider how to increase your take home pay. Consider raising your exemptions at work. This reduces the taxes taken out each paycheck. Use the extra cash to pay down debt, not to pay for increased expenses. DON'T SPEND THE EXTRA MONEY ON NOT NECESSARY ITEMS!

What not to do - Don't borrow from home equity or 401(k) to pay for short term items. It may seem easy and simple, but the long term effects are horrific.

The best debt-reduction move is to ask for help. Most lenders will work with you if you call them. Unlike a fine wine, problems don't get better with age. As always, we are there to help. Call or email us with questions.

Goodbye 2011....

Today marks the end of 2011 for the Federal government. September 30 is the fiscal year end and tomorrow begins a new budget. Fortunately Congress was able to pass a budget for the new year....or at least a couple of weeks of it. They will begin again next week deciding how to spend money they don't have.

Speaking of money you don't have, almost time to start thinking about tax returns and year end planning. As we get closer to our year end, December 31, we will post different tried and true methods to reduce your tax bill next April. So stick around and we will talk soon...

Until then, enjoy the Fall and as always, call or email me at slux@southcountycpa.com if you have any questions. I am here to help...

Tax Cheating on the Rise

Another tax season has come and gone, but not without its scams. IRS reports that cheating was up 181% this year. Favorite scams: Deduction for prostitutes; Earned Income Credit fraud; deductions to charities that were never made and taking a tax credit for buying an energy efficient car that wasn't bought.

IRS is upping their automated review of returns using computers to match W-2's and 1099's. So if you didn't include one on your return, you will be getting a letter this summer!

If you didn't file, or do get a love letter, please do not hesitate to contact us. We are here to help.

So Who Pays The Tax Bill

The wealthy? The Middle Class? The poor? Who pays what?

Well here is the answer. But like all statistics, they lie! The wealthiest 1% of Americans paid 40% of the total taxes in 2007. But overall, the percentage of tax they paid was 29% of their income, down from 37% in 1979 and 30% in 2002. The Average American paid 20% in 2007, down from 22% in 1979. But the wealthy pay the most. Here is a chart that shows the spread.

As always, we are here to reduce your taxes. Do not hesitate to call at 949-683-8111 or email. Have a very happy Tax Day on Monday, 4/18.