Do-it-yourself or hire an accountant? The crucial choice in tax returns preparation

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In taking on a Herculean task of tax returns preparation, hiring the services of tax experts, such as Maryann Schugmann and Isidor Hefter, proves to be most convenient. Even though it might be daunting in itself due to the prospect of professional fees, nothing can pay the price for the peace of mind brought about by having a trained professional look at one’s overall tax situation. Having a professional prepare one’s taxes eases the problem of looking over the returns, making the necessary corrections, and finalizing the tax returns. Moreover, tax analysts may also provide valuable proposals, such as ways on how taxpayers may reduce their taxes.

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Meanwhile, the do-it-yourself way of tax returns preparation also presents its own unique set of perks. First off, it enables individuals to have full control over their tax returns and lets them decide on the pace by which the process will take place. By employing this method, individuals can also get to see firsthand how the different parts of one’s financial situation can come to affect the overall status of taxes. Though this approach has been made easier and more practicable by technology in recent years, it may still take a lot of practice before one can gather enough experience to truly master this skill.

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Isidor Hefter, CPA, specializes in tax planning and research for corporate and high net worth individuals. Learn more tips on tax planning by following this Twitter account.

Surviving the US tax cliffhanger: The importance of stock redemption in year-end tax planning

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This year may prove to be a difficult time for many large US corporations. Many tax provisions will already expire by the end of the year, and the Congress is still ambivalent on what to do with regard to the proposed changes. As pointed out by Thomson Reuters, a majority of these susceptible rules are important. For example, provisions like business research credit, bonus depreciation allowance, and Bush-era tax cuts may either be extended or vetoed should the Congress decide to. This lack of certainty makes year-end tax planning all the more crucial and challenging at this point. 

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In light of this impending dilemma, Marian Rosenberg, a senior tax analyst at Thomson Reuters cites “stock redemption” as a way by which US corporations could “lock in low tax rates for shareholders, avail themselves of the work opportunity tax credit, and secure generous depreciation and expense deductions.”

According to Rosenberg, corporations could actually qualify for a 15 percent tax rate on the distribution if they consider taking money out of the business through stock redemption before 2012 ends. If the provisions on Bush-era tax cuts expire at the end of 2012, profits will be threatened as “long-term gains will be taxed at a 20 percent rate and dividends will be taxed as ordinary income at a rate of up to 39.6 percent.” 

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As with all other cases, careful planning may save business entities from any imminent sources of loss. However, it is still important for corporations to consult with qualified tax advisors such as Hilton Sokol, Isidor Hefter, or Maryann Schugmann before enacting any major strategies to ensure higher success rates.

More tips on tax planning may be accessed at this Twitter account.

Tax Planning Basics: 3 Ways to Reduce Taxes

Still new to tax planning? This article from Taxes.About.com provides three invaluable ways by which you can cut back on your taxes.

The goal of tax planning is to arrange your financial affairs so as to minimize your taxes. There are three basic ways to reduce your taxes, and each basic method might have several variations. You can reduce your income, increase your deductions, and take advantage of tax credits. 

Reducing Income

Adjusted Gross Income (AGI) is a key element in determining your taxes. Lots of other things depend on your AGI (or modifications to your AGI)-- such as your tax rate and various tax credits. AGI even impacts your financial life outside of taxes: banks, mortgage lenders, and college financial aid programs all routinely ask for your adjusted gross income. This is a key measure of your finances.

Because your adjusted gross income is so important, you may want to begin your tax planning here. What goes into your adjusted gross income? AGI is your income from all sources minus any adjustments to your income. The higher your total income, the higher your adjusted gross income. As you can guess, the more money you make, the more taxes you will pay. Conversely, the less money you make, the less taxes you will pay. The number one way to reduce taxes is to reduce your income. And the best way to reduce your income is to contribute money to a 401(k) or similar retirement plan at work. Your contribution reduces your wages, and lowers your tax bill.

You can also reduce your Adjusted Gross Income through various adjustments to income. Adjustments are deductions, but you don't have to itemize them on the Schedule A. Instead, you take them on page 1 of your 1040 and they reduce your Adjusted Gross Income. Adjustments include contributions to a traditional IRA, student loan interest paid, alimony paid, and classroom related expenses. A full list of adjustments are found on Form 1040, page 1, lines 23 through 34. The best way to boost your adjustments is to contribute to a traditional IRA.

As you can see, two of the best ways to reduce your taxes is to save for retirement, either through a 401(k) at work or through a traditional IRA plan. Contributions to these retirement plans will lower your taxable income, and lower your taxes.

Increase Your Tax Deductions

Taxable income is another key element in your overall tax situation. Taxable income is what's left over after you have reduced your AGI by your deductions and exemptions. Almost everyone can take a standard deduction, and some people are able to itemize their deductions. Itemized deductions include expenses for health care, state and local taxes, personal property taxes (such as car registration fees), mortgage interest, gifts to charity, job-related expenses, tax preparation fees, and investment-related expenses. One key tax planning strategy is to keep track of your itemized expenses throughout the year using a spreadsheet or personal finance program. You can then quickly compare your itemized expenses with your standard deduction. You should always take the higher of your standard deduction or your itemized deduction.

Your standard deduction and personal exemptions depends on your filing status and how many dependents you have. You can increase your standard deduction and personal exemptions by getting married or having more dependents.

The best strategies for reducing your taxable income is to itemize your deductions, and the three biggest deductions are mortgage interest, state taxes, and gifts to charity.

Take Advantage of Tax Credits

Once we've tweaked our taxable income, we are ready to focus our attention on various tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for saving for retirement, and for adopting children. The best tax credits are for adoption and college expenses. Not everyone is in a position to adopt a child, but everyone could take some college classes. There are two education-related tax credits. The Hope Credit is for students in their first two years of college. The Lifetime Learning Credit is for anyone taking college classes. The classes do not have to be related to your career.

You may also want to avoid additional taxes. If at all possible, avoid early withdrawals from an IRA or 401(k) retirement plan. The amount you withdraw will become part of your taxable income, and on top of that there will be additional taxes to pay on the early withdrawal.

One of the best, and most abused, tax credit is the Earned Income Credit (EIC). Unlike other tax credits, the EIC is credited to your account as a payment. And that means the EIC often results in a tax refund even if the total tax has been reduced to zero. You may be eligible to claim the earned income credit if you earn less than a certain amount.

Increase Your Withholding

You can avoid owing at the end of the year by increasing your withholding. More money will be taken out of your paycheck throughout the year, but you will get bigger refund when you file your taxes.  

Source: http://taxes.about.com/od/taxplanning/a/taxplanning.htm

Thomson Reuters: “Year-end Tax Planning Tips for US High Income Earners”

In light of the ever-changing laws that govern tax payment in the US, many high income earners may worry about the foreseeable adjustment that they are in for during the outset of the next fiscal year. To help mitigate the drawbacks of this inevitable change, the following article from Thomson Reuters provides some tips that may effectively help out on year-end tax planning:
 

Tax laws are scheduled to change once again in 2013. However, “There’s still time to take advantage of favorable 2012 tax rates and laws and get ahead of higher projected tax rates in 2013,” said Jim Van Grevenhof, a senior tax analyst for Thomson Reuters. “Time is of the essence, however, because the window of opportunity is closing quickly and the ‘fiscal cliff’ is looming.”

Below, Van Grevenhof describes some of the more significant 2012 tax issues and strategies for minimizing tax liabilities.

First, let’s look at planning ideas to avoid or minimize two fairly certain tax increases in 2013.

New 3.8 Percent Medicare Contribution Tax. As a component of recent healthcare legislation, beginning in 2013 there is a new 3.8 percent Medicare Contribution Tax. This tax is levied on the lesser of (a) net investment income or (b) the excess of modified adjusted gross income (MAGI) over certain threshold amounts ($250,000 for joint returns, $125,000 for married separate returns, and $200,000 for all other taxpayers).

Taxpayers can eliminate or minimize this new tax by decreasing MAGI or net investment income, or both, in 2013. Tax reduction strategies include structuring the receipt of bonus, profit sharing, or other incentive payments in 2012 versus 2013; selling investment assets with built in gains in 2012 instead of 2013; and selling property on an installment basis in 2012 and, in conjunction, electing out of the installment method to recognize the entire gain in 2012.

New 0.9% Medicare Surtax. Beginning in 2013, recent healthcare legislation also provided a new 0.9 percent Medicare Surtax. This tax is imposed on wages and self-employment (SE) income in excess of specific MAGI threshold amounts ($250,000 for joint returns, $125,000 for married separate returns, and $200,000 for all other taxpayers). Taxpayers can eliminate or minimize this new surtax by implementing strategies to reduce SE income earned after 2012.

One strategy is to accelerate SE income that normally would have been earned in 2013 (and, therefore, subject to the 0.9 percent Medicare surtax) into 2012. Cash-method sole proprietors may be able to accelerate taxable income into 2012 by invoicing clients as soon as feasible, so that proprietors receive payment for them in late 2012. They may also be able to defer deductible expenses into 2012 by waiting to pay deductible business expenses such as office supplies and repairs and maintenance until next year. Also, a taxpayer who is an employee of a family-owned business that will pay a bonus for this year might want to get it paid in 2012, rather than waiting for 2013.
“Beginning in 2013, taxpayers might consider leasing real property to the taxpayer's closely held business, renting business property to a proprietor spouse, employing family members in the business, and, in certain situations, adopting a self-insured medical reimbursement plan,” advised Van Grevenhof. “All these can help to minimize SE income.”

Next, let’s look at provisions of the 2001 and 2003 tax cuts set to expire at the end of 2012. Some or all may be extended in their present or a modified form. However, without Congressional action, these favorable provisions will expire on December 31 and tax rates will increase in 2013.

Current 15 Percent Capital Gains Rate in 2012. The maximum rate on long-term capital gains is scheduled to increase from 15 percent to 23.8 percent (20% + 3.8%) in 2013. Taxpayers can use various strategies to minimize the effect of this increase, including harvesting built-in gains during 2012, deferring sales of investment loss assets until 2013, and electing out of the installment sale method for gains incurred during 2012.

Current 15 Percent Maximum Rate on Qualified Dividends. The maximum tax rate on qualified dividends is scheduled to increase from 15 percent to 43.4 percent (39.6% + 3.8%) in 2013. Taxpayers can minimize the impact of higher 2013 tax rates by maximizing the payment of dividends from closely held domestic C corporations in 2012.

Maximum Tax on MRDs. The maximum tax rate on the taxable portion of an IRA minimum required distribution (MRD) will increase from 35 percent to 39.6 percent in 2013. Taxpayers turning 70½ in 2012 should consider taking their initial MRD in 2012 versus 2013.

Maximum Rate on Roth Rollovers. The rate on the taxable portion of a traditional to Roth IRA rollover will increase from 35 percent to 39.6 percent in 2013. Taxpayers contemplating the conversion of a traditional IRA to a Roth IRA should consider completing the transaction in 2012 to avoid the higher projected 2013 tax rates.

Defer Large Charitable Contributions. Higher tax rates will increase the value of charitable contributions in 2013. Taxpayers can defer large charitable contributions from 2012 to 2013 and obtain a larger tax benefit from the contribution next year.

Taxpayers should consult with a tax advisor before applying these or other tax strategies.
Up-to-date analyses of legislation and regulations affecting taxpayers are available on the industry-leading, award-winning Thomson Reuters Checkpoint research platform.

Thomson Reuters Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial and risk, legal, tax and accounting, intellectual property and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs approximately 60,000 people and operates in over 100 countries. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, go to www.thomsonreuters.com.

Isidor Hefter: A look at the American Institute of Certified Public Accountants

The American Institute of Certified Public Accountants (AICPA) is the largest member association representing the accounting practice, with almost 386,000 members, including Isidor Hefter of Rosen Seymour Shapss Martin & Company LLP.

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The AICPA maintains a set of ethical standards for the accounting profession and US auditing standards for audits of private companies, nonprofit organizations, federal, state, and local governments. AICPA members represent many areas of practice, including business, consulting, private practice, government, and education. On behalf of its members, the AICPA monitors and advocates on legislative and other issues affecting certified public accounts globally. Partnering with other CPA professional organizations, the AICPA educates federal, state, and local policymakers about key issues, including the following:

• Taxation. The AICPA advocates on behalf of CPA members, like Isidor Hefter, with federal lawmakers and regulators to represent all CPAs and help create a more workable tax system for practitioners and taxpayers.

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• Federal issues. The AICPA helps promote effective policymaking by developing Congressional testimony and working with federally elected officials and regulatory agencies.

• State regulation and legislation. As an information and resource provider, the AICPA monitors regulatory and legislative trends, assists discussions, and moderates information sharing.

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Isidor Hefter is also a member of the New York State Society of Certified Public Accountants. For more information about him and his work, visit this Facebook page.

Isidor Hefter: Is food exempted from sales tax?

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Rosen Seymour Shapss Martin & Company LLP senior partner Isidor Hefter specializes in taxation. He lectures in the firm’s continuing education program, focusing on the areas of federal and state income taxes, and sales and use taxes. This article discusses what kinds of food and food products are subject to sales tax and which of them are exempted.
 

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The New York State Department of Taxation and Finance affirms that food and food products, sold at groceries and convenience stores, are exempted from sales tax. Below is a list, although not inclusive, of food items that may not be taxable:

• Snack cakes and cookies
• Packaged salads sold by the pound
• Fruits and vegetables
• Meat
• Canned products
• Dairy items
• Snack items like potato chips, pretzels, popcorn, and nuts unless sugar-coated, chocolate-coated, candy-coated, or honey-coated

Isidor Hefter is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. 

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However, under certain circumstances, some food items are sold with tax. These include the following:

• Heated food - soups, pizza products, rotisserie chicken
• Food for consumption on the premises - restaurant and coffee shop items
• Food prepared by the seller and is ready for consumption - sandwiches, ice cream preparations, and meals 

From: Isidor Hefter

To learn more about Isidor Hefter and taxation tips, visit this Facebook page.

Isidor Hefter: Becoming a certified public accountant

This latest Isidor Hefter blog will share how accountants can ace in their careers once they hold the statutory title of being a certified public account (CPA).

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Achieving CPA-status requires fundamental skills, education, and trainings. You cannot just aspire being a CPA without going through the staple steps, which start with having a bachelor’s degree in accounting.

After receiving an undergraduate degree, you can prepare for the CPA examination. Taking this examination, according to the American Institute of CPAs (AICPA), is the major step toward CPA success. After all, the exam would certify your stature as an accountant so nothing else matters than passing it.

A graduate of CCNY, Brooklyn College in New York, Isidor Hefter is a member of AICPA and the New York State Society of Certified Public Accountants.

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AICPA shares some steps on how to prepare for the CPA exam, which include:

- Learning about the CPA examination. Having an idea of the content, structure, format, delivery, and topics of the exam will help you a lot in preparing for it.
- Learning about the CPA examination process.
- Preparing yourself for CPA examination changes.
- Preparing to take the CPA examination. Months’ worth of reviews are very important. By taking tutorials or sample tests, you will have an idea on how to go about the actual exam.
- Deciding on the jurisdiction which to apply. At this stage, you should’ve already decided in which state you want to be certified as a CPA for you to meet the requirements that your chosen jurisdiction entails.

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More about Isidor Hefter can be read in this blog.

A look at Isidor Hefter's career

For over two decades now, Isidor Hefter, CPA, has been involved in the growth and development of the accounting firm Rosen Seymour Shapss Martin & Company LLP (RSSM), where he serves as senior partner. Aside from doing tax planning and research for corporations and high net worth individuals, he is especially proficient in performing other vital functions for the firm, such as advising individuals and business owners on how to apply best practices for their taxes while maintaining profit, representing clients before the State of New York for income tax, and dealing with residency and domiciliary issues, and sales use tax audits. On top of these responsibilities, he also lectures for the firm’s continuing education program, in the areas of federal and state income taxes, and sales and use taxes.

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Before his stint at RSSM, Isidor Hefter has already solidified his portfolio in the field of accounting. To start with, he became a member of the finance group at BP North America, Inc., the U.S. holding company for the British Petroleum Company PLC. Additionally, he has also worked as a senior member of the tax department of the accounting firm of Arthur Andersen.

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Mr. Hefter’s achievement today is the fruits of his hard work and patience as a student. His interest in accounting led him to take up a bachelor’s degree in accounting at CCNY, Brooklyn College, New York. He furthered his studies by taking up graduate courses in the masters in taxation program at Pace University, also in New York.

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Learn more about Rosen Seymour Shapss Martin & Co. LLP and Isidor Hefter’s expertise by following this Twitter page.

Isidor Hefter and the Rosen Seymour Shapss Martin & Co. LLP

Certified public accountant Isidor Hefter is a senior partner at the Rosen Seymour Shapss Martin & Co. LLP. He has brought in over 20 years of expertise in the firm in matters of tax planning and research for corporate and high net worth individuals. Aside from that, he has also shown proficiency in areas relating to estate tax planning and representation before the Internal Revenue Service, the State and City of New York, and other state and local governments. Representation has included the likes of income tax concerns, domiciliary issues, and sales use tax audits. Over the years, he has acquired skills in guiding business owners on ways to best plan their taxes, while attaining financial stability.

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Isidor Hefter has been involved with the financial sector long before joining Rosen Seymour Shapss Martin & Co. LLP. He was a member of the Finance Group at BP North America, Inc., the U.S. holding company for the British Petroleum Company PLC. He also became a senior member of the tax department, involved in corporate and individual taxes, at the accounting firm of Arthur Andersen. Mr. Hefter is also a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants.

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Learn more about the Rosen Seymour Shapss Martin & Co. LLP and Isidor Hefter’s expertise by following this Twitter page.

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