Don’t Wait! Start Your Year-End Tax Planning Now – November 2012

The Shaw Atlas

November 2012

Welcome to The Shaw Atlas, the monthly newsletter from Shaw & Associates, CPAs & Financial Advisors. We look forward to keeping you abreast of ever-changing tax codes, providing you with money saving accounting tips and illustrating proactive strategies to help you achieve the financial life you envision.

Newsletter contents:

‘Tis the Season for Giving Back

Thanksgiving Trivia

Don’t Wait! Start Your Your-End tax Planning Now

Awards Center

 

‘Tis the Season for Giving Back

Realities for Children NightLights
Kevin Shaw

Shaw & Associates is a member of Realities For Children in Larimer County. Our membership helps to provide for the needs of abused and neglected children locally and supports the work of Realities for Children Charities.

Every year this organization hosts the NightLights event at the First Presbyterian Church. You may have seen the big blue tree at the corner of Mulberry and College during the holidays (blue is the color of child abuse awareness and prevention)…that is the Realities For Children NightLights Tree! This year the official tree-lighting ceremony is December 1st, 6:00 p.m. at 531 S. College Avenue.

NightLights has become one of the largest fundraising events for abused children in Larimer County, providing for children in need when all other resources have been exhausted. Because of Business Members like us at Realities For Children and the event sponsors, 100% of donations made to the NightLights campaign will be used to meet the needs of these local children.

This is how it works: families, individuals, organizations and businesses can sponsor a light on the NightLights Tree to help light up the night for local children who have been abused, neglected or are at-risk. Each NightLight is a $100 tax deductible donation, and we encourage you to become part of this beautiful and heartwarming community tradition. As a NightLights donor, you will be recognized in a variety of print and web media, but most importantly you will have given a gift of hope and love to a child in need.

There are three ways to sponsor a light:

  1. Donate Online: Visit the Realities for Children NightLights event website at www.GiveaNightLight.com
  2. Mail a check to: Realities for Children Charities, 1610 South College Avenue, Fort Collins CO 80525
  3. Visit their office: If you would like to pay with cash or check in person, you can stop by the Realities for Children office at 1610 South College Avenue in Fort Collins: Mon-Fri, 10 a.m.- 5 p.m.

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Thanksgiving Trivia

In the spirit of the upcoming holidays and the stresses that come along with everything year-end, we thought some Thanksgiving Trivia would be a quick fun interruption to your daily grind! Be sure to check out our Facebook page on Monday, November 26th for the answers! If you happen to not be a fan of our Facebook page, the answers will also be in next month’s newsletter.

1. What year did the Pilgrims celebrate the first Thanksgiving?

a. 1620

b. 1621

c. 1622

d. 1630

2. Which U.S. President established Thanksgiving as an annual holiday?

a. George Washington

b. Abraham Lincoln

c. Franklin D. Roosevelt

d. Rutherford B. Hayes

3. In 1941, the U.S. Congress passed a resolution making Thanksgiving day the fourth Thursday in November rather than the last. What was the purpose of the change?

a. To avoid potential snowstorms in the north

b. To avoid heavy rains in the south

c. To extend the Christmas shopping season

d. All of the above

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Don’t Wait! Start Your Year-End Tax Planning Now

The Importance of Tax Planning
Marcy Palm, Accounting Manager

It’s fall, one of my favorite times of the year. I love the smell of the cooler air, the colorful leaves, snow in the mountains, Halloween, and pumpkin pie. Oh, and not to mention year-end tax planning! I know what many of you are thinking, you’ve been trying to ignore taxes since last April 15th, why can’t you just keep on ignoring them until about March of next year? Ongoing tax planning is always important, especially if you are a business owner or manager, self-employed, or have income sources other than just a W-2 job. However, this year, with all the pending tax law changes, year-end planning is especially crucial.

As you may have already heard, either from us or the media, several tax cuts that were enacted in the early-to-mid 2000’s are scheduled to expire at the end of 2012. (Keep in mind, Congress could jump in at the last minute and extend some of these tax cuts, just as they did in early 2011, making 2012 year-end tax planning even trickier.) Combine these pending tax cut expirations with several new taxes that were passed in the past few years that are set to take effect in 2013, and this means that income taxes for most Americans will increase in 2013, even for those in the lower tax brackets.

Therefore, the standard tax-planning rule of accelerating deductions and deferring income may not hold true for 2012. If you assume that taxes will indeed increase in 2013, you may consider delaying some expenditures until early 2013. These could include charitable contributions, extra mortgage payments, business equipment purchases, non-essential medical expenses, etc. And, to the extent you can control your income, you may try to accelerate your revenues for 2012 by pushing hard on business receivables, selling investments with gains, and exercising employee stock options.

Another potential increase in your taxes will occur because the employee portion of the social security tax is scheduled to increase in 2013 back to the pre-2011 rate of 6.2% (compared to the 4.2% rate we’ve been paying the past 2 years). So, if you have the ability to select timing of bonuses or other compensation, it may be very advantageous to accelerate those to 2012.

However, there are other considerations involved with each of the previous examples, which is why talking to a trusted tax advisor is so crucial, especially this year. For example, I mentioned delaying non-essential medical costs to 2013. Since medical costs are only deductible once you reach a certain threshold, if you have already incurred significant medical expenses in 2012 that exceed the threshold, it may make more sense to incur the non-essential medical costs in 2012 because you will be certain they will be deductible. If you don’t incur any significant medical costs in 2013, the postponed non-essential medical services may not be deductible because of the above-mentioned thresholds. Did this paragraph just confuse you? It would have confused me if I didn’t live this jargon every working day, which again reinforces why it is so crucial to seek professional guidance.

Another great example is purchasing business equipment. Even if you finance these purchases, you have the potential to deduct them in full in the year of purchase, which could save you a substantial amount of taxes. This year, it may make sense to delay those purchases until early 2013. However, there is an additional consideration with equipment purchases. Under current tax legislation, the maximum amount of write-off you can take on new equipment purchases in 2012 is $139,000 but only $25,000 for 2013. If you have significant equipment purchases planned, you may want to consider making some of them in 2012 so you aren’t limited by the 2013 reduction.

We are always willing to meet with you to discuss tax planning or tax questions you may have. Most of these decisions need to be made and acted on before December 31, so it is essential you get this scheduled in the next several weeks. Just give Cassy a call at 970-223-0792 or email her at cassy@kevinshawcpa.com to get an appointment scheduled on one of our calendars. Additionally, remember that if you are not a client of our firm, or if you have friends or family who may have tax planning questions, we do offer a free initial one-hour consultation for potential new clients, but only until December 31 (and again after the April 15th tax deadline). Whether it be with us or someone else, don’t wait to do your tax planning. It could save you thousands of dollars!

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Awards Corner

Congratulations to Dave & Pam Pettigrew for coming in first for 2012 third-quarter sales for Prudential’s Colorado real estate agents. Last year they were awarded the 2011 President’s Circle Award from Prudential Real Estate and Relocation Services, which recognizes the top residential sales professionals who demonstrate great success in the residential sales for the year. We are proud to work closely with clients that continue to excel in their professional accomplishments.

If you would like to showcase your business’s achievements in our newsletter please contact Cassy at Cassy@kevinshawcpa.com

Being featured in our awards section does not indicate that the client endorses our services.

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