Still Time to Save on Taxes With These Tips

Trim Your Taxes While You Deck the Halls

We posted the December Hotline newsletter yesterday for all SIPA member companies and their employees. The online version contains a good article on taxes from the Virginia Society of Certified Public Accountants about what you can still do in this last week to save money. Here are some highlights from that article:

Small business options
Self-employed individuals have more leeway with deductions than other taxpayers. Be sure to structure your business transactions to achieve the most efficient tax results for your business. Deduct, deduct, deduct. Need new anti-virus software, a printer, office supplies or a new computer? Get the items purchased and put into use by December 31, 2010, and take the write-off on your 2010 taxes with IRS Section 179 deductions.

The HIRE Act offers two new tax benefits to employers who hire certain qualified employees. You can benefit from the HIRE Act until December 31, 2010. Also, consider delaying or accelerating billings and/or payments. It may be beneficial for you to buy equipment or pay for classes and conferences on your credit card now—or with extra “2010 dollars”—and take the deduction this year. (With that same thinking, SIPA is offering a special rate of $250 OFF its regular registration price through Dec. 31 for its landmark 35th Annual Conference, June 5-7, in Washington, D.C.)

TRIVIA QUESTION OF THE DAY:
In 1963, President John F. Kennedy quoted what fictional Christmas-time
character in his speech about businesses in America,
saying “Humanity was my business”? (see answer below)

Expiring tax breaks
There are several tax breaks that expire at the end of 2010, so take advantage while you can:
** Energy efficient home improvement credit;
** Hybrid vehicle tax credit (all models);
** Guaranteed 15-percent maximum rate for long-term capital gains;
** Child and dependent care tax credit will be reduced starting in 2011;
** 2010 child tax credit of $1,000 per child will revert to $500 per child in 2011;
** Computers as a qualified expense for section 529 college savings plans;
** Earned income credit for third child;
** Student loan interest deduction is scheduled to change;
** American Opportunity tax credit for undergraduate education.

Max out your retirement savings options
If you are fortunate enough that your employer is still offering a 401(k) plan, be sure to take advantage of it. No 401(k)? Then check out the options available in 2010 for individual retirement accounts (IRA) and Roth IRAs. In 2010 only, taxpayers will have a choice to convert their traditional IRA to a Roth IRA and report the entire amount of the conversion in 2010 or defer taxes by reporting the income ratably over two years, in 2011 and 2012. Consider contributing the maximum allowable as it pertains to your unique financial situation.

Donate to charity
If you itemize your deductions and want to take a charitable donation deduction on your 2010 taxes, you need to make the donation by December 31, 2010. If you have been putting off those donations, holiday time is a great time to do some good—for someone else and for your taxes.

Benefit from losses
If you have incurred losses on individual stocks, mutual funds or other investments that are not in a retirement account, you can either hold on to what you own in hope that its value will rise in the future or sell it and take a loss on the investment. Also, depending on your accounting methods, you may wish to check inventory for goods that have been damaged or have become obsolete. The drop in market value of the inventory can provide your company with added deductions.

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Answer: The Ghost of Jacob Marley from Charles Dickens’ “A Christmas Carol”

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