DIVIDENDS July 2011
Increase Tax Savings by Maximizing Your Itemized Deductions
When you itemize, the tax savings can be significant since itemizing deductions on your tax return can total into the thousands of dollars over the standard deduction.
Take a look at Schedule A of Form 1040. List your itemized expenses and compare it to the amount of the standard deduction. Your total itemized deductions must be more than your standard deduction for the year in order to itemize.
Total itemized deductions are found by adding your mortgage, interest, real estate taxes, personal property taxes, charitable contributions (if any), miscellaneous expenses exceeding 2% of adjusted gross income and medical expenses exceeding 7.5% of adjusted gross income.
Four tips to maximize your itemized deductions:
- Bundle medical expenses.
- Pay state income taxes before year-end.
- Bundle investment and tax prep related expenses.
- Pay prior year property taxes in January of current year and current year property taxes before Dec. 31 of the current year.
If you’re single, itemized deductions must exceed $5,450.
If you’re married, itemized deductions must exceed $10,900.
Bundling and maximizing itemized deductions may enable you to itemize deductions every other year and take the standard deductions the alternate year.
Source www.irs.gov
Federal Unemployment Tax Change
The IRS has announced that effective July 1, 2011 there will be a reduction in the Federal Unemployment Tax Act (FUTA) rate due to the expiration of the 0.2 percent FUTA surtax.
This will decrease the overall rate from 6.2% to 6.0% on FUTA taxable wages paid after June 30, 2011.
The annual FUTA taxable wage base of the first $7,000 paid to each employee remains unchanged.
As the FUTA tax is strictly an employer-paid tax, there is no impact to your employees. Any impact resulting from this change will be reflected in your company's FUTA tax liability.
Before You Pay a Vendor...
Before issuing a check for payment to a vendor, ensure you have a completed W9 form in your records. A W9 form is used to request a valid taxpayer identification number (TIN), and to request certain certifications and claims of exemptions.
There are two situations in which a W9 form would be used. First, if your business pays a non-employee more than $600 for a service. Second, if you receive more than $600, a W9 will be used to request your TIN.
In general, an individual’s TIN is the Social Security number. For other entities, it is the Employee Identification Number (EIN). If you do not have a TIN, you must request one.
By completing a W9 form, you:
- Certify that the TIN you provided is correct;
- Certify that you are not subject to backup withholding; and
- Claim exemption from backup withholding.
W9 forms are available on our web site, flacpas.com.