THE ACCOUNTING OFFICES OF PATRICK S. MCNALLY

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  • Great Strategies to Lower Taxes

    • Charity Begins in your Closet

      • Instead of just deducting $30 per bag of stuff donated to your charity, make a detailed list of everything you donate. Include the ‘thrift shop value’ of each item. Your $50 bag could turn into something much more if researched properly.

        According to the IRS:
        • With no receipts, your deduction is limited to $500.
        • With receipts, your total deduction for all personal goods is limited to $5,000.
        • If you expect to donate more than $5,000 of assorted personal items this year, get a written appraisal for each batch of donations. (New – from the JOBS Act)
        • For any one item worth $5,000 or more – a written appraisal is required.

    • Renegotiate Your Compensation

      • Many of you have heard me say it year after year. “A dollar of bene (benefit) beats a dollar of wage any day” As your wages increase, your taxes increase, and your tax breaks decrease. Look at all the things you must spend money on for your job. Convince your employer to pay for these items instead. Convince your company into paying for your briefcase, PDAs, mobile phone, laptops, luggage, etc. It may even be worthwhile to reduce your salary by the tax cost of those items.

    • If You Must Buy A Computer Device

      • or other expensive equipment, arrange for the company to write you a letter on their stationery, stating it’s mandatory for you, and all employees in your position, to provide these tools as part of your job. If it’s not a written company policy that you must have these tools, or equipment, you might lose the deduction. It’s just a good CYA.

    • Does Your Employer Offer Any Employee Benefit Plan?

      • If you or other employees are paying for your own medical insurance, or child care, or medical expenses, talk to your employer about offering a plan. You can deduct the expenses from your wages – reducing all your taxes, including Social Security and Medicare costs. Most small employers think it’s too expensive to offer employee plans. Actually, it’s relatively cheap. The costs are covered by the company’s reduced taxes and related expenses. Most payroll companies offer these services. If your employer still doesn’t “get it”, suggest that they and the company look for another accountant. (wink, wink)

    • Business Expense Logs

      • Life is full of seemingly trivial paperwork. It’s hard enough to keep up with all your employer’s demands, much less the IRS’s. But, if you’re audited, the IRS will not accept nice tidy business logs and records that were made up the week prior the audit, assembled from memory. And if your laptop or other electronic device contains all your records, do you really want to turn them over to the IRS in an audit? Not me! So get get a daily appointment books or a diary for about $10. Enter your appointments, cash spent, and places driven. Fill it in from your laptop while on the phone or watching TV and be sure to back up our data each day. It will look nice and battle worn at the end of the year. If audited, you can enter the missing information from your notes, laptop, etc. Turn that over to an auditor – and they won’t have access to the intimate details of the rest of your life. (Not that any of us have those)

    • Credit Card statements are Not enough

      • The Tax Court recently agreed with the IRS. Without business logs, receipts, or details to support the charge on the credit card statement, expect to lose that deduction. Meals, entertainment and travel must include the date of the event, the business purpose of the event, and the names of the people or companies accompanying you to an event. (That $10 appointment book mentioned above) Expense for equipment, supplies, etc. must be supported by receipts. Just because you went to the Apple Store, it doesn’t mean that charge was for your job or business. This is only a rumor now, but I have heard at recent tax seminar, that someone actually bought an IPod and tried to pass the charge off as computer equipment. I’m glad I don’t have any of those kinds of clients.

    • Cash Expenses

      • Where does all your cash go? When you’re in business, or have a job that requires you to pay as you go along, those cash expenditures are probably deductible. Keep track of the cash you spend each day. Get a receipt - or make a note in your appointment book (Again!) At year-end, add up the tips, parking meters, valet, etc. You may find a substantial amount of business deductions.
        There are many ways to keep your taxes under control. Your (handsome, witty, sharp) Insert adjective here tax professional can’t think of them all during your tax appointment. Do yourself a favor. Schedule another appointment after April 15th, to plan some of these things. During the relative calm of summer and fall, a half an hour appointment, could reap huge dividends during tax season.


  • Taking Stock of Gains and Losses

    • Have you sold any stocks, bonds or securities this year?

      • If so, in order to calculate your capital gains or losses, you will need to furnish us with the dates, and amounts of the sale of those items. This information is usually reported to you on a Form 1099-B from your broker. As important though, (and often not reported by the broker) are the dates purchased, and the amounts paid for those securities. If you have sold stocks or bonds this year be sure to have both pieces of information with your records. We strongly suggest our clients contact their broker during January, rather than February and March, when they are inundated with similar requests from other clients and accountants.
        2013 Long Term (Over 1yr) Capital Gains Rates....0%, 15% & 20%, depending on your income
        2013 Short Term (One year or less) Capital Gains Rate...10% to 39.6%, depending on your income

        Keep in mind that if you have sold a different class of asset other than stocks, bonds or mutual funds (e.g. rental property or collectibles) the tax calculation is not a simple as applying the above mentioned percentages to a calculated gain. Items such as depreciation recapture, the particular class of asset, and the alternative minimum tax calculation can change dramaticaly the amount of tax paid on such gains.