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Issue # April 2006

 April 24 2006

 

 

Dear Members

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Important Dates:

January 31 2006    Federal and State Employment Tax Due (Forms 941 & DE-6)

                            W-2, Sales Tax

February 28 2006  Form 1099Misc Income Due To Independent Contractors

April 15 2006        Income Tax Due Sole Proprietorships & Partnerships

April 31 2006        Federal and State Employment Tax Due (Forms 941 & DE-6)

                            Sales Tax

July 31 2006          Federal and State Employment Tax Due (Forms 941 & DE-6)

                            Sales Tax

October 31 2006    Federal and State Employment Tax Due (Forms 941 & DE-6)

                            Sales Tax

 

CONTENTS

_Publisher's Article:  *****    It's Time To Plan for Uncle Sam
                                           

_Market's New Inventions

_Special Contests & Announcements

_Member' Free Website Tools

_Classifield Ads

 

 

Feature Article:

 

It's Time To Plan for Uncle Sam 

With the end of the year approaching, every business needs
tax planning. Unfortunately, many businesses fail to fully
deduct eligible expenses. For instance, did you know that
accrual basis corporations that pay out charitable contributions
within two and one-half months after year-end may deduct
these contributions on their tax return in the year accrued?

To qualify for the accrued charitable contribution deduction,
its board of directors must authorize the contribution before
the end of the year and the donation must be made within that
two-and-a-half month window. In addition, a copy of the
resolution should be attached to the return, together with a
declaration, signed by the principal officer, stating that the
resolution was adopted during the tax year.

However, charitable deductions are limited to 10 percent
of taxable income. Moreover, if the charitable contribution
is limited, you are only allowed five years to carry it forward.
After that time, any unused charitable contribution carryovers
will be lost. If your company has any charitable contribution
carryovers that are about to expire, every effort should be
made to absorb them before making new contributions.

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Congress has created a new deduction for manufacturers.
The deduction starts at 3 percent and grows to 9 percent
by 2010. Because of the way Congress designed the
deduction, it effectively reduces the overall corporate
tax rate for qualifying taxpayers.

Net operating losses (NOL) must be carried back two years
(unless election made) then carried forward 20 years. If the
net operating loss is not utilized within these periods, it
will expire without providing any benefit. Rather than let
this asset expire without being utilized, it may be
advantageous to undertake some basic tax planning strategies
that will generate taxable income that can then be offset by
the expiring net operating .  

Companies should begin to review their reserve accounts
for potential deductions, such as bad debts or inventory
write-offs. A deduction for bad debts is only permitted in
the year the receivable becomes partially or completely
worthless. Similarly, a write down for any excess
inventory is only allowed in the year the inventory is
actually sold or scrapped.

Property and Depreciation

By accelerating certain expenses into 2006, you may be able
to reduce your tax liability for the year. One way is with the
section 179 election. section 179 allows your business to
purchase up to $420,000 of qualifying property and deduct
up to $105,000 of depreciation as an immediate expense.
Normally, you would have to spread the cost of the asset
over its useful life and deduct only a percentage of the
total cost each year.

Con't

 

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By claiming the section 179 deduction, the business may
strategically benefit from the following tax advantages:

? Deducting the full $105,000 section 179 deduction even
if the qualifying property was placed into service on the last
day of the tax year.

? Avoiding the short-year depreciation or mid-quarter
convention rules.

There are other business-related deductions that can be claimed
on a personal tax return. For instance, if you use part of your
home as an office, you may be entitled to deduct expenses
related to the home office based on the percentage of square
footage the home office occupies. Related expenses include
mortgage interest, property taxes, insurance, utilities, and repairs.

If you used personal funds for business expenses, such as
office supplies, or meals and entertainment, and were not
reimbursed by the business, you may deduct these items
on your personal tax return, subject to certain limitations.
This includes expenses related to the business use of
your regular or mobile phone, Internet fees, or mileage.

 

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AUTHOR_AFFILIATION
By Stuart W. Margolis, CPA, MS and Brian L. Enverso, CPA, MS, CVA
AUTHOR_AFFILIATION
H.R. Margolis Company is a public accounting and consulting firm
with specialties in turnarounds and profit planning, valuation of
printing companies, mergers and acquisitions, auditing, tax, and
financial management for the graphic arts Industry. If you have
any comments or questions, you can reach Stuart Margolis or Brian
Enverso at (610) 667-4310 or (212) 736-1060 or e-mail,
smargolis@hrmargolis.com or benverso@hrmargolis.com.

 

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Special Contests & Announcements
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