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Accounting

What is a CPA?

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CPA

What is a CPA?

A Certified Public Accountant Miami or CPA Miami is a special type of accountant. Officially it’s the title of someone in the United States, who has passed the Uniform Certified Public Accounting Examination and has met some additional state education and experience requirements to get this certification. This test is grueling and requires upwards of 150 hours of special education and Accountant Miami complies and reports it’s CPE to the Florida Board of Accountancy.

But what does this mean to you as a small business owner in Miami. Do you need a Miami CPA or will a regular Miami Accountant or even a Miami Bookkeeper be sufficient for your business?

Most people use the term CPA and accountant interchangeably but there is a very big difference. The CPA designation carries a lot of weight within the financial community and certainly within the accounting profession.

Services Provided By Accountant Miami:

In public accounting, those accounting services provided to a business on a contract basis, a CPA attests (to a financial audit) and gives assurances that financial statements are reasonable and accurate and adhere to generally accepted accounting principles (GAAP). They also attest to the reasonableness of disclosures and that statements are free from “material misstatement”.

As a Miami Auditor, a CPA is required by professional standards and Federal and State laws to maintain independence from the entity for which they are conducting a financial audit and review, often called a Financial Audit.

Our Miami Consulting Service, advises companies on acceptable business practices and making recommendations on financial management. Typically these consultants do not work as auditors for a company at the same time they are acting as consultants.

As part of the certification, our Miami Accountants must complete 40 hours of continuing professional education (CPE) every year to keep up with the new rules and regulations in the financial, accounting, and business world. This is proof of the high level of expectations of the accounting profession for a Certified Public Accountant in Miami.

Our Certified Public Accountant in Miami belongs to the Florida Institute of Certified Public Accountants (FICPA) and American Institute of Certified Public Accountants (AICPA) with the goal of keeping up to date with the accounting community and taking continuing education classes. Of course tax laws change frequently and our Miami Accountants will spend time staying abreast of changes in financial areas. As a member of a local association they have access to the latest thinking and rules in the accounting area.

Why You Need A CPA

If for no other reason than Tax Planning it’s good to have the advice of a Tax Accountant. And as far as business management and financial advice access to a good Accountant in Miami is very desirable.

But does that mean you need a CPA?

In general you can assume that anyone who has taken the time to get certified as a CPA, and maintain that certification, is at the upper levels of the skill set, our Miami Accountants certainly are. It’s a clear credibility booster to be a CPA. If your business can afford the best than our CPA in Miami are worth the money.

But does that mean they are better than a typical accountant. Of course not. But it does indicate a level of commitment that is worth considering. Certainly if legal proceedings are required, the assurance of a CPA will hold more weight than a typical accountant. Again much depends on the reputation of the CPA in the community as well. Certainly an audit by a CPA has an implied level of credibility. Not to mention a non CPA cannot perform financial audits by law.

Our Miami CPA Firm does much more than financial audits these days. We provide consulting and overall financial planning not only for small and large businesses but also for estate planning, investments, and strategic planning.

So if you want to run your business at the highest level you certainly want to consider hiring a Certified Public Accountant like the ones at Accountant Miami.

 

Categories
Tax

A Little Pre-Tax Season Tax Planning Can Go a Long Way

A Little Pre-Tax Season Tax Planning Can Go a Long Way

Some may tell you that it’s too late to do some Tax Planning; that you’ve done all you can do. That it’s time to just hunker down and wait for tax season to start, hoping it will be over before you know it. In truth, it may be too late to drastically change the course of your tax season. However, some relatively easy workflow strategies can help you realize timesaving efficiencies and help you better weather the storm.

By polling firms formally and informally, Tax Preparation Miami uncovered five tried-and-true strategies for a smoother busy season, Tax Planning. Not surprisingly, most agree that a little pre-season Tax Planning and preparation can go a long way.

Tax Return Preparation easier with Tax Planning

1. Communication

This is critical. It won’t eliminate unexpected kinks in your busy season plan, but it will help to minimize them. Your Tax Preparation Miami firm should have a clear communication strategy for clients, staff and any third-party resources you plan to utilize during busy season. Don’t assume that everyone is already on the same page.

Depending on the size of your Income Tax practice and your relationship with individual clients, communication may be in person or in an engagement letter. Key elements should include the following:

Clearly state when, how and where to submit tax information.

  • Give the deadline for tax data, making it clear that failure to meet that deadline results in an automatic extension
  • Provide disclosure and consent forms.
  • Use this as an opportunity to manage expectations, emphasizing constraints on your time.
  • If you have people going into the field, arm them with the list of information needed for tax season so they can address it in person with the client. Make it part of your year-end planning to tell your client when their work is scheduled and get their buy-in. This gives them an opportunity to alert you to scheduling conflicts such as vacations, board meetings, etc.

It’s important to clearly articulate your expectations for your staff – hours, weekend work, opportunity to work remotely, contingency plans in the event of an unexpected absence due to illness, weather, or personal matters (if this varies from your normal HR policy).

Additionally, if you’re using temporary or seasonal workers, or outsourcing, now is the time to inform that resource of what to expect in terms of a time commitment in order to avoid misunderstandings or over-commitments later.

Finally, set a staff schedule for when you will meet during busy season. Allow some flexibility, but lock in key dates for things like determining when to extend clients to avoid wasting time trying to schedule management discussions on the fly. If you’re planning to meet once a week to review workloads and schedules, do it the same day and time every week and set a standing, manageable agenda that will allow participants to get what they need quickly to balance work and address potential resource issues.

2. Capacity Tax Planning

Two important themes to Tax Planning pre-season preparation: Use what you learned last year as a guide, and do as much as possible before the season really gets going. For example, you might want to run last year’s extension report and prepare these same extensions in early January.

Look at how you handled the larger, more complex client returns last year to see exactly when the return was prepared and reviewed, and build it into your scheduling for this year. Research major tax law changes in advance, and add that intelligence into the appropriate client tasks within your workflow software. For example, you might do a data scan to identify all the clients that will be impacted by the new tax legislation this year, then flag them and add instructions to those tasks universally so the preparer and reviewer have the information at their fingertips.

Tax Planning should coordinate scheduling and client responsibility early. This tip goes back to communicating expectations and creating a plan of accountability. Utilize software tools like workflow and scheduling to enforce your plan. Mail your completed organizers in early January, and utilize available technology resources for your client data (i.e., Goldman Sachs provides online access to clients’ 1099s, etc.).

3. Prepare for Problems

Let’s face it – there will be glitches, so it’s best to expect them and prepare for how you will handle them when they arise. Create a schedule that carves out time to plan for and address potential workload and bottleneck issues. Use real-time scheduling and workload management tools to get an up-to-the-minute view of all work in progress by person and status to see who’s buried in preparation or review, who’s overbooked and who’s under-booked so you can make those on-the-fly capacity planning decisions.

For example, one firm has a weekly meeting between the scheduler, the audit team leader and the tax team leader during which they review issues, identify chunks of time and conflicts, discuss new unexpected business, and locate additional resources. This allows them to gain a seven-week outlook and move work dynamically within the workflow system. Part of the purpose of this meeting is pre-emptive problem solving. It’s possible that you can schedule tax season well in advance, but there will always be issues that come up.

Tax Planning relies on its workflow software to see clients with 3/15 and 4/15 filing deadlines to quickly view and proactively address any missing information or other issues holding up the client return. Armed with that view, this firm can proactively work with clients and staff to address the bottlenecks.

Of course, having a real-time view of the work also empowers accounts receivable to stay on top of billing for all the returns that went out that week.

4. Digital Work Environment

The specific software application’s your firm employs varies according to the size of your firm, the Tax Planning services you offer and perhaps even your culture. I think we can all agree that, in addition to some software basics (MS Office, Adobe), the following tools enable you to work digitally: dual monitors, scanners, workflow system, electronic file storage (DMS or shared network filing tree) and a portal.

Some of these you can still put in place before the upcoming busy season. You don’t have to make a career out of picking a scanner; just get started. Use the resources available to help you make a good selection quickly: consultants, technology-focused publications, networks and associations, peers, AICPA and state society resources, and websites like TotallyPaperless.com.

Now is the time to make sure that your staff knows how to properly use the tools at their disposal. An Adobe refresher and a plug-in toolbar can empower partners and managers to review online.

5. Process Improvement

Adopting paperless technologies and understanding workflow is at the heart of process improvement to attain greater efficiency throughout your practice. In an ideal scenario, you would have time to create a committee, document current processes, identify best practices, optimize for technologies used, map your new workflow, standardize and train across the firm, and automate workflow for a digital environment.

This late in the game, you may have to settle for focusing on your 1040 process or whatever your firm does most and, if time allows, move onto smaller processes. The key here is to question every step so you’re not just doing what you did last year. Your processes should evolve over time. I know one firm that created teams of employees tasked with flow-charting existing processes and recommending improvements. Involving staff members gives you greater insight and gives them ownership of new processes.

Now is not the time for fundamental changes (you’ll have to make that a priority after busy season), but you can address simple modifications that allow you to eliminate redundant loops, valueless steps, and the ever-wasteful search for information. Tightening your process so that you save even 10 to 20 minutes per return (a very conservative goal) can have a real impact on your season if you’re preparing hundreds or even thousands of 1040s.

Although preparing for the coming season in January is not ideal, a little preparation and planning can help your season run a lot smoother. These steps can serve as the foundation from which you build for next season. Do a post-season review to see what worked well, what didn’t, and what can be improved so that you can build some of those bigger changes into your strategy.

Reviewing and refining your Tax Planning strategy in May allows you to take lessons from the just finished season while they’re still fresh. Then, you can implement process improvements and new technologies during the more relaxed summer months and use the fall filing deadlines to test them in a live situation that’s not quite as stressful as the real deal.

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Accounting

Physician Accountants Miami

Physician Accountants Miami

As Physician Accountants Miami, we serve an integral part of the community, physicians and dentist. We are a niche boutique Physician Accountants Miami CPA firm. Physician Accountants Miami was founded in 1983 by Gustavo A. Viera CPA after rising to Senior Manager at PriceWaterHouseCoopers.

Why choose Physician Accountants Miami

Doctors and other health care providers face many challenges as they try to keep their practices running smoothly. Dealing with serious issues such as reduced reimbursements from Medicare and insurance providers, as well as the constant threat of medical malpractice lawsuits, physicians often find themselves spending too much time worrying about financials. Sadly, this stress takes valuable time away from their primary objective—caring for patients.

Physician Accountants Miami has a team of experienced CPAs with decades of experience with physician accounting working alongside doctors, dentists, clinics, hospitals, nursing homes, and other health care facilities. Physician Accountants Miami is also one of the few CPA firms in Miami that are affiliated with Tax attorneys that meet with our clients as needed, in our offices or your office.

The healthcare industry today is all business, which makes it even more important that you have the right financial partner on your side. At Physician Accountants Miami, a CPA firm serving the needs of doctors, physician groups and dentist, we realize that our clients have specific tax and financial needs so we have assembled a dedicated team ready to assist with managing all aspects of your practice.

As a full-service Physician Accountants Miami CPA firm, we provide a wide range of accounting, tax planning, wealth management and physician accounting consulting services to meet the needs of your healthcare practice. We work with doctor and physician practices of all sizes and specialties from sole practitioners to large medical groups.

We pride ourselves on providing physician accounting services designed to simplify the business side of your practice so you can address the more important issues; your patients. Physician Accountants Miami offer:

Physician Accountants Miami Services:

  • Financial statement preparation
  • Outsourced controller/CFO
  • Outsourced accounting and bookkeeping
  • Tax planning and preparation – business and individual
  • Payroll and payroll tax reporting
  • Accounting software support – QuickBooks
  • Annual cost reporting for Medicare and Medicaid providers
  • Incorporation
  • Entity selection – (Sole proprietor, LLC, S Corp, C Corp)
  • IRS Representation
  • Cash flow and budgeting analysis
  • Debt restructuring
  • Financial planning and analysis
  • Mergers and acquisitions
  • Debt restructuring
  • Retirement planning
  • Succession planning
Practice Management Services:
  • Choosing the right type of entity – (Sole proprietor, LLC, S Corp, C Corp)
  • Tax planning and structuring
  • Strategic planning
  • Practice start-up consultation
  • Practice valuation
  • Overhead analysis
  • Contract review and negotiation
  • Capital acquisitions
  • Lease vs. buy analysis
  • Business continuation planning
  • HIPAA/compliance
  • Operational review
  • Financing assistance
  • Business plans
  • Equipment acquisition planning
Practice Transition Services:
  • Mergers
  • Acquisitions
  • Buy/sell agreements
  • Real estate sale or purchase
  • Spin-offs
  • Financing
  • Liquidation or reorganization of a practice
  • Litigation
  • Succession planning
  • Practice transitions – sale, merger, acquisition, partnership

Wealth Management Services

  • Retirement planning
  • Succession planning
  • Business continuation planning
  • Business exit strategies
  • Executive compensation plans
  • Buy/sell agreements
  • Benefit plan selection and structuring

For this reason you can feel confident that our Physician Accountants Miami will always keep you abreast of all the latest industry trends, government regulations and consumer demands to make your business stronger and more profitable.

Categories
Tax

How to Reduce Tax Liability

How to reduce tax liability

Income tax preparers know costs and expenses are crucial part of Income tax planning, and one of the most difficult. How to reduce tax liability is contingent on what deductions you can claim.

How to reduce tax liability as allowable deductions as incurred and paid. These are not mutually exclusive.  Income tax preparers when trying to answer the age old question “How to reduce tax liability” and during the Income tax planning phase must consider what was spent for the purpose business deduction, and most importantly, what was not spent but incurred. How to reduce tax liability questions must be asked and answered during the Income tax planning period.

How to reduce tax liability via Income tax planning

To be allowable, it must not be excluded by regulations (see beneath).

The decision maker ought to often consider every single product of cost independently.

Income tax preparers Expenditures Check List

These are:

a) Funds expenditure

b) Repayments of cash on financial loans taken out for company reasons

c) Depreciation of capital assets

d) Sums utilized, or supposed to be employed, in setting up or growing a organization

e) Losses incurred prior to the start of the evaluation period

f)   Costs incurred in providing organization enjoyment.

These are the unofficial guidelines recommended by Income tax preparers during Income tax planning on how to reduce tax liability. It is totally important that you communicate to your Income tax preparers just before you allow or disallow any enterprise bills.

As lengthy as the ailments in the first paragraph are fulfilled, these are the day-to-day bills of a business you can deduct:

Accountancy costs

Marketing

Cleansing of organization premises

Big difference between opening and closing stock (on accounts)

Workers wages just before any deductions are made, including any wages payable to the domestic companion

Employer’s contributions to employees’ pension scheme

Employer’s (secondary) Class 1 SS contributions

Heating and lighting

Hire or rental costs (but not any cash or purchase elements)

Curiosity payable under a credit sale, a consumer credit score arrangement or a retain the services of obtain arrangement (but not the cash aspect of payments)

Authorized expenses connected with the enterprise

Payment in variety for perform carried out for the enterprise – the financial worth is allowable

Rent and Rates

Stationery

Stock purchases

Sundries, sometimes known as miscellaneous things, which are modest in relation to complete allowable costs provided that the decision make is content that no non-allowable expenses, for case in point for company enjoyment, are incorporated

Telephone, telex, fax etc (Only the proportion that is used for enterprise, i.e. if you use your telephone thirty% for company, 70% for private, then you can declare 30% of the costs as an allowable expense)

Transportation excluding any home-to-operate costs

VAT allowable (two)

Clearly, expenditures is a large area of tax far too huge to cover in a solitary web site publish, so if you need to know much more about expenditures, just take us up on our Cost-free one Hour Consultation.

Categories
Tax

8 Common Tax Mistakes Accountants Make

8 Common Tax Mistakes Accountants Make

Here are 8 mistakes accountants might make when preparing taxes for clients.

It’s tax season, and that usually means a lot of scrambling around to prepare and find ways to cut taxes. We know that many accountants across the nation are tirelessly working to complete these reports by April 15, but here are common tax mistakes that accountants make.

1. Misunderstanding the Pease Rule

Accountants working with wealthy clients commonly misunderstand the way the Pease rule (the itemized deduction phase-out) works, says Gustavo A Viera, CPA and managing partner of a Miami CPA Firm. The Pease rule, which is back in effect starting in 2013 as a result of ATRA (the American Taxpayer Relief Act of 2012), reduces itemized deductions by the lesser of either 3% of the amount by which a tax payers’ adjusted gross income (AGI) exceeds a certain limit or 80% of itemized deductions. Not Recording Itemized Deductions Properly

2. Accountants sometimes put their tax preparation fee as a miscellaneous itemized deduction on Schedule A, but often the tax payer is not able to deduct it because it has to be above 2% of adjusted gross income. If the taxpayer has rental income, a sole proprietorship, or is incorporated, the tax fee could be put on the Schedule E, C, or 1120s if applicable, and the full deduction can be taken.

3. Not Capitalizing on Passive Income-Related Expenses

Expenses related to rental property, such as a cleaning expense, are sometimes not deductible on Schedule E because of the limitation on passive losses being limited to only offsetting passive income.   If the taxpayer has a small business, these expenses can be put on Schedule C or the 1120s tax form, if applicable, and written off.

4. Miscalculating Cost Basis for Long-Term Gains

If we see that the gain on the sale of an investment is three times what the investor paid for that investment, often it is a mistake. When accountants calculate cost basis to figure gains, they may not take into account the re-invested dividends says Gustavo A Viera, CPA.  Reinvested dividends increase the cost basis, and remember; basis is not taxable.  People can end up paying a lot more in capital gains taxes if the wrong cost basis is used, he adds.  Accountants often have to rely on the investor to get the accurate basis. It’s important for the investor to not just use the original price paid, but add in all re-invested dividends.

5. Leaving Negative Taxable Income Alone

Clients sometimes have itemized deductions and exemptions that are greater than their income. The problem is that you don’t usually get to carry that forward. In such instances pulling money out of a pre-tax IRA to offset the unused deductions and exemptions. That money comes out without tax since the deductions and exemptions shelter it, then the client can convert it to a Roth IRA where it will grow tax free and later come out tax free.

6. Being Reactive Instead of Proactive

Accountants tend to be rearward focused, says Gustavo A Viera, CPA. “They will work with clients on their tax return, but they are never looking ahead to help reduce taxes in the future,” he says.  “I would like to see more accountants doing tax planning, and providing advice for the future as opposed to always looking in the rear view mirror.”

One area where accountants could arguably get more actively involved is to help their retired clients manage their tax burden on a year-to-year basis by helping them figure out which asset pools (taxable, tax-deferred, Roth, etc.) to draw their cash flows/living expenses from.

7. Not Realizing Impact of Tax Planning

Advisors should remember that tax planning has huge impact on client returns. Morningstar recently introduced a research paper on “Gamma” – a concept designed to quantify the additional expected retirement income achieved by an individual investor from making more intelligent financial planning decisions. The research paper can be.

8. Failing to Partner With Financial Planners

The best accountants should be partners with their clients’ financial planners, and that means thinking with a financial planning hat on. The tighter coordination needed between the two professions are giving rise to more CPAs adding planning to their practices and more firms looking to recruit CPAs to the planning side.

Categories
Tax

Accountants Miami Year-end tax planning: Preparing for the tax cliff

Accountants Miami Year-end tax planning: Preparing for the tax cliff

Accountants Miami can help clients cope with multiple tax hikes scheduled to take effect in 2013. Rarely has there been such a major difference between the laws in effect in one year and the next. The maximum income tax rates next year could be as high as 43.4% on ordinary income (44.6% if the potential impact of reinstated limitations on itemized deductions is taken into account) and 23.8% on long-term capital gains (or 25% if itemized deduction limitations are factored in). In addition, unless Congress acts, millions of additional taxpayers will be liable for the alternative minimum income tax (AMT) for 2012 because the most recent AMT patch expired at the end of 2011. Further, the current 2% payroll tax holiday is scheduled to expire at the end of this year.

Few taxpayers are prepared for the impact of these changes, and many have, for the most part, chosen to ignore them in the hope that they will just go away. Smart practitioners will see this as an opportunity to help clients deal with a difficult situation and demonstrate how a Accountants Miami can add value. Fortunately, there are abundant planning opportunities; in particular, Accountants Miami can help clients avoid or minimize the impact of scheduled tax increases resulting from the expiring Bush tax cuts, especially the impact of higher tax rates on all income, including capital gains, and the new 3.8% Medicare surtax. Quick action is imperative. It is essential to “run the numbers” and then determine the appropriate steps to minimize the impact of these potential new taxes. This article focuses on some of the more significant changes on the horizon and how practitioners can help clients deal with them.

ACCOUNTANTS MIAMI DEALING WITH THE NEW MEDICARE SURTAXES

Starting in 2013, a surtax of 3.8% of net investment income will apply to certain individuals, trusts, and estates. The surtax applies to individuals with modified adjusted gross income (MAGI) over $250,000 for married taxpayers filing jointly; $125,000 for married taxpayers filing separately; and $200,000 for taxpayers filing single or as a head of household. The tax is imposed on the lesser of the individual’s net investment income for the tax year or MAGI in excess of those thresholds. For trusts and estates, the surtax will apply when the trust or estate is in the highest tax bracket for the year (approximately $12,000 in 2013).

Net investment income is the excess of the sum of the following items, less any allowable deductions properly allocable to such income or gain:

Gross income from interest, dividends, annuities, royalties, and rents unless derived in the ordinary course of a trade or business (excluding a trade or business that is a passive activity or a trade or business of trading financial instruments/commodities); Other gross income from any passive trade or business or a trade or business of trading financial instruments/ commodities; and

Net gain included in computing taxable income that is attributable to the disposition of property (including the taxable portion of gain on the sale of a personal residence) other than property held in any trade or business that is not a passive trade or business or a trade or business of trading financial instruments/commodities.

In addition to the new 3.8% Medicare surtax on net investment income, starting in 2013 a new 0.9% Medicare surtax will apply to wages and self-employment income of taxpayers with MAGI in excess of these threshold amounts. Whether income is subject to the 3.8% or the 0.9% additional Medicare tax will depend on:

Timing;

Type of income; and Taxpayer’s other income, deductions, etc.

As a result, although counterintuitive, 2012 may be the year to accelerate rather than defer income. For example, taking salary (or bonuses) in 2012 will avoid higher tax brackets applicable in 2013 and will avoid the new 0.9% Medicare surtax applicable to high-income taxpayers. Selling off investments this year that will be subject to the new Medicare surtax on net investment should be considered, as should exercising nonqualified stock options that are “in the money.”

Also, taxpayers may consider deferring deductions that reduce AGI into 2013 where they may provide a greater tax benefit. For example, if compensation accrued in 2012 is paid more than two and one-half months after the employer’s tax year ends, Temp. Regs. Sec. 1.404(b)-1T will apply to delay the deduction until 2013. Similarly, if the taxpayer makes qualified plan contributions for 2012 after the extended due date of the 2012 return (i.e., after the grace period in Sec. 404(a)(6)), these deductions will be pushed into 2013. Business taxpayers may be able to defer deductions to 2013 that might otherwise be deducted in 2012 under the recurring items exception contained in Sec. 461(h)(3).

Can the taxpayer benefit from inventory write-downs for lower of cost or market valuations or for lost, missing, or abandoned inventory? Accelerating billing or collecting receivables for sole proprietors, rentals, or pass-through operations as well as factoring receivables may also be options. Also, taxable conversions of corporate entities into LLCs or other taxable liquidation events should be considered; however, the potential future impact on self-employment tax must be evaluated. If the client will have a net operating loss (NOL) in 2012, consider whether to carry back the NOL or waive the carryback and then carry it forward to 2013.

While accelerating itemized deductions for individuals is generally a good planning strategy, it may be especially so in 2012. The Pease limitation, which reduces itemized deductions for high-income taxpayers, is scheduled to return next year. Therefore, accelerating itemized deductions may be particularly beneficial this year. Clients who deduct sales tax, as opposed to state/ local income taxes, should consider making big ticket purchases by year end in case the deduction for state sales taxes is extended into 2012. If the client is considering making charitable contributions, note the potential for significantly increased limits on charitable contributions next year. Bunching deductions (e.g., taxes, charitable contributions, accountants’ fees, and possibly medical expenses) in one year while claiming the standard deduction in intervening years may produce a better tax result.

While accelerating income to take advantage of currently lower tax rates or deferring deductions to offset income being taxed at higher rates later is an attractive option, the impact on cash flow and the present value of money must be considered. These factors will vary depending on the tax rates and interest rate applicable to the deferral periods. Again, this is why it is essential to run the numbers to determine the appropriate steps to minimize the impact of these new taxes.

Practitioners should also be on the lookout for worthless securities and bad debts. These are deductible in the first year they become wholly worthless. Business clients frequently feel that their reserve for doubtful accounts, which is not deductible, is sufficient to cover their bad debts, so they do not specifically write off bad debts.

Perhaps the big question from a planning perspective is whether S corporations will be the new entity of choice because there is no 3.8% surtax on flow-through business income, and flow-through business income is not subject to the 0.9% surtax on earned income. Family partnerships may also see a rebound. Parents and grandparents may be able to spread investment income subject to the 3.8% Medicare surtax among multiple family members who are under the MAGI threshold.

Trusts should consider paying distributions to beneficiaries to avoid the 3.8% Medicare surtax, which kicks in for trusts at approximately $12,000 of taxable income in 2013. The surtax on these distributions, if any, will then be paid by beneficiaries if they are over the $200,000 or $250,000 threshold. The 65-day rule in Sec. 663(b) can be used to defer distributions to as late as March 6 of the following year and still have them apply to the current year.

Keep in mind, however, that clients who are nonresident aliens are not subject to the 3.8% surtax since they will not benefit from Social Security.

TIMING STRATEGIES

As previously discussed, timing is critical in determining whether income is subject to the 3.8% Medicare surtax. Income received in 2012 is not subject to it, and the lower 2012 tax rates still apply, so, in most cases, income received in 2012 will be taxed at lower rates than in future years. Depending on income level, these higher rates may or may not apply in future years. So again, it’s essential to run the numbers.

A closely held C corporation with accumulated income should consider paying a dividend in 2012. Its shareholders would pay tax at 15% in 2012, while the tax rate might be as high as 43.4% in 2013. On a $1 million dividend, this would save $284,000.

Also, married couples compute MAGI based on their combined income. Therefore, if a husband’s salary is $150,000 next year and his wife’s salary is $175,000, their combined income of $325,000 is $75,000 over the MAGI threshold. Because each is individually under the threshold, they may not be having enough withheld on their salaries to cover the 0.9% Medicare tax ($675). They need to consider this in calculating their estimated tax, or they could request their employers withhold additional tax from their salaries. If this couple also had $50,000 of net investment income in 2013, the $1,900 of 3.8% Medicare surtax on this income, as well as the additional $675 of 0.9% Medicare surtax on their salaries, must be taken into account in determining their estimated tax in 2013.

Distributions from IRAs are not subject to the 3.8% Medicare surtax, but distributions from traditional IRAs and qualified plans are included in MAGI. This could result in other investment income being subject to the surtax. For example, for the couple above, if the husband’s and wife’s salaries were $100,000 each instead of $150,000 and $175,000, and they also took a taxable IRA distribution of $25,000, $25,000 of their $50,000 net investment income is now subject to the 3.8% Medicare surtax even though none would have been subject to the surtax had they not taken the IRA distribution. While regular IRA and qualified plan distributions are included in MAGI, distributions from Roth IRAs are not. This may make converting a traditional IRA into a Roth IRA an even more attractive option in 2012.

Dividing certain deductions, such as state income taxes, between 2012 and 2013 may reduce income subject to the AMT. Prepaying expenditures eligible for the American opportunity tax credit, which expires at the end of this year, may also make sense, although the lifetime learning credit will still be available after the end of this year.

INVESTMENT STRATEGIES

Capital gains will most likely be subject to much higher taxes in 2013 (the tax on long-term gains is scheduled to increase from 15% to 23.8%; and the tax on short-term gains from 35% to 43.4% for taxpayers in the highest brackets), so consider accelerating gains into 2012 and paying tax at lower rates now. Future higher capital gain rates may not be of concern to elderly taxpayers, particularly those in poor health, who will not have a taxable estate. They can pass these assets to their heirs with a stepped-up basis tax-free. Of course, anyone who currently qualifies for the 0% capital gains rate, which is scheduled to expire at the end of 2012, should definitely take advantage of this special rate.

It may be better to pay tax on the entire gain from an installment sale in 2012 by electing out of installment sale treatment under Sec. 453(d), rather than deferring tax on the gain to 2013 and beyond to avoid the surcharge as well as possibly keeping MAGI in those years under the threshold. Conversely, installment sale treatment may be an even more attractive option in the future since spreading out this income over a period of years may keep the taxpayer under the MAGI threshold.

Since the 3.8% Medicare surtax is based on net investment income, deductions such as depreciation and operating expenses that are properly allocable to investment income are especially valuable starting in 2013. Clients with real property used in a trade or business, including rental properties, can maximize depreciation with cost-segregation studies. If they have multiple properties, they could spread out these studies, doing one or more for 2013 and then another for the following year and so forth. Doing this should help to minimize their taxable and net investment income and may keep them under the MAGI thresholds.

Depreciation expense can also be “controlled” by timing when assets are purchased and when they are placed in service, as well as by selecting the depreciation method. Whether to elect to expense assets under Sec. 179 can also affect taxable income greatly, as can whether to claim bonus depreciation for assets placed in service that year. Advisers should also consider the impact on taxable income of implementing the new tangible property regulations (T.D. 9564).

Grouping elections for passive activities may reduce the amount taxable as net investment income. Under Regs. Sec. 1.469-4, a rental building used in a related active trade or business can be classified as a nonpassive activity, which avoids the 3.8% Medicare surtax, but will subject the rental income to the 0.9% additional Medicare tax on earned income over the MAGI threshold.

Maximizing contributions of pretax compensation to qualified plans can benefit taxpayers in two ways: Lowering their AGI may keep them under the MAGI threshold, and investment gains in qualified plans are not subject to the 3.8% Medicare surtax. As mentioned above, distributions from qualified plans are included in MAGI and may therefore cause other investment income to be subject to the 3.8% Medicare surtax by pushing the taxpayer over the MAGI threshold.

PORTFOLIO BALANCING

In consultation with the client’s investment adviser, portfolio balancing should be considered. A focus on growth investments rather than investments that produce dividends or interest income can help avoid the 3.8% Medicare surtax. Tax-exempt interest is not subject to this surtax and also does not increase MAGI. Similarly, the buildup of value in an insurance policy is not subject to this surtax, nor are death benefits generally taxable.

Annuities defer recognition of income. It may be possible to “leapfrog” over high tax years subject to surtax and defer tax into lower-income years when the taxpayer will be subject to lower tax brackets and not subject to the surtax. Oil and gas investments and rental real estate may generate current losses that reduce MAGI and net investment income while generating positive investment returns.

Bond investment strategies include selling bonds in 2012 to recognize accrued interest. For example, a taxpayer could sell bonds in December 2012 that have $100,000 of accrued bond interest that would otherwise be paid in January 2013. If the taxpayer is in the maximum federal tax bracket, the taxpayer’s tax on the accrued interest would be $35,000 in 2012, but $43,400 if the interest were collected in 2013, resulting in a tax savings of $8,400. If the taxpayer were to purchase another bond in January 2013, the accrued interest purchased on the new bond could offset interest received during the year.

Taxpayers with investment interest expense in excess of net investment income should consider not making an election under Sec. 163(d)(4)(B)(iii) to treat net capital gain from the disposition of property held for investment and qualified dividend income as investment income in order to deduct the investment interest expense in the current year. Not making this election will allow the excess investment interest expense to be carried over to future years when it could offset investment income, which may be subject to both higher tax rates and the Medicare surtax.

OTHER STRATEGIES

Charitable remainder trusts enable donors to defer capital gains. Also, those charitably inclined should consider donating appreciated securities. They will receive a charitable contribution deduction and avoid tax on capital gains. Of course, if those securities have declined in value, the taxpayer should sell them and then donate the sale proceeds to the charity. The loss on the sale will be available to offset other gains and may help to reduce the taxpayer’s MAGI.

By accelerating medical expense deductions into 2012 for certain expenses that taxpayers can control the timing of, such as elective surgery, dental work, eye exams, etc., taxpayers under 65 can avoid the increase in the medical expense deduction threshold, which increases from 7.5% to 10% in 2013. For tax years before 2017, this increase in the medical expense deduction threshold does not apply if a taxpayer or his or her spouse has attained age 65 before the close of the tax year.

Also health care insurance for self-employed individuals may be more valuable starting in 2013. They can deduct these premiums for health care insurance above the line, which will reduce their MAGI. They may, therefore, want to consider an insurance plan with better coverage, since they can deduct the insurance cost while reducing out-of-pocket medical bills for which they will likely get little or no benefit.

BUSINESS / OTHER CHANGES

Advisers should be aware that health insurance plans that existed as of March 23, 2010, (the date of enactment of the health care law) are subject to only some of the provisions of the act. These plans are known as “grandfathered plans.” Employers and individuals who are still covered by these plans should check to determine what changes relating to their health coverage apply to them.

Practitioners should also search for tax credits, such as the small employer health insurance tax credit and the work opportunity tax credit for unemployed veterans and unemployed veterans with service-connected disabilities. Perhaps Accountants Miami should consider using a firm that specializes in identifying employee tax credits to maximize this benefit.

Starting in 2012, all employers required to file 250 or more Forms W-2, Wage and Tax Statement, for the year are required to disclose the aggregate cost of their applicable employer-sponsored coverage on their employees’ W-2s, under interim guidance in Notice 2012-9. The interim guidance in Notice 2012-9 is effective until the IRS issues further guidance. Practitioners should be familiar with this notice since it provides information on what employers must disclose as well as other optional disclosures.

While not addressed in this article, practitioners should also be mindful of the dramatic changes that are scheduled to occur regarding estate and gift taxes and take these changes into account when advising their clients.

POSSIBLE CHANGES

President Barack Obama’s reelection essentially eliminated any possibility for full repeal of health care reform, but as of this writing the potential for changes to the tax provisions during the lame-duck session were uncertain. We may see changes in 2013, but it is unlikely that any significant legislative changes will occur quickly. Practitioners should therefore assume that these new taxes will be in place next year and plan accordingly.

Accountants Miami can add a lot of value for their clients, and they should take advantage of the unique opportunities available at this time to help them.

EXECUTIVE SUMMARY

The Bush tax cuts are scheduled to expire at the end of 2012, causing tax rates to increase dramatically beginning in 2013. A number of new tax provisions related to the health care law, such as the 3.8% surtax on net investment income, are also scheduled to be effective beginning in 2013.

It is likely that there will not be any significant legislation repealing these tax increases before they go into effect.

A number of ways to reduce income that would be subject to the 3.8% tax on net investment income are explained in this article.

There are also a number of strategies for shifting income from 2013 to 2012 and shifting deductions from 2012 to 2013 to lower clients’ taxes.

Because each client’s situation is different, Accountants Miami can provide valuable tax planning to clients by running the numbers on different strategies and advising clients  of the best options for their situation.

Categories
Tax

How to Choose a Tax Accountant in Miami for Your Small Business

Tax preparation and filing isn’t easy at the best of times, but with business ownership comes new responsibilities and the need for a good Tax Accountant Miami.

Whatever your business type, you may decide that you can benefit from the services of a Tax Accountant Miami to help you get your ducks in a row or help you complete your return.

Not getting the right help can expose you to potential tax return errors, which can lead to costly penalties and time lost down the line. And because each business is different it’s important to get the right Tax Accountant in Miami based on your needs.

When selecting a Tax Accountant in Miami, here are four areas you need to cover:

What are Your Options?

All Tax Accountant in Miami specialize and come in many forms, including tax franchises, tax attorneys, and certified public accountants (CPAs are licensed by the state and are suited to complex tax issues) and enrolled agents (an enrolled agent has passed an IRS test plus an IRS background check, they focus exclusively on tax accounting).

As you build a shortlist of potential candidates, ask around for referrals and focus on identifying Tax Accountant in Miami who have experience working with businesses of a similar size and type to yours? Is the Tax Accountant Miami familiar with your particular line of business?

Tax Accountant in Miami What Type of Services do they Offer?

Some Tax Accountant in Miami (particularly the walk-in franchise tax preparation services) are great at helping you get your taxes done quickly. But if you need long term tax planning help you may want to consult a CPA or enrolled agent- they actually don’t charge a whole lot more than the franchise tax experts and can specifically help businesses understand how to realize tax efficiencies.

Other things to look out for are accuracy guarantees (many offer this as a protection against potential penalties in the event of an audit), willingness to amend the return in the event of errors, and assist you in any dealings with the IRS.

Don’t be afraid to ask questions that help you get a better picture of your needs’ your situation may be less or more complex than you are aware, and an initial consultation can help you better gauge your needs (many tax preparation offices will do this for free in the hope of winning your business). Bring your records, last year’s return, and any other documentation that gives a quick snapshot of your circumstances.

Tax Accountant in Miami How Will they Bill You?

Call around a few local tax offices to scope out the pricing and billing policies. Most fees depend on the complexity of your tax return and you can expect to pay either by the hour, or a flat fee. Ask lots of questions about what is included in these rates and any potential extra fees you may incur. Are there any ways you can keep your fees to a minimum by doing as much preparation and good record-keeping yourself in advance.

If the IRS queries your return or audits you, will the tax professional assist you? Are they authorized to represent you to the IRS?

Ask for References

In the rush to get your return done, don’t disregard the importance of references. Ask your shortlist of tax professional candidates for a list of clients who are close to your business profile, and follow up with these before you make your decision.

Categories
Tax

Tax planning Miami – Ten Ways To Audit Proof Your Tax Return

Except for Tax planning Miami Firms, no one wants to fight with the Internal Revenue Service. That’s why there’s such a mystique about avoiding an audit. While what-triggers-an-audit theories abound, there are some basic things you can do to reduce your chances of being picked for an audit or at least to make any interactions with the IRS less traumatic. My advice doesn’t come with a guarantee, but it’s better than a Ouija board.

 Tax planning Miami Don’t claim flaky deductions

 Use a Tax Preparer Miami Pro, or software

Some argue a return prepared by a Tax planning Miami professional is less likely to be audited, but there’s little reliable data to support it. Nevertheless, having a Tax planning Miami professional prepare your return–or at least advise on anything quirky–is a good idea.

If you do your own return, using a commercially available software package, such as Turbotax or H&R BLOCK’s Taxcut will make it easier and more reliable. If the software produces some result you consider wrong, don’t simply override it. (Or, at least investigate before you do.) Example: You’re not rich and can’t understand why the software has spit out a Form 6251 showing you owe the alternative minimum tax. Sad to say, you probably do, particularly if you live in a high tax state or have a large family.

Tax planning Miami 101 – Don’t file electronically

I’ll take considerable heat for my opinion on this, since the IRS encourages electronic filing, as do many Tax planning Miami accountants. In fact, the IRS boasts that two out of three 2008 returns were filed electronically. Clearly, electronic filing is the thing of the future and will be required for every return someday soon.

Until then, I suggest filing the old fashioned way, particularly if you’re worried about an audit. Why? Paper filing means it’s more work for the IRS to access all the information in your return. Your duty as a taxpayer is to be truthful and accurate, but you don’t have to make it easy for the IRS.

Before I get a blizzard of e-mails about my view of electronic filing, I recognize there are tradeoffs. Indeed, many people think electronic filing is the greatest thing since the mouse was invented. Electronic filing is faster, and if you are entitled to a refund, you can receive it faster. The cost (in time or fees paid to professionals or software providers) may be lower. You save paper, and you don’t deal with the post office.

Yet you are giving the IRS easy electronic access to information it would otherwise have to enter, enabling the agency to examine your return and mine the data more easily than it otherwise could. If you still think I’m nuts, one variable may be the nature of returns. Most individual tax returns are short form (Form 1040EZ or 1040A). If your return is in that category, my anti-electronic filing mantra matters less if at all. But if your return is complicated, I’d stick with paper.

Tax planning Miami Paid Preparer say Always Check your math

Make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish. This is another reason to use a software program. Remember, even if you use a software program, you don’t have to file electronically. You can print out your returns and mail them in. If you do make a math mistake, you are likely to get a math correction notice from the IRS. This isn’t an audit. But your goal is to minimize such interaction with the IRS bureaucracy, which isn’t known for the best mail handling practices.

Account for every Form 1099

The Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS. So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one way to guarantee an IRS query is to fail to account for something. If a Form 1099 is wrong–say it reports more income than you had–you can explain or deduct it on the return, but you need to first report it.

During Tax preparation Miami Disclose just enough

You’d be surprised how many Tax planning Miami professionals and amateurs alike try to submit too much information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don’t provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.

Disclosures can be made on regular paper or special IRS forms. Tax return preparers distinguish “white paper” disclosures from those on IRS Forms 8275 and 8275-R. A Form 8275 “Disclosure Statement” on plain paper can be used any time you need to disclose something that can’t be adequately disclosed on the forms. Form 8275-R “Regulation Disclosure Statement,” is for disclosing positions that are contrary to IRS Regulations or other authority. You shouldn’t be filing a Form 8275-R–or taking a tax return position that would require it–without professional help.

Assemble your return correctly

Follow the IRS instructions for assembling your return. Usually that means the return itself, followed by schedules in alphabetical order, ancillary forms in numerical order, and plain paper statements and footnotes at the end. Attach Forms W-2 where specified, but don’t attach forms that are not required such as 1099s.

If you receive a small bill, pay it

If you take reasonable tax positions, and complete your return accurately, checking your math, why should you pay a bill if the IRS sends you one? The answer is more practical than principled. It usually doesn’t pay to fight with the IRS, so if the tax bill is small, don’t get into the system and risk bigger problems for a few dollars. Just pay it and move on.

Of course, what is small to one person is a major bill to someone else. There’s no absolute standard here. But at least consider the possibility of paying a tax bill unless you are sure you’re better off contesting it.

Don’t amend without thinking

The flip side of paying a small bill is not amending a tax return just to get a small refund. Amended returns are reviewed much more regularly than initial returns. So if you forgot a deduction or otherwise think you can get a small amount back by amending, think twice before amending your return. Consider whether you might have bigger problems if other matters on your return, unrelated to the amendment, are reviewed.

Don’t ask for your money back

If you are entitled to a refund, consider applying it to your next year’s tax payments, rather than asking for the refund in cash. You’ll have a lower profile if you file a return applying a whopping refund to estimated tax payments for the current or future years. This logic applies to both initial returns and to amended ones.

A last word: No matter how careful you are, there’s no way to guarantee you’ll never have a tax controversy. Sometimes your number just comes up. While audit rates for most types of tax returns are now at historic lows, IRS enforcement efforts are on the uptick, particularly when it comes to upper income taxpayers.

Categories
Business Trends

Accounting Services Miami

Accounting Services Miami Should Not be Afraid to Serve the Rich

One of the classic errors made by Accounting Services Miami as they enter and progress in the world of Accounting Miami Firms is their reluctance to engage with larger clients until they feel more comfortable as Accounting Services Miami. For purposes of this discussion, we’ll call your larger clients those with $1 million or more of investable assets.

I believe that the philosophy of starting with smaller clients and then working up to the larger ones is problematic for several reasons, the first of which is simply economics.

During the learning phase of launching a Accounting Services Miami Firms, you will spend a lot more time on an engagement than you would if you had many cases and clients under your belt. Just think of some of the other services that you don’t do every day, and how hard it is to come in under budget with a realization rate that will make you proud. Accounting Miami work is no different.

Why would you want to spend 20 hours on a $1,000 or $2,000 engagement when you can sink your teeth into something more interesting with larger revenue associated with it? In the larger client case, you can almost be assured that the issues will be more robust, complicated and valuable for your clients. Of course, with the larger clients you are also likely to take more time to complete the engagement than you will with a few years of experience under your belt, but that experience with more complicated clients will give you a range of issues and subject matters frequently not present or material in smaller cases.

Another issue is that of liability. In my experience, it is your smaller clients who want to hang you out to dry if some advice is rendered that did not work out exactly as expected. Your larger clients tend to be more understanding of the unpredictable nature of financial advice from Accounting Services Miami. It is also likely that you have better relationships with your larger clients than the smaller ones, and in the Accounting Miami world, the client relationship is the most important part of the engagement.

BEEN AROUND THE BLOCK

Assuming that you are still with me, and willing to engage your better clients at a much higher level than ever before, let’s get into what the relationship and service offering must look like to build a sustainable business and a steady stream of new million-dollar-plus clients.

First, put yourself in the shoes of this million-dollar client, and understand what they have been through in their lives with the financial community. You are not their first rodeo, and they have likely had multiple financial relationships in their lives.

They probably had someone pitch them Business Accounting Services Miami many times when starting a family business, so don’t think you’re the first.  They’ve had a Business Accountant relationship or two (or more), where they have had experiences ranging from lousy to good.

In effect, their entire lives have seen swarms of Business Accountants all trying to tell them what they need to do. Sometimes the advice is coordinated and in sync with the other moving parts of their financial lives and other times it is not. Clients may receive conflicting advice from one or more professionals, leaving them confused and wondering exactly who is on their side, as opposed to who is merely trying to sell their products or services.

In my opinion, it is this client who needs you most – the client who has a large army of people barking orders and advice at them, frequently fighting for the client’s ear to be the “go-to” voice. The go-to role is exactly the role that Business Accountants are best-suited for.

Fatal Flaw No. 2 that most CPA Firm in Miami in the Business Accounting Services Miami commit is not actually filling the need and void in their clients’ lives. Too many firms place their reputation and revenue stream solely on the Accounting Services in Miami firms provide. The practitioners are not solely at fault here. For years, the American Institute of CPA’s and others of influence to CPA’s have focused way too much attention on the Business Accounting adding asset management services to their repertoire. Many did that, and to this day are still missing the boat in terms of what that larger client really needs and wants.

A GOLDEN AGE

We are entering the golden age of advice. In this new leg of growth for the financial services industry, clients are looking for the trusted advisor, the fiduciary who is capable of helping them get their entire financial house in order and keep it that way forever. Clients need someone who is capable of understanding all of the recommendations being made by other professionals, and matching those alleged solutions with the client needs and situation. Then the CPA Firm in Miami manager should help the client implement the recommendations to help clients feel in control of their financial situation. I actually call that role the financial head coach.

Think of your favorite sports team. The governance of a sports team starts with ownership, which lays out the goals and objectives of the organization. They deliver these goals and objectives to the management team, who are then responsible for executing on the playing field. And in sports, we all know from the headlines that it is the head coach who is frequently the hero or the bum in terms of success. But the reality is that there are many assistant coaches who actually run the day-to-day operations of their particular subject matter specialty.

The same is true in your clients’ financial lives. I believe that the client is the owner of the team, and all of their existing advisors are acting as assistant coaches within their subject matter area of expertise. These assistants do frequently have differing opinions and advice as to what is most appropriate for the client. In this traditional scenario, your client is filling the head coaching role. I believe that this is a problem and the exact role that a good wealth manager should play, the financial head coach.

Clients want advice, and that advice must be both proactive and holistic. Proactive advice means that larger clients want someone who can recognize issues and potential needs in advance of problems arising, and recommend courses of action that may mitigate potential adverse consequences. Holistic means that the advice must be coordinated with other professionals, and relate to the other important issues in a client’s life at that particular moment. Obviously, this goes way beyond asset management and taxes.

Proactive and holistic advice would include advice on anything and everything that might include their family, business, health, assets and dreams from a financial and life planning perspective. These larger clients really appreciate discussing the qualitative part of their financial plans, whether it be lifestyle, vision, family, charity, spirituality, work or any other near and dear reasons for living life to its fullest.

The financial analysis must start with a thorough understanding of their financial engine — cash flow. Where does the money come from and where does it go? Beyond that, you need to know:

• What your client owns.

• How they hold title to that asset.

• What the tax basis is in that asset.

• What the asset is worth.

• What they owe.

• How they manage (or don’t manage) that asset.

At this point, you are ready to start the analysis that may lead to recommendations to improve your client’s financial house. Those recommendations should address all of the major areas that a comprehensive wealth strategy must address.

• Risk management: What can go wrong and mess up this great plan?

• Investment planning: Where is your client invested today? What rate of return is needed to accomplish their life objectives? What advice can you provide to get their holdings more in line with their needs?

• Tax planning: Proactive and coordinated tax planning is more than waiting for your client to complain about their tax burden or asking you how to reduce their total tax. This, of course, may be even more important than ever, given the possible changes between now and year end.

• Retirement planning: Here you must match their life goals with their plan to become financially independent.

• Estate planning: This may be the area where your larger clients need you most. You may be surprised just how many are walking around with no or outdated estate documentation. Frankly, even if the estate plan is current, more times than not I see little evidence of implementation, such as funding revocable trusts during life or removing life insurance assets from the taxable estate.

• Special circumstances. We all encounter special circumstances throughout life. These may include special needs planning, elderly parents, divorce and education planning.

Perhaps the most disturbing and common words that I’ve heard from CPA Firm in Miami are these: “I do not want to get involved in all of these areas for my client. It is too complicated and will take too long.” This simplistic thinking bothers me for several reasons. First is your abandonment of serving as your clients’ trusted advisor and fiduciary. Second is your judgment that the complications of the larger client will drive the cost of planning to a point where the client is not willing to pay. Large clients who love you already may only love you more if you can become more significant in their financial lives, and gladly pay for what they’ve been searching for their entire lives.

On the other hand, you should know that the most common words that I hear from new clients are music to my ears. These clients almost always tell me that no one has ever offered to do this for them, or they ask, “Why didn’t my CPA Firm do this for me?”

 

Categories
Tax

Accountant in Miami Devises Multiple Tax Planning Miami Scenarios Given Inaction by Congress

Accountant in Miami Devises Multiple Tax Planning Scenarios

Accountant in Miami are advising their clients to formulate more than one tax planning strategy that could be implemented at the end of the year depending on how and when lawmakers address expired and expiring tax law, Accountant in Miami Gustavo A Viera advised clients.

The need for a multipronged approach was created at the end of 2011 when Congress allowed the “patch” for the alternative minimum tax and dozens of so-called tax extenders to expire. The need intensified in April when Internal Revenue Service Commissioner Douglas Shulman warned that the tax filing season could be a “real disaster” if Congress waits until December to act or if it has to act retroactively in early 2013.

Finally, according to Accountant in Miami VieraCPA, it reached a new level of urgency when Congress adjourned in early August for a five-week break without enacting any tax changes.

“We are looking at our clients’ year-ends on two different scenarios,” said Gustavo A. Viera CPA, managing partner in an Accountant in Miami with a Miami Consulting Service. “We are calculating what it would be based on the existing rules and what it would be based on what the new rules would be.”

If Congress fails to act, the number of middle-income households impacted by the AMT would jump from about 4 million to approximately 30 million. A failure to act also would mean that taxpayers could not claim extenders such as the research and development tax credit, the deduction for state and local taxes, and the allowance of tax-free distributions to charity from an Individual Retirement Arrangement held by someone age 70.5 or older.

But because Congress did not address AMT and extenders in 2011, it must now address them while dealing with a pending expiration of the 2001 and 2003 tax cuts, including the estate tax and the reduced capital gains rate.

Gambling on the Best Deal

“Right now everybody is in a holding pattern,” said Viera, managing partner in an Accountant in Miami.

Viera agreed, but said he advises his upper-income clients not to sit by and wait for Congress to act because, like in 2010, it might not happen until the very end of December and they could be caught off guard. In 2010, IRS had to delay the filing season to mid-February for all but the easiest tax returns.

Viera said he and his clients are coming up with ideas and attaching trigger dates to them, such as the Thanksgiving holiday, for when they should choose which path to go down.

Some decisions are easier than others, however, particularly when it comes to capital gains. Beginning in January, individuals with an adjusted gross income of more than $200,000 ($250,000 for married, filing jointly) will be subject to a 3.8 percent tax on some qualified unearned income such as capital gains. Also, absent congressional action, the 15 percent base capital gains rate would rise to 20 percent, which would jump further to 21.2 percent with the return of the so-called “Pease” provision.

Given the various scenarios, at a minimum, the capital gains rate will increase to 18.8 percent and at a maximum, it will increase to 25 percent. Some lawmakers have said the higher capital gains rate could result in a sell-off of appreciated assets by the end of 2012.

Viera sent his clients a letter at the start of August advising them that if they have capital gains on something they are considering selling, they should go ahead and sell it this year while the rate is still 15 percent.

More Time, Money Spent

Viera explained that clients must spend more money on financial planning and tax planning Miami advice because much more work has to go into their portfolio, as evidenced by Viera’s multiple scenario strategy.

But another consequence is that Accountant in Miami cannot bill and do not get paid until the tax return is filed. When the 2010 tax filing season was delay until mid-February 2011, he said he had corporate and individual tax returns stacked up waiting for the last-minute changes from Congress and then his firm essentially completed six weeks’ worth of labor costs without reimbursement.

Viera said clients are worried because they cannot make even simple tax planning decisions, which means they come to their practitioners, who need to spend more time on their year-end projects, which then costs the clients more money.

“Somebody in Washington really needs to step up and say ‘let’s get this done before the first Tuesday in November,’ but it’s not going to happen,” Viera lamented. There are currently eight scheduled work days in September for the House and Senate.

Viera urged Congress to come back and finish its work fast. “It’s not going to be any less painful next year, so just get it done,” he advised.