by NFS | Dec 16, 2010 | Archives
Q: What tax moves should investors make by the end of the year to minimize what Uncle Sam takes in taxes?
A: If you don’t pay attention to the tax hit of your stock moves, you might be paying Uncle Sam too much.
There are several simple maneuvers you can make when it comes to you portfolio to make sure your tax hit is as small as possible.
The first step all investors should take is tax-loss harvesting. If there are some money-losing dogs in your portfolio, now’s the time to start selling them. If you sell your losers, you can use those capital losses to offset any capital gains you might have had from selling winning stocks. It gets better. If your capital losses outstrip your capital gains, you can use those capital losses to reduce your ordinary income by up to $3,000 a year. And you can then carry those losses forward indefinitely until you exhaust them.
These capital losses are very lucrative already, but could be even more attractive depending on what Congress decides with tax rates and what happens with tax rates in the future, says Barbara Weltman, contributing editor to J.K. Lasser and author of 1001 Deductions and Tax Breaks.
Just be careful. When you sell a stock, you can’t buy it back for more than 30 days or you risk triggering a so-called wash sale. If you buy a stock that you sold for a loss back, you may lose out of the capital loss deduction.
There is a dilemma with tax loss selling, too. What if you sell a stock for tax reasons, but still like the stock? It would be somewhat tragic if the stock you’ve been losing money on for so long rallied in December after you sold it for tax reasons.
There are ways to manage this situation and the wash sale rule, Weltman says. For instance, let’s say you have a large loss in shares of a drugmaker, but you still like the pharmaceutical industry and don’t want to be out of the market for more than 30 days. You might consider buying shares of a competitor in the drug industry you think also has good prospects. You can also purchase a stock index mutual fund or exchange-traded fund that owns the stock and hold that while you wait the 30 days.
By Matt Krantz
USA Today
by NFS | Dec 15, 2010 | Archives
Do You Know What a Forced Liquidation Can Do to the Value of Your Business? Check out NFS Business Briefs
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by NFS | Dec 15, 2010 | Archives
From hot air balloons to bagels, 2010 proved to be yet another year in which states and municipalities passed some strange tax laws in a desperate bid to raise revenues and close their budget gaps.
The Tax & Accounting business of Thomson Reuters has compiled a sampling of some of the year’s quirkiest sales and use tax changes, emphasizing the importance of technology and expertise to help navigate the dynamic sales and use tax landscape.
A few of the “quirky” sales and use tax highlights of 2010 include:
• Candy without flour in Washington: In June, Washington State enacted legislation that made candy without flour taxable. According to a list published by the Washington Department of Revenue, “Rainbow Whirly Pops” and “Lemon Drops” were taxable, but “Twizzlers” and “Peppermint Bark Shortbread” remained exempt. However, because the law caused so much confusion, and after push-back from voters and large candy makers, Initiative 1107 was passed, repealing the tax on candy effective Dec. 2, 2010.
• Belt buckles in Texas: Every year before it is time to go back to school, several states allow for a tax holiday on school supplies and clothing, with several oddities seemingly infiltrating the exemptions. In Texas, belts are exempt, but belt buckles are not. Cowboy boots and hiking boots are also exempt, but rubber boots and climbing boots are taxable.
• Bagels in New York: In 2010, New York cracked down on its enforcement of the tax on prepared food, specifically targeting a New York staple: bagels. If you buy a whole bagel and take it home with you, it is exempt from tax. However, if you purchase that same bagel, but eat it at the bagel shop (even without cream cheese), bagel shops must charge sales tax on the purchase price. Apparently, the mere slicing of a bagel kicks your bagel purchase into a taxable transaction. As a result, New Yorkers are paying approximately 8 to 9 cents more per bagel.
• Cup lids in Colorado: Effective March 1, 2010, Colorado eliminated the exemption for non-essential food items and packaging provided with purchased food and beverage items. So, while cups are considered essential, lids are not.
• Hot air balloons in Kansas: On June 30, the Kansas Department of Revenue issued a private letter ruling discussing the taxability of hot air balloon rides. Kansas generally taxes sales of admissions to “any place providing amusement, entertainment or recreation services.” The question was not whether or not balloon rides are entertaining, but whether or not federal law pre-empts the imposition of state sales tax on sales of those rides. Under the Anti-Head Tax Act, 29 U.S.C. Section 40116, states and local jurisdictions are prohibited from imposing fees and charges on airlines and other airport users. The department determined that un-tethered balloon rides where the balloon is actually piloted somewhere “some distance downwind from the launching point” would be considered carrying passengers in air commerce and would be pre-empted by the law. However, state sales tax can be imposed on tethered balloon rides.
• Haunted houses in New York: According to TSB-A-10(11)S, admissions to haunted houses are subject to the New York sales tax.
By Accounting Today Staff
by NFS | Dec 14, 2010 | Archives
WASHINGTON DC – The Bush tax cut and unemployment benefit extension legislation passed a key procedural hurdle in the Senate on Monday, overcoming the 60-vote threshold needed to come up for a vote later in the week.
The measure advanced Monday evening by a vote of 83 to 15, with 45 Democrats and 37 Republicans voting to invoke cloture and cut off debate. A final vote on the legislation is expected on Tuesday in the Senate, and then it will be sent to the House.
The status of the $858 billion bill in the House is in question, however, as a majority of House Democrats voted in a resolution within their caucus last week to express their disapproval of the bill.
Many congressional Democrats are upset that President Obama struck a deal with Republican congressional leaders to extend the Bush-era tax rates for two years even for those earning over $250,000 a year, violating a campaign pledge. Another possible deal breaker is that the estate tax will be set at 35 percent, with a $5 million exemption for individuals, instead of the 55 percent rate for estates over $1 million that it was scheduled to return to at the beginning of next year. Democrats will try to introduce amendments to increase the estate tax and add other provisions, but Republicans have warned that they are not open to allowing many changes in the legislation.
The bill includes some provisions that are seen as favorable trade-offs by the Obama administration, including a 13-month extension of unemployment benefits and a 2 percent cut in the Social Security payroll tax for a year, lowering the rate from 6.2 percent to 4.2 percent.
The bill also extends the Research & Experimentation Credit, the Child Tax Credit, the Earned Income Tax Credit, and the American Opportunity Tax Credit for college tuition, along with patching the alternative minimum tax to prevent it from affecting millions more taxpayers. Obama has argued that it is necessary to pass the legislation to extend tax cuts for the middle class and avoid jeopardizing the economic recovery.
By Michael Cohn
Accounting Today
by NFS | Dec 13, 2010 | Archives
Effective January 1, 2011, businesses with a payroll tax deposit are required to make those payments by using the Electronic Federal Tax Payment System (EFTPS). If you are not currently enrolled in the EFTPS program you probably received a letter regarding this in the last week. A 10% penalty may be applied if EFTPS is not used in 2011.
We can answer any of your questions and help you set up the EFTPS program. Call us at 800-560-4NFS immediately. The approval process can take 4-6 weeks. We can initiate this on-line. We will need the following information – business name, address, EIN, bank name, routing #, account #, and authorized signer.
We have found that the EFTPS system works much better than the old system of depositing the payroll taxes at the bank – you can schedule payments from any computer with internet access. The only drawback is you cannot wait until the day the taxes are due to schedule a payment. You must schedule your payments by the day before the due date and the money is transferred from your checking account on the due date that you schedule.
We recommend that semi-weekly depositors schedule their payments the day the payroll is computed and that monthly depositors schedule their deposit when they run their first payroll of the following month. Schedule these payments in advance as we have found that those who wait until the deadline tend to miss deadlines and incur penalties.
Employers who have $2,500 or less in quarterly payroll tax liability and pay their liability when filing their tax returns (i.e. Forms 941 or 944) are the primary exception. Otherwise, employers and sole proprietors who file payroll tax returns must use the EFTPS System.
Do not procrastinate in initiating the application process or you will incur penalties in 2011.
There are several simple maneuvers you can make when it comes to you portfolio to make sure your tax hit is as small as possible. 
