For example

* Wash sales. Thinking of selling a security before December 31 to take advantage of a capital loss? To make sure the loss is deductible, refrain from buying a substantially identical security during the 61-day period that begins 30 days before you sell and ends 30 days after.

* Worthless stocks. For capital loss purposes, securities with no value are treated as if you sold them on the last day of the year. Your loss is generally the same as your cost.

If you want to deduct worthless securities on your 2011 return, you’ll need to prove the security became worthless during the year and that it truly has no value. Not sure you can meet those requirements? Selling before year-end may be a better option.

* Stock donations. Giving appreciated stock to charity lets you avoid capital gains tax and claim a charitable deduction.

In order to deduct the donation on your 2011 return, the gift must be complete. For certificates you endorse and present directly, the date of mailing or other delivery is considered the date of the gift. When your broker or the issuing company handles the transaction, the gift is complete when the stock is titled to the charity.

Interested in tax planning services? Give us a call at (970) 482-6947 or e-mail us at info@krugercpas.com and we will be happy to set an appointment with you to go over your situation. We will let you know of things that need to be done before year-end and what your 2011 estimated tax liability is.

Here are three exceptions to the general rule.

* Meals provided to your employees on a social basis. That once-a-year holiday party qualifies for 100% deductibility as a “recreational, social, or similar activity,” as long as it is primarily for the benefit of all your employees.

* Food with nominal cost. Do you supply bottled water, morning-meeting donuts or office snacks for your staff? “De minimis” employee benefits — those small items your business pays for that are not considered taxable income to your employees — are typically 100% deductible.

* Any food or drink available to the general public.  This includes food served at seminars, promotions, or an open-house reception where you invite the public is 100% deductible.

Remember that you’ll still need to keep records to substantiate your deductions for meals and food served under these exceptions.

We’ll be happy to help you review your expenses and set up a system to account for items that qualify for this a more generous deduction.  Give us a call at (970) 482-6947 or e-mail us at info@krugercpas.com.

 * WHO? The question of who will succeed you in the business can be the toughest of all, largely because there is so much emotion involved. Most owners want to pass the business on to the family. But are your children willing to take on the business, and if so, are they capable of running it? Will it cause a family squabble if one or two children want to run the business, but others are not interested? Resolving these issues may take a lot of honest, open discussion with family members to discover their true feelings. If there is not an obvious family successor, other alternatives include selling the business to an outsider, promoting an existing employee to head the business while you retain ownership, or even selling the business to the employees.

 * WHEN? When you make the transition depends on a number of factors, such as your age, health, retirement goals, and the readiness of a successor. Consider whether you want to maintain some involvement with the business or make a clean break. Remember, though, you should always have a contingency succession plan in case of sudden death or disability.

 * HOW? How you structure the transition depends partly on the answers to the earlier questions and partly on financial considerations. Think through issues such as whether you need retirement income from the business or whether you primarily want to minimize estate taxes. Knowing your goals for the transition will make it much easier to tailor a succession plan that fits your specific situation.

 For guidance in your business succession planning, call us at (970) 482-6947.

• Eliminate waste, fraud and abuse with health insurance and social security
• Provide an emergency spending reform
• Provide a balanced budget amendment for Congress to vote on
• Cut $1 trillion in spending in immediately and cap discretionary spending
• Select a “super committee” to work on deficit reduction

The “Super Committee” is to consist of twelve members selected by Congress.  The committee is to draft legislation to reduce the federal deficit by at least another $1.5 trillion over the next ten years.  A majority of seven or more members must approve the plan by late November, in order for Congress to vote on the plan by the end of the year.  Some of this deficit reduction could include tax increases.  If the committee cannot agree, or Congress fails to act, then automatic spending cuts will start without tax increases.

Earlier in the year, another bipartisan committee of Senators referred to as “The Gang of Six” began negotiations to reduce the deficit and produced an outline of spending cuts.  It may be likely that this will be a starting point for the “Super Committee”.  The “Gang of Six” plan would increase taxes by over a trillion dollars over the next 10 years relative to current policy. That’s roughly a 6.5 percent increase in total taxation.

The Gang of Six proposal reduces income tax from six brackets to three which are:

• Lowest two rates (10% and 15%) could fall to 8%
• Middle two rates (25% and 28%) could drop to 14%
• Top two rates (33% and 35%) could drop to 23%

Other proposed tax changes:

• Reduced deductions for mortgage interest, charitable deductions and medical expenses.
• Repeal deductions for state income taxes and all miscellaneous itemized deductions.
• Long-term capital gains and qualified dividends, which are currently taxed at a maximum 15%, would be taxed as ordinary income.
• Alternative minimum tax would be repealed.

It appears that there will be significant tax law changes in the near future.  In addition, the Bush-era tax cuts are set to expire at the end of the 2012.  These tax cuts could be changed before expiring.  Please note that most of the above tax changes are only proposals, with the exception of the Bush-era tax cuts expiring.  Kruger & Clary, CPAs will keep you updated on all of the changes as we learn more.

Personal debt can be categorized as necessary or unnecessary. Necessary debt can generally be linked to assets such as your home mortgage, a basic car for getting to work, or a college degree. Unnecessary debt, on the other hand, might include routine credit card charges or installment loans for items that rapidly decline in value.

If your goal is long-term financial freedom, avoiding unnecessary debt is crucial. Three simple habits can help you achieve this goal.

1. Live below your means. Much of the stuff that seems so essential today will, in fact, grow less desirable over time. Of course, living below your means requires that you discover what those “means” are.  For many people, this means tracking your income and expenses over a period of time – a month or more – to learn where your money comes from and how it’s spent. You might be surprised. That cup of gourmet coffee on the way to work, that weekly meal at the fine dining establishment, that car payment for the latest sedan – all cut into your disposable income. By spending less on such items, you’ll be able to save for the future and develop long-term wealth.

2. Save for emergencies. By setting aside money in easily accessible accounts, you avoid racking up credit card bills when unexpected expenses occur. Such expenses could include trips to the emergency room, replacing the water pump on the family car, or patching a hole in the roof. A reserve fund can also help you survive periods of unemployment without incurring additional debt.

3. Use debt wisely. If you decide to incur debt, know what you’re doing. Slow down, take a deep breath, think about how valuable this item will seem three months from today. Also ask yourself whether you can pay off these new charges out of next month’s income.

Staying out of debt isn’t glamorous, and it requires more than a little self discipline. But the long-term benefits are substantial. If you’d like additional suggestions for developing habits of financial discipline, give us a call (970) 482-6947.

Are you looking for ways to save $1,000 off your income tax bill?
If married, would your spouse be interested in the tax savings of up to $2,000 on a joint return?

In order to achieve this kind of tax savings you must contribute to a retirement plan and you might qualify for a tax credit called the “retirement savings contributions credit”. 

Unlike a tax deduction, a tax credit is a dollar for dollar reduction of the taxes you owe.  How do you qualify for this credit?
By making a contribution to a retirement plan, you could be eligible for the saver’s credit.  This includes contributions to both Roth and traditional IRAs, as well as, salary deferrals
into SEP, SIMPLE, 401(k), 403(b), and 457 plans.

How much is the credit? The credit ranges from 10% to 50% of the first $2,000 contributed to a retirement plan.  In other words, the maximum credit is $1,000 for an individual. If you and your spouse both contribute at least $2,000 to your retirement accounts, you could qualify for up to a $2,000 credit on a joint return.

Are there limitations? Like many tax breaks, this credit decreases or phases out entirely once your income reaches certain levels.  The credit is not available if 2011 income exceeds $28,250 for individuals, $42,375 for heads of household, and $56,500 for married couples filing a joint return. In addition, you cannot take the credit if you are under age 18, a full-time student, or someone else’s dependent. 

Here’s an example. Say you put $3,000 into an IRA and you qualify for the maximum $1,000 saver’s credit. You can deduct your $3,000 contribution for a tax savings of $450 ($3,000 x 15% tax rate).  Add this $450 tax savings to the $1,000 saver’s credit, and your total tax savings equals $1,450.

For more information about the saver’s credit or about retirement accounts, contact us at (970) 482-6947 or info@krugercpas.com.

If you provide care for stray or feral animals in your home for an IRS-approved charity, you may be able to take a tax deduction for your out-of-pocket expenses. A recent U.S. Tax Court judge ruled that a taxpayer who fostered feral and stray cats in her home could deduct amounts she spent for food, veterinarian bills, litter, and other unreimbursed expenses incurred to help the animal charity in its mission. To be deductible, the taxpayer must keep records of the expenses, and the charity must provide a written acknowledgment of the volunteer work as a charitable gift.

The Humane Society hopes to get the word out on this case, stating that thousands of members do volunteer work such as this and spend their own money to support the mission of local shelters and rescue groups.