• Audit Protection Services
• Tax Planning
• 2009 Tax Tips
• Recovery Rebate Credit In 2009!
• New Procedure for Divorced or Legally Separated Parents with Dependent Children
• Tax Relief for Struggling Homeowners
• The Importance of Buy - Sell Aggreements
• Other Newsletters

Audit Protection Services

The number of letters from the IRS has increased over the past few years, and is requiring a significant amount of time from us. As a result, starting in 2010, we will charge an hourly rate to respond to any tax return audits, inquiry letters from the taxing authorities, and other related tax matters that arise after the return has been prepared. We are now offering a separate additional service called Audit Protection Services to help protect you in case of an audit or letter, so that you won’t incur additional accounting fees. As a bonus, if you purchase the Audit Protection Services for your 2009 tax return, it will also cover your 2007 and 2008 returns only if prepared by us.

• What is Audit Protection Services?
  
  Our audit protection service provides protections if you are contacted by the IRS or state tax departments. For an additional fee, we will relieve your stress by reviewing, responding and representing you.
  
  Our firm will submit a reply to both the IRS and state inquires concerning the tax return in question. In addition, we will represent you should your income tax return be selected for examination by the IRS or your state. This will include the appeal process, but not tax court representation. Replying to the IRS or state nuisance letters can be costly. With our Audit Protection Services, you will receive this service at a fraction of the ordinary cost.
  
  
• How does it work?
  
  If you receive a notice of tax audit, we immediately inform the tax authorities that we are representing you. You are not required to talk to the tax auditor. In fact it is best that you do not have any contact with the tax auditor, because that person may ask you questions other than what the audit is focused on and bring up other questionable items.
  
  
• Why would I need these services?
  
  Many tax rules are complex. It is important to have Kruger & Clary representatives answer questions and formulate the best response with regards to the audit. We do the necessary research to understand the tax rules for any issues that the tax auditor may bring up. We take the time to understand your side of things and present the information to the tax auditor in a way most beneficial to you.
  
  
• What’s the cost?
  
  You can sign up for the Audit Protection Services at the time you bring in your tax information to us to prepare your return, or any time before the return is filed. The cost is just 10% of your tax preparation fee. Those fees will need to be paid by the time your return is finalized. The protection will last for three years from the date your return has been submitted. You must sign up for the service at the time you sign your return, and it is not available after that date.

Tax Planning

Many of former President George Bush’s tax cuts are set to expire in the near future, and President Obama is facing huge budget deficits that may require significant tax increases to repay money that has been spent this year. In these uncertain tax times, you may want or require professional answers to your specific tax questions. For this reason, we are launching a project this fall to review your 2009 tax situation and project how you may be affected in the next few years.

As part of our service, we will review your year-to-date information and determine if you have underpaid, or overpaid, your taxes. We will then make planning recommendations to attempt to reduce your 2009 tax burden. The next step will be to analyze your tax situation for 2010 and beyond to determine if you should accelerate, or delay income or expenses to put you in a better tax position. We can also review your employer retirement plan options to ensure that you are taking full advantage of these offerings.

For business owners we can expand on the services discussed above by reviewing their year-to-date business activity. Many opportunities exist for businesses because they can prepay anticipated expenses by year-end and deduct them in the current year. Equipment purchases have very liberal tax incentives this year. They disappear, or are severely limited in 2010.

To take advantage of our offer, please contact us. This fall we are offering a $150 discount for up to three hours of tax planning service for a total cost of $300. Don’t wait until it’s too late, contact us today to get started.

2009 Tax Tips

• There are a number of Hybrid and Alternative Motor vehicles that qualify for the Energy Policy Act of 2005. Please call us before you purchase a Hybrid or Alternative motor vehicle to verify it qualifies. Also, we can tell you how much of a federal and state credit you might receive on your taxes.



• 2009 Mileage Rates:
  • 55 cents for business miles
  • 24 cents for medical or moving miles
  • 14 cents for charitable volunteer mileage
    
    
• Gift Tax Exclusion In 2008, you were allowed to gift $12,000 per person without any tax implications. In 2009 the amount increases to $13,000. You may pay an unlimited amount as a gift for education paid directly to the institution. Further, you can give an unlimited amount for medical costs and health insurance premiums paid directly to the provider.



• If you're right on the fence from itemizing or taking the standard deduction, group your deductions that benefit you the most when you can itemize. For example, pay your January mortgage payment in December, donate the junk in your basement and maybe get those knees fixed the year you itemize and not next year when you take the standard deduction.



• Make your IRA contributions earlier so that you can start earning your tax-deferred interest earlier.



• Take advantage of a retirement plan that you have at work. If your company has a retirement plan try to maximize your contributions since it is pre-taxed. Or, if your employer matches a portion of your contributions take advantage of that since it is "found money".



• Take advantage of flexible spending accounts to reimburse yourself tax-free for medical expenses or dependent care expenses.



• Take advantage of energy breaks such as installation of energy efficient home improvements.



• Review your investment portfolio. Do you have any mutual funds, stocks or bonds that are at a loss that could offset any capital gains?



• Do you have credit card debt? Maybe a home equity loan makes sense.

Recovery Rebate Credit In 2009!

You may still qualify to take a refundable credit on your 2008 tax return, if you did not receive an economic stimulus payment or you received less than $600 for single filers, $1,200 for married filers, of $300 for each qualifying child. Our office will be researching and entering our clients stimulus amount that the IRS states they sent out in 2008 to see if you qualify for more money. Your credit is calculated using 2008 tax information. For example, you were ineligible to receive a stimulus check based on 2007 tax information because you made more than the maximum income limits (more than $75,000 for individuals and $150,000 for Married Filing Joint). If in 2008 ,your income decreased and was within the limitations, you would receive the credit in 2008. This is a refundable credit. In other words, even if you do not have a tax liability, you will receive the amount from the IRS. You may also qualify for an additional $300 for children you didn’t claim on your 2007 return, but are claiming in 2008.

New Procedure for Divorced or Legally Separated Parents with Dependent Children

Tax Relief for Struggling Homeowners

The Mortgage Forgiveness Debt Relief Act of 2007 allows taxpayers to exclude from taxable income up to $2 million of debt forgiven on their principal residence ($1 million for married filing separate taxpayers). Taxpayers whose mortgages have been forgiven during 2007, 2008 or 2009 should fill out Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness).

Debt that qualifies for this relief includes:

Debt reduced through mortgage restructuring.

• Mortgage debt forgiven in connection with a foreclosure.
• Debt used to refinance qualifying debt (only up to the amount of the old mortgage principal).

However, debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for this relief.

Taxpayers whose debt is reduced or eliminated will receive a Form 1099-C from the lender at the end of the year, which will show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The Importance of Buy - Sell Agreements

Any business with two or more partners or shareholders should create a buy-sell agreement. Despite their name, buy-sell agreements are probably better titled buyout agreements, as they establish the terms and conditions of a future sale between owners. A buy-sell agreement specifies events that would trigger the buyout of one owner's portion of the business, such as an owner's death, disability, retirement or bankruptcy. A buy-sell agreement also details the method of establishing a purchase price, terms of payment, types of allowable (and prohibited) ownership transfers and many other crucial items.

Why are these agreements so important? Because without a buy-sell agreement in place, a change in ownership could be devastating to a business. If one owner files for bankruptcy, the business could get tied up in bankruptcy court. If an owner dies suddenly, the remaining partners could wind up with an unsuitable replacement partner (such as the deceased owner's relative). Or if an owner wishes to retire, disputes may arise between owners as to a fair purchase price and ideal timeline for such a buyout. Addressing these types of scenarios before they happen will help you avoid unnecessary headaches and legal issues and ensure a smooth transition of ownership.

There are two common types of buy-sell agreements, both which are activated by a partner's death or disability and typically use insurance to fund the purchase of ownership interests. In a cross purchase plan, each business owner buys a life insurance policy on the other owners. That way, if an owner dies, the surviving owners will use the life insurance proceeds to purchase the deceased owner's share of the business. In a stock redemption plan, the business agrees to purchase an owner's shares upon their death with the proceeds from the life insurance policy that the company on the shareholder's life. Whatever buy-sell agreement you choose, be sure that it adequately covers a wide range of events, not just death or disability.

A good buy-sell agreement will help ensure continuity of your business and most importantly, give you as a business owner peace of mind. If you would like to learn more about creating the right type of buy-sell agreement for your business, contact Kruger & Clary today.

Other Newsletters