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Spring Cleaning: Tax Records You Can Throw Away
Spring is a great time to clean out that growing mountain of tax and financial papers that clutters your home and office. Here's what you need to keep and what you can throw out without fearing the wrath of the IRS.
Let's start with your "safety zone", the IRS statute of limitations. This limits the number of years during which the IRS can audit your tax returns. Once that period has expired, the IRS is legally prohibited from even asking you questions about those returns.
The concept behind it is that after a period of years, records are lost or misplaced and memory isn't as accurate as we would hope. There's a need for finality. Once the statute of limitations has expired, the IRS can't go after you for additional taxes, but you can't go after the IRS for additional refunds, either.
The Three-Year Rule
For assessment of additional taxes, the statute of limitation runs generally three years from the date you file your return. If you're looking for an additional refund, the limitations period is generally the later of three years from the date you filed the original return or two years from the date you paid the tax. There are some exceptions:
Assuming that you've filed on time and paid what you should, you only have to keep your tax records for three years, but some records have to be kept longer than that.
Remember, the three-year rule relates to the information on your tax return. But, some of that information may relate to transactions more than three years old.
Here's a Checklist Of The Documents You Should Hold Onto.
While it may bring you some psychological satisfaction to review your financial journey from poverty to wealth, if you find some tax returns that were filed with Roman numerals, it's probably time to clean out your attic.
Beware of Tax Consequences of a Job Loss
Given the current economic conditions, you may be faced with tax questions surrounding a job loss and unemployment issues.
Here are some answers:
Q: What if I receive unemployment compensation?
A: Unemployment compensation you received under the unemployment compensation laws of the United States or of a state must be included in your income. It is taxable income. If you received unemployment compensation, you should receive Form 1099-G showing the amount you were paid and any federal income tax you elected to have withheld.
Q: What if I lose my job?
A: The loss of a job may create new tax issues. Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time also are taxable. You should ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time. Public assistance and food stamps are not taxable. The IRS has updated a helpful publication which lists a number of job-loss related tax issues.
Q: What if I am searching for a job?
A: You may be able to deduct certain expenses you incur while looking for a new job, even if you do not get a new job. Expenses may include travel, resume and outplacement agency fees. Moving costs for a new job at least 50 miles away from your home may also be deductible.
Q: What if my employer goes out of business or into bankruptcy?
A: Your employer must provide you with a 2009 W-2 Form showing your wages and withholdings by February 1, 2010. You should keep up-to-date records or pay stubs until you receive your Form W-2. If your employer or its representatives fails to provide you with a Form W-2, contact the IRS and we can help by providing you with a substitute Form W-2. If your employer is liquidating your 401(k) plan, you have 60 days to roll it over to another qualified retirement plan or IRA.
If you have experienced a job loss and have questions, please call us. You need to be prepared for the tax consequences.
Cash Management Tips for Small Businesses
Cash is the lifeblood of any small business. Here are some tips to help ensure that your business maintains a sufficient cash flow to meet its financial goals and keep running efficiently:
Toughen up your credit policies. Review the payment terms you offer to customers and tighten them up if slow payment is a problem area for your business. For instance, how long are customers given to pay? What action will be taken if a payment is missed? Be sure your credit terms are communicated effectively to customers before transactions are entered into.
Come up with a budget - and stick to it. Surprisingly, many small businesses do not engage in the budgeting process. A budget can be extremely effective in helping you keep track of whether cost- and revenue-related goals are being met. Depending on the size and complexity of the business, the budget process might be informal or formal, lengthy or simple. Projected revenues and expenses should be broken down by months.
Tighten up billing. If collecting bills has become a problem for your business, you might want to consider increasing the intervals at which customers are billed--e.g., from three months to one month, or from one month to two weeks.
If you have questions regarding your company's cash flow and credit/collection policies, please contact us.
Last Minute Tax Advice
It is April already and your taxes are not yet done. Here are some stress relieving ideas to help you.
Claiming the Child Tax Credit
With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 through 2010 for each qualifying child under the age of 17.
A qualifying child for this credit is someone who meets the following criteria:
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:
In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an 'additional' Child Tax Credit. The additional Child Tax Credit may give you a refund even if you do not owe any tax. Additional Child Tax Credit is based on earned income in excess of $3,000 in 2009 and 2010. For 2009, the total amount of the Child Tax Credit and any additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.
You may claim the Child Tax Credit on Form 1040 or 1040A. Details on how to compute the credit can be found in Publication 972, Child Tax Credit or call us for help.
Are You Eligible for a Tax Credit?
You should consider claiming tax credits for which you might be eligible when completing your federal income tax returns. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable - taxes could be reduced to the point that you would receive a refund rather than owing any taxes. You should consider your eligibility for the credits listed below:
Tax Incentives for Higher Education
The tax code provides a variety of tax incentives for families who are saving for, or already paying, higher education costs or are repaying student loans.
You may be able to claim a credit for the qualified tuition and related expenses of the students in your family who are enrolled in eligible educational institutions. The types of credits available are the Lifetime Learning Credit and the American Opportunity Tax Credit.
Different rules apply to each credit. If you claim a American Opportunity Credit for a particular student, none of that student's expenses for that year may be applied toward the Lifetime Learning Credit.
You may be able to claim a tuition deduction of up to $4,000 of qualified education expenses paid during the year for yourself, your spouse, or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.
You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.
Spring Cleaning: Personalize and Tidy Up Your QuickBooks Desktop
One of the reasons the QuickBooks line of desktop products has been so successful is because of its clean, simple appearance and efficient navigational tools. But there's room for improvement and personalization. Everyone uses QuickBooks just a little differently. You can create a desktop that meets your specific needs, while maintaining the program's inherent usability. Every desktop version of QuickBooks (except for Simple Start) offers several tools to accommodate your preferences, so we'll show you some of the best.
Establish Default Windows for Startup
QuickBooks automatically opens to its default desktop (the Home page), which displays a set of the most commonly used navigational icons, separated by type. You can change this behavior so that every time you launch the program, it opens to the screen(s) you want to see first.
You'll have to tweak your Preferences to make this happen. Click Edit | Preferences. In the list on the left, click Desktop View. You'll see a window that looks like Figure 1:
In the Desktop View section of your Preferences window, you can choose to have one window or multiple windows open, and save a desktop configuration that will open when you launch QuickBooks.
Note: If you want be able to have multiple windows open simultaneously, be sure that option is checked.
There are three options for preserving your desktop layout. If you click Save when closing company, QuickBooks will open with the windows that were open when you last closed the company file. If you don't want any windows to open, check Don't save the desktop. And if you have a set of favorite windows that you want to open each time you launch QuickBooks, set up that configuration and click Save current desktop. Of course, you can simply choose to have the Home page display when you load QuickBooks.
There are other desktop-related options in this same window that have to do with QuickBooks' help features. You may also want to adjust these if you commonly use those services.
Customize Your Icon Bar
This is probably the simplest thing you can do to improve navigation. QuickBooks comes with an icon bar pre-installed, a horizontal strip at the top of the screen whose icons take you to specific parts of the program. The default icon bar may serve your purposes well, but if not, you can easily modify it. Click View | Customize Icon Bar (or right-click directly on the icon bar). The window shown in Figure 2 opens.
Figure 2:The Customize Icon Bar window contains all the tools you need to modify the navigational icons displayed in the QuickBooks icon bar.
To add, edit, or delete icons, simply click on the appropriate buttons. A new window opens containing self-explanatory tools to help you make your changes. You can also add separators (vertical lines) that can divide related groupings of icons.
Tracking Open Windows
If you've chosen to have multiple windows open simultaneously, you can easily keep track of what's open-and navigate there quickly-by using the Open Windows list. To get there, click View | Open Window List. QuickBooks will open the sidebar shown in Figure 3. This list appears to the left of the main desktop or any open windows. To close it, simply click View, then uncheck Open Window List.
You can use the Open Window List to keep track of which windows are open. Clicking on one takes you there.
Customizing the Home Page
QuickBooks' Home page is one of the program's best feature. It not only serves as a navigational tool-you can click on an icon labeled, for example, Enter Bills, and QuickBooks will take you to that page-but it also illustrates the workflow of some processes.
You have some control over what appears on the Home Page. To make changes, click Edit | Preferences, then Desktop View and then Company Preferences tab to display the window in Figure 4.
In this window, you can turn on or off some of the icons that appear on the Home page.
Here, you can check or uncheck icons like Sales Receipts. But in order to show or hide icons, you'll have to make sure that the actual features enabling them are active or inactive.
Your current preferences are displayed at the bottom of the window. You can easily alter them by clicking on one of the hyperlinks. So if Sales Tax is off, for example, click on it, and a window opens that lets you set up a sales tax item.
There's yet another way to isolate the functions you use most often: the Favorites list. Click Favorites | Customize Favorites to access the list of options (like Chart of Accounts and Price Level List). Highlight one, then click Add. When you're done with your list, click OK. Click the Favorites menu anytime you want to access these.
QuickBooks desktop is a powerful navigational tool, and provides simple maps to all of the program's functions. Such versatility and customizability contribute to the program's overall ease of use, and make it a pleasure to use.
Setting up Preferences correctly in QuickBooks-for elements like Items & Inventory and Payments-will make the program work the way you need it to. If you have any questions on how to do this, please call us.
Review Your Retirement Plans
Inventory Your Non-Financial Assets
Review Budget vs Actuals
Schedule Estimated Tax Payments
Review Retirement Contributions
Tax Due Dates for April 2010
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