FBAR filing deadline is rapidly approaching

EXPATRIATE TAX – U.S. residents with $10,000 or more in foreign bank accounts must file a Report of Foreign Bank and Financial Accounts by the end of the month or risk substantial fines.

The FBAR (Report of Foreign Bank and Financial Accounts) is due the year after the year that the $10,000 threshold in met. The FBAR due date cannot be extended and failure to file an FBAR may result in civil and/or criminal penalties. Considering a Tax Professional? For no obligation free consultation contact us today!
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Published in: on June 26, 2013 at 12:50 pm  Comments (1)  
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Tips for Taxpayers with Foreign Income

Tips for Taxpayers with Foreign Income
If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.

Here are some tips taxpayers with foreign income should know:
1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.
2. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department.
3. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.
4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012.
5. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.
For no obligation free consultation contact us today!
Aba Tax Accounting
Amare Berhie, Enrolled Agent
Amare@Abataxaccounting.Com
612-282-3200 Toll Free866-936-0430
http://www.abataxaccounting.com
Www.abatax81.blogspot.com
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Published in: on March 27, 2013 at 2:44 pm  Comments (1)  
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Important Facts about Dependents and Exemptions

Important Facts about Dependents and Exemptions.

Federal, State, Local and International TaxesWhile each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return. 

1. Exemptions reduce taxable income.  There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return. 

2. Personal exemptions.  You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer. 

3. Exemptions for dependents.  Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers. 

4. Some people do not qualify as dependents.  While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse. 

5. Dependents may have to file.  If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe. 

6. Dependents can’t claim a personal exemption.  If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption. 

Remember that a person must meet several tests in order for you to claim them as your dependent. See Publication 501 for the tests you will use to determine if you can claim a person as your dependent. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abataxaccounting.wordpress.com

www.abatax81.blogspot.com

Published in: on February 7, 2013 at 9:09 pm  Leave a Comment  
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Year- End Tax Planning – Income From Foreign Sources

Year- End Tax Planning Income From Foreign Sources

Income From Foreign Sources – Many U.S. citizens earn money from foreign sources. But unless it is exempt under federal law, taxpayers sometimes forget that they have to report all such income on their tax return. 

As such, some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law. 

Effective September 1, 2012, taxpayers who are low compliance risks are able to get current with their tax requirements without facing penalties or additional enforcement action. These taxpayers generally have simple tax returns and owe $1,500 or less in tax for any of the covered years. 

U.S. citizens are taxed on their income regardless of whether they live inside or outside the United States. The foreign income rule also applies regardless of whether the person receives a Form W-2, Wage and Tax Statement, or Form 1099. 

Foreign source income includes earned and unearned income, such as:

  • Wages and tips
  • Interest
  • Dividends
  • Capital gains
  • Pensions
  • Rents
  • Royalties

But there is some good news. Citizens living outside the United States may be able to exclude up to $95,100 of their 2012 foreign source income if they meet certain requirements. This will increase to $97,600 in 2013.

If you’re married and you and your spouse both work abroad and meet either the bona fide residence test or the physical presence test, each of you can choose the foreign earned income exclusion. Together, you can exclude as much as $190,200 for the 2012 tax year.

Caution: The exclusion does not apply to payments made to U.S. government employees or folks in the military living outside the United States.

If you earn income from outside the country, please be sure to meet with us about it. We can advise you on how to address all of the tax implications of this situation. For no obligation free consultation contact us today!

ABA Tax Accounting

info@abataxaccounting.com

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abataxaccounting.wordpress.com

Published in: on November 13, 2012 at 2:43 pm  Leave a Comment  
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Year-End Tax Planning For Individuals – Accelerating Deductions

Year-End Tax Planning For Individuals – Accelerating Deductions

Federal, State, Local and International Taxes – A deferral strategy shifts income to a following year if tax rates in that subsequent year will be lower overall than in the current year. If you’ll be in a lower tax bracket next year, you may wish to accelerate your deductions into this year and postpone your income into the following year. Here are some of the ways you can do this:

  • Pay a state estimated tax installment in December instead of at the January due date. However, make sure the payment is based on a reasonable estimate of your state tax.
  • Pay your entire property tax bill, including installments due in year 2013, by year-end. This does not apply to mortgage escrow accounts.
  • Try to bunch “threshold” expenses, such as medical expenses and miscellaneous itemized deductions. Threshold expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income (AGI). By bunching these expenses into one year, rather than spreading them out over two years, you have a better chance of exceeding the thresholds, thereby maximizing your deduction. 

For example, you might pay medical bills and dues and subscriptions in whichever year they would do you the most tax good. 

  • Tip: Now is the time to bunch deductible medical expenses. Medical expense deductions are 7.5% of AGI this year, but in 2013 increase to 10% of AGI. 

In cases where tax benefits are phased out over a certain adjusted gross income (AGI) amount, a strategy of accelerating income and deductions might allow you to claim larger deductions, credits, and other tax breaks for 2012, depending on your situation. The latter benefits include Roth IRA contributions, conversions of regular IRAs to Roth IRAs, child credits, higher education tax credits and deductions for student loan interest. 

  • Tip: Accelerating income into 2012 is an especially good idea for taxpayers who anticipate being in a higher tax bracket next year. 
  • Tip: If you know you have a set amount of income coming in this year that is not covered by withholding taxes, increasing your withholding before year-end can avoid or reduce any estimated tax penalty that might otherwise be due. 

On the other hand, the penalty could be avoided by covering the extra tax in your final estimated tax payment and computing the penalty using the annualized income method. 

If you have any questions about estimated taxes, please call us. 

  • Caution: The Alternative Minimum Tax (AMT) no longer just impacts the wealthy! Do not overlook the effect of any year-end planning moves on the AMT for 2012. 

Due to tax changes in recent years, AMT impacts many more taxpayers than ever before and, the tax is not indexed to inflation. As a result, growing numbers of middle-income taxpayers have been finding themselves subject to this higher tax. 

Items that may affect AMT include deductions for state property taxes and state income taxes, miscellaneous itemized deductions, and personal exemptions. 

Note: Thanks to the “AMT Patch” AMT exemption amounts for 2012 remain the same as 2011 (see below), but are set to drop in 2013. For example, the AMT exemption amount in 2013 drops from $74,450 in 2012 to $45,000 for married filing jointly taxpayers. Here are the 2012 exemption amounts:

  • $48,450 for single and head of household filers,
  • $74,450 for married people filing jointly and for qualifying widows or widowers,
  • $37,225 for married people filing separately. 

Please call us if you’d like more information or if you’re not sure whether AMT applies to you. We’re happy to assist you. 

CALL US FIRST – This is just one of the year-end planning tax moves that could make a substantial difference in your tax bill for 2012. But the best advice we can give you is to give us a call. We’ll sit down with you, discuss your specific tax and financial needs, and develop a plan that works for your business.

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abataxaccounting.wordpress.com

Published in: on November 9, 2012 at 3:17 pm  Leave a Comment  
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YEAR-END TAX PLANNING FOR BUSINESSES – Purchase New Business Equipment

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YEAR-END TAX PLANNING FOR BUSINESSES – Purchase New Business Equipment 

Small Business Tax Planning – There are a number of end of year tax strategies businesses can use to reduce their tax burden for 2012. Here’s the lowdown on the Purchase New Business Equipment option.

Section 179 Expensing. Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2012 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $139,000 for property placed in service by December 31, 2012. The maximum threshold amount for capital purchases in 2012 is $560,000, but in 2013, that amount drops to $25,000. Also in 2012, businesses can take advantage of an accelerated first year bonus depreciation of 50% of the purchase price of new equipment and software placed in service by December 31, 2012 that exceeds the threshold amount of $560,000. This bonus depreciation is phased out in 2013.

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Note: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.

Please contact our office if you have any questions regarding qualified property and bonus depreciation.

Timing. If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here’s a simplified explanation:

Conventions. The tax rules for depreciation include “conventions” or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as “placed in service” (or “disposed of”) at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.

Example: You buy a $40,000 piece of machinery on December 15. If the half-year convention applies, you get one-half year of depreciation on that machine.

The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40% of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.

The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

If you’re planning on buying equipment for your business, call us first. We’ll help you figure out the best time to buy it to take full advantage of these tax rules. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abataxaccounting.wordpress.com

Published in: on November 5, 2012 at 1:40 pm  Leave a Comment  
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Charitable contributions may help lower your tax bill – www.abataxaccounting.com

Charitable contributions may help lower your tax bill – www.abataxaccounting.com

Federal, State, Local and International Taxes – Charitable contributions made to qualified organizations may help lower your tax bill. The IRS offers the following tips to help ensure your contributions pay off on your tax return. To read more log on to our blog www.abatax81.blogspot.com. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abataxaccounting.wordpress.com

Published in: on November 2, 2012 at 12:45 pm  Leave a Comment  
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Tax Planning for 2013, Various Tax Benefits Increase Due to Inflation Adjustments

Federal, State, Local and International Taxes – For tax year 2013, the Internal Revenue Service announced today annual inflation adjustments for more than two dozen tax provisions.

  • The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.
  • The amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax,” is $1,000, up from $950 for 2012.
  • The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012.

Details on these inflation adjustments and others such as the low-income housing credit, the dollar limits for high-deductible health plans and other amounts can be found in Revenue Procedure 2012-41. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Published in: on October 19, 2012 at 9:40 pm  Leave a Comment  
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