May Update – Important Information

  • Reminder of Due Dates of Extended Returns

Many clients choose to file their tax returns based on the extended deadlines allowed by the IRS. Some of them believe filing for tax return extensions reduces the chance of tax audits; others simply can’t obtain the necessary records, such as Forms K-1, by the normal filing deadlines, or they need more time to complete bookkeeping. About 2/3rds of our clients file extensions each year, meaning our “busy season” is mostly the months of August through October 15th.

  • Business returns are due on may-updateSeptember 15th and individual returns are due on October 15th.

To make sure your returns receive the most thoughtful attention and are filed on time, we ask that you get the information needed to us at least 45 days in advance of the filing deadlines.  We realize summer is a very busy time with vacations. We appreciate receiving data early where you are able to do so.  Our tax practice will be closed for one week during June and one week during July due to family circumstances.


  • Contemporaneous Charitable Donation Confirmation Letters Required

Be aware of a potential problem with major donations substantiation that could result in disallowance of your large charitable contribution deductions.  The Internal Revenue Code disallows deductions for contributions of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgement of the contribution by the donee organization. For donations of money, the acknowledgement letter must state the amount contributed, indicate whether the done organization provided any goods or services in consideration for the contribution, and provide a description and estimate of the value of any goods or services provided, if applicable. A contemporaneous statement must be obtained before the earlier of the date of filing the original tax return for the tax year, or the due date, including extensions for filing the original return for the year.  In one Tax Court case, taxpayers had $25,171 in donations to their Church disallowed.


  • Effective Tax Planning Suggestions

Our clients often approach us with requests to prepare a tax plan.

The client may want to know how much they should pay for their quarterly estimated taxes, or may want to know the taxes due on a major transaction. Other times the client may want to implement tax saving strategies, such as a Section 1031 exchange, a pension plan or C corporation, or appropriate salary amounts.

We have found that the planning outcomes from these requests sometimes may not be as beneficial as they might be. Solid tax planning requires good data, good communications and follow-through to implement recommendations. Sometimes bookkeeping is so far out of date that the last look at a business that is available is the tax return for the prior year; this can mean that the data may be 1 to 1 ½ years stale. Some clients can’t identify the itemized deductions that they will have for the current year due to lack of records.  We encourage you to maintain current financial and tax records, particularly when your tax situation changes frequently.

Tax planning projects are increasingly complex. Recent changes to the tax laws have imposed more complexity, such as higher tax rates and new taxes. The new laws imposed a 20% capital gains tax rate on some income, increased the maximum ordinary income rate from 35% to 39.6%, and increased payroll taxes on some salaries by .9%, and imposed a new tax on investment income.

Where we might have been able previously to plan for some tax impacts based on simple rules and straight forward tax rates, we now may be required to prepare complete pro forma tax returns.

Just this week we prepared a tax plan for a client to identify the taxes on a single transaction.  We found that the income in that scenario would be subject to the following tax rates:  part of the gain would be taxed at 0%, and other parts of the gain would be taxed at the 26% AMT tax rate, at a 20% capital gains tax rate, at a 15% capital gains tax rate, and at a 25% depreciation recapture tax rate.  This complexity means that we can’t just “wing it” when we are asked to provide the tax answers you need.

We encourage you to contact us with your tax questions, or if you need a tax plan. In addition, please refer to the 70+ articles posted in the Resources section of the web site. We particularly encourage you to review the information that is posted about business entities, and qualifying for deductions for the business use of your home and costs related to business vehicles.

  • Look for Upcoming Training Seminars 

We have recently entered into a new contract with to provide in person training seminars and online courses on accounting and tax topics.  The courses will be directed to the needs of our clients who can benefit from training courses on accounting, tax planning and real estate taxation. The first course has tentatively been planned for October 23rd and 24th, location yet to be announced. Look for more information about this in a future blog post.