Archive for May, 2012

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May

Come see us at Dow Diamond!

Categories: Business, In The News

Tags: dow diamond, entrepreneur, innovation

The Fourth Annual Mid Michigan Innovators Heading for the Big Leagues is being held May 31st from 4 to 9 p.m. at Dow Diamond. RFM Financial Solutions and Robert F. Murray & Co. will be there and we encourage anyone interested to attend. Heading for the Big Leagues celebrates innovation & entrepreneurship in the mid-Michigan region and gives attendees and opportunity to network and see firsthand some of the innovative products and services being developed here. Special recognition will be given to entrepreneurs and businesses that have cultivated mid-Michigan’s entrepreneurial environment, including establishing and emerging companies that are critical to growing Michigan’s economy. Our very own Paul Murray had the honor of receiving an award at the 2011 event.

May

Michigan Income Tax Act Amendment

Categories: Individuals, Tax Tips & Alerts

Tags: 2012 Income Tax changes, Michigan Income Tax Act, Michigan Property Tax Changes, Michigan Tax Rate changes, Snyder amends Michigan Income Tax Act

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Written by: Mike Riley, CPA

On May 25, 2011, Governor Rick Snyder signed legislation amending the Michigan Income Tax Act. The new legislation affects 2012 tax returns. Many taxpayers will see an increase in their Michigan income tax – particularly as a result of changes made to the calculation of the Homestead Property Tax Credit. Of course, the staff at Robert F. Murray & Company is available to help answer any questions you may have.

Important changes that you should be aware of are as follows:

Tax Rate:

Rate remains unchanged for 2012 at 4.35%.
For 2013 and each tax year thereafter the rate is 4.25%.

Exemptions:

Personal exemption for 2012 is set at $3,700.
Personal exemptions will be indexed for inflation for 2013 and thereafter.
Repeal of the Special exemption for seniors and for unemployment compensation greater than 50% of AGI.
Special exemption for disabled and exemption for disabled veterans remain unchanged.

Deductions/Subtractions:

Repeal of the $600 deduction for children (age) 18 and under.
Repeal of the Renaissance Zone deduction.
Removes both the gross income and the related expenses from oil and gas production if the gross income was subject to severance tax.

Non-Refundable Credits:

Repeal of the credit for city income taxes.
Repeal of the credit for public contributions.
Repeal of the credit for contributions to homeless shelters, food banks and community foundations.
Repeal of the credit for automobile donations.
Repeal of the credit for college tuition and fees.

Refundable Credits:

Reduces the Earned Income Tax Credit from 20% to 6%.

Property Tax Credit:

Available for homes with taxable values of less than $135,000.
Credit phase out begins at $41,000 of total household resources and is reduced by 10% for each $1,000 increase. Complete phase out at $50,000 of household resources.
For senior claimants: Full Credit of 100% if total household resources are $21,000 or less and reduced by 4% for each additional $1,000 in total Resources until $30,000 is reached. For total household resources of $30,000 to $41,000 senior claimants receive 60% of the credit.
All other claimants are eligible for 60% of the tax credit.
Household income (under the old rules) is now replaced by TOTAL household resources which EXCLUDES losses from business, rentals and royalties and Net Operating losses.

May

What Considerations Should be Made in Drafting Buy-Sell Agreements?

Categories: Business, Planning & Strategies

Tags: business valuation, buy-sell agreements, FMV, independent valuation

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By: Heather I-D Graham, CPA, CVA

Drafting Buy-Sell Agreements requires that special consideration be given to a number of special rules that affect valuations for estate and gift tax purposed. For example, options to acquire property at less than FMV and restrictions on the right to sell property are generally disregarded in determining value. An independent valuation, or the assistance of a valuator in deriving a formula approximating FMV at the date of the agreement helps insure the proper tax result of the Buy-Sell agreement. Buy-Sell Agreements also have numerous other non-tax issues, all of which can be enhanced by a proper valuation formula.

The business valuation formula can be different or each business, depending on the industry, risks, and case circumstances. If you need professional assistance, pelase give us a call.

May

2013

Categories: Business, Individuals

Tags: 2013 taxes, tax rate increase, taxes and election

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Written by: Keith Frame, CPA

We haven’t talked much about it. We have not yet done much planning in consideration of it. I think most of us CPAs believed it would never come to be (and still don’t in some cases). But the year 2013 is set to usher in a wave of tax increases that will cost all taxpayers dearly.

Not only do the temporary Bush tax cuts disappear, but new taxes appear to fund Obamacare. A brief rundown of changes affecting individual taxpayers is as follows:

Tax rates increase across the board with the top marginal rate rising from 35% to 39.6%
Capital gains tax rates rise from 15% to 20%
Tax rates on dividends increase from 15% to your marginal income tax rate which could be as high as 39.6%
Reduction of the child tax credit from $1,000 to $500
A new .9% hospital insurance tax on wages in excess of $250,000 for married taxpayers filing a joint return ($200,000 for single taxpayers)
A new 3.8% tax on net investment income for married taxpayers with income in excess of $250,000 ($200,000 for single taxpayers). Net investment income includes interest, dividends, capital gains and rental income

There are several strategies that should be considered as we get closer to the year 2013:

Arrange to receive income in 2012 instead of 2013 if possible
Sell profitable investments this year – if you are considering the sale of an asset with a significant capital gain, selling in 2012 will result in a capital gain rate of no more than 15% plus avoiding the 3.8% tax on investment income
Reduce exposure to taxable dividends – it might make sense to include dividend paying stocks in tax-deferred accounts and purchase growth stocks and tax exempt bonds in taxable accounts
Distributions from tax-deferred accounts are not included in investment income so this gives taxpayers an additional incentive to maximize retirement plan contributions

Taxes will be THE hot topic during this year’s presidential election. We don’t expect to see much action on these issues prior to the election as the candidates weave and dodge on their real positions.

The effect of these increased taxes on the economy in general, the housing market and the stock market will not be a positive one. The outcome of the election and the last month of this year will dictate planning decisions for many of our clients.

May

Flow-Through Withholding Law: Some New and Some Old

Categories: Business, Michigan Business Tax

Tags: CIT, MBT, Michigan Corporate Income Tax, Michigan Withholding

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Written by: Scot Smith, CPA

NEW MICHIGAN CORPORATE INCOME TAX (CIT) EFFECTIVE JANUARY 1, 2012

With the new Michigan Corporate Income Tax replacing the old Michigan Business Tax effective January 1, 2012 we want to inform you of a new law regarding flow-through income tax withholding responsibilities:

Michigan based partnerships, “S” corporations and Limited Liability Companies (also known as flow-through entities) are now required to withhold and pay Michigan corporate income tax on a quarterly basis at a rate of 6%, if:

The partner, shareholder or member (K-1 recipient) is a “C” corporation, and
The business income of the flow-through entity is over $200,000.

Michigan business income is Federal taxable income adding back bonus depreciation and the domestic production activities deduction, if any. Withholding and payment of income taxes is required quarterly based on the K-1 recipients’ distributive share of income, using Form 4917. In addition, the withholding requirement only applies to Michigan-based sales, so a proration will be necessary if there are sales in other states.

If the flow-through entity has K-1 recipients who are also flow-through entities, it must be determined who the ultimate taxpayer is to determine if there should be Michigan corporate income tax withheld at 6% or Michigan individual income tax withheld at 4.35%.

OLD LAW REGARDING NON-RESIDENT MICHIGAN WITHHOLDING

If the K-1 recipient is a Michigan non-resident individual, the flow-through entity is required to withhold and remit Michigan income tax at a rate of 4.35% on their distributive share of income regardless of the amount of the flow-through entity’s business income.

In addition to the quarterly forms and remittances noted above (Form 4917), Form 4918, Annual Withholding Reconciliation Return is due by February 28th.

May

Get Your Quickbooks File Up-to-Date

Categories: Business, Individuals

Tags: quickbooks

Comments: No

Written by: Lisa Whyte, CPA

If you use QuickBooks, you understand that we use your data to prepare your tax return. You may not realize that we don’t simply take your numbers and use them as is. We typically verify the accuracy of your accounts.

We frequently need to make some adjustments to correct your QuickBooks balances. If our adjustments are not entered in your QuickBooks file, then your balances will remain incorrect. If you have received adjustments from your accountant for your 2011 tax return, please be sure to enter them. I personally prefer to use (when possible) the QuickBooks Accountant’s Copy because it allows clients to simply import our adjustments into their file.

Please review the adjustments that your accountant gives you. Some adjustments, such as recording depreciation, we expect to do every year. Other adjustments, such as reclassifying an expense, may signal that transactions have been improperly recorded. Discuss these adjustments with your accountant; they may need you to start recording transactions in a different manner.

After you have entered our adjustments, discussed with your CPA what transactions need to be recorded differently, and followed these recommendations your QuickBooks reports will be more accurate.