Archive for July, 2012

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Jul

Prepared for a Network Issue

Categories: Business

Tags: network down, network failure, network issue, network proglem

Written by: Annette Clark, CPA

Are you prepared?

What plans do you have if your computer or network was to be taken out by a power surge or a storm? Do you have a backup of your data and programs? How long would it take you to get your business running? How long to get to where you were before the crash?

Backup specifics and procedures vary according to the needs of a company. After you develop your procedures, it is important to test, document and verify them. Periodically reviewing your backup and restore process is a key part of ensuring data security.

Delegation of Tasks

It is critical that reliable personnel perform your backup and restore operations. Consider the following questions when deciding how to delegate these tasks:

Who makes the policy that determines what files and computers are backed up, and how is the policy made known?
Who is responsible for performing backups?
If backups occur automatically, who handles interruptions such as error messages?
Who does the backup when the assigned backup operator is unavailable?
To whom is the success or failure of a backup reported? Who notifies the users if a backup fails?

Policy Considerations

Developing a backup-and-restore process and deciding what to back up requires that you either set or comply with company policy. Keep the following issues in mind when determining your backup plans:

What is the policy for backup, and how is your plan in compliance?
Are all modified files to be backed up, or does company policy specify only critical files or the files of certain users, groups, departments, or divisions?
Are any disks or volumes on the computer not to be backed up?
Are users responsible for backing up their own client systems or files stored locally?
Is there a charge-back system for the amount of storage used?

Testing Backup-and-Restore Procedures

Complete verification of the entire backup-and-restore process is critical. Develop backup-and-restore strategies with appropriate resources and personnel, and then test them. Testing backup strategies also demonstrates how much time is required to restore data. A good plan ensures fast recovery of lost data.

Jul

Michigan Income Tax Changes

Categories: Individuals

Tags: income tax personal exemption, income tax rate, michigan individual tax

Comments: No

Written by: Annette Clark, CPA

Michigan Legislature Accelerates Individual Income Tax Rate Reduction

Individual Income Tax Personal Exemption Amount Increased

Public Act 223 of 2012, effective June 29, 2012, will accelerate a scheduled personal income tax rate reduction. The rate will be reduced from 4.35% to 4.25% on October 1, 2012, instead of January 1, 2013.

Public Act 224 of 2012, effective June 29, 2012, will increase the Michigan personal income tax exemption amount to $3,950 from $3,700, beginning October 1, 2012. The amount for the 2012 tax year will be annualized. Beginning January 1, 2014, the exemption will be $4,000. The exemption will continue to be multiplied by the number of personal or dependency exemptions allowed on the taxpayer’s federal income tax return.

Jul

Obamacare

Categories: In The News

Comments: No

Written by: Mike Harter, CPA/PFS, CFP®

Once the Supreme Court ruled on Obamacare, discussions and opinions started to swell about the tax implications in the law. While I am in no way a fan of Obamacare, I think you need to have the facts straight to have an informed opinion.

A recent email that was circulating was passing along wrong information (maybe on purpose to scare readers). The email was talking about the new tax on home sales after 2012. It said that you would be paying a 3.8% tax on the sale price of your home and all real estate transactions. A $100,000 home would be taxed $3,800 and a $400,000 home sale would be taxed $15,200.

Well there is a new tax on unearned income as part of the bill starting in 2013. And yes it is 3.8% and includes capital gains of which your home sale could qualify. However, there are a few more hurdles that must be met before the 3.8% tax is imposed. Hurdle 1 – The adjusted gross income in the year of sale must exceed $250,000 for a married couple and $200,000 for singles. Hurdle 2 – The capital gain must also exceed $500,000 for a married couple and $250,000 for singles. Keep in mind that we are talking about capital gain, not selling price as the incorrect email was alluding too.

The $500,000/$250,000 exemptions only apply to your primary residence. Not your second home and not other real estate properties. So yes, in addition to a capital gain tax (poised to raise to 20% in 2013) an additional 3.8% tax would be tacked on for some taxpayers and transactions.

As you can see, this tax would not hit the majority of real estate transactions that most taxpayers experience and so the amount of dollars raised from this is in question and can not substantially have an impact on the cost of health care. So why have it? Is looks and smells more like class warfare than a key component of the bill.

What do you think?

Jul

IRS Tax Tips

Categories: Tax Tips & Alerts

Tags: irs tax tips, Tax Tips

Comments: No

Did you know that the IRS has Tax Tips listed on their website? You can subscribe to their Tax Tip page and be notified every time there is a new tip available! Just follow this link to the listing of tax tips for 2012 and this linkto subscribe to the newsletter.

Jul

How Long Should You Keep Tax Records?

Categories: Individuals

Tags: electronic tax copies, tax documentation, tax records, taxes

Comments: No

As a rule, keep your tax records and supporting documentation until the statute of limitations runs out for filing returns or filing for a refund. For most taxpayers, that means you’ll want to keep those records for three years following the date of filing or the due date of your tax return, whichever is later. So, for example, if you filed your 2011 tax return on April 17, 2012, you’ll want to keep those returns and those records until April 17, 2015.
If you don’t report all of the income that you should report exactly (if you omit more than 25% of the gross income shown on your return), the statute of limitations is extended. You’ll want to keep those records for six years.
If you file a clearly fraudulent return or if you don’t file a return at all, the statute of limitations never actually runs. In that event, you’ll want to hold onto your records, well, forever (really, it’s much less work to simply file).
Supporting documentation for your tax returns includes not only your forms W-2 and 1099, but also bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
If you claim depreciation, amortization or depletion deductions, you’ll want to keep related records for as long as you own the underlying property. They include deeds, titles and cost basis records. Similarly, if you claim any special deductions or credits, you may need to keep your records a little longer than normal (for example, if you file a claim for a loss from worthless securities or bad debt deduction, you should keep those records for seven years).
If you have employees, including household employees, keep your employment tax records for at least four years after the date that payroll taxes become due or are paid, whichever is later. This should include forms W-2 and W-4, as well as related pay information including benefit forms.
You’ll want to keep your records organized — I recommend arranging them by year — and store them in a safe place. The IRS has also been accepting electronic copies of receipts since 1997 so scan your documents and keep them electronically to save you some space. Just be sure they are legible.

Jul

Health Care Law Upheld

Categories: Business, Individuals

Tags: affordable care act, FSA changes, health care law, health insurance, medical expenses

Comments: No

Written by Scot Smith, CPA

On June 28, 2012 the Supreme Court largely upheld the Affordable Care Act. Individuals should prepare for the following provisions that become effective in 2013:

(1) employer-provided health Flexible Spending Arrangements (FSAs) will be limited to $2,500 per year,

(2) the hospital insurance portion of the FICA tax will be increased from 1.45% to 2.35% for wages over $200,000 ($250,000 if MFJ; $125,000 if MFS),

(3) medical expenses will be deductible as itemized deductions only to the extent they exceed 10% of Adjusted Gross Income (the current 7.5% threshold will still apply to taxpayers who turn 65 before the end of the tax year),

(4) taxpayers with modified Adjusted Gross Income over $200,000 ($250,000 if MFJ; $125,000 if MFS) will be subject to a 3.8% surtax on net investment income (interest, dividends, rents, royalties, capital gains), and

(5) employers who provide qualified prescription drug coverage for Medicare Part D eligible retirees, which is subsidized by the Department of Health and Human Services, will have to reduce their deduction for the coverage by the amount of the excludable subsidy.