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DiSabatino CPA Blog

DiSabatino CPA Blog

A blog by Michael DiSabatino CPA with topics on Tax Savings, Business, Management and more...

Mike's weekly post usually concentrated on tax saving strategies.

Non-taxable Income for Those in the Armed Services

Non-taxable Income for Those in the Armed Services

One of the benefits available to the men and women of our Armed Services and, in many cases, staff supporting them is the ability to exclude items from taxable income. Here is a list of the most common items that may often be omitted from income tax.

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Michael DiSabatino Nominated as SFV Trusted Advisor

August, 2014 - Michael DiSabatino was nominated for the San Fernando Valley Business Journal's Valley's Trusted Advisors 2014. The business journal announced the 2014 Trusted Advisors Awards, where the Journal honors the important work of accountants, bankers, attorneys, insurance professionals and wealth managers in the greater San Fernando Valley region. There were a total of 80 professionals nominated for the top 20 awards.  Michael DiSabatino, nominee, was proud to be nominated amongst the top advisors in the area, and wishes to thank all those whose continued confidence in our firm made this nomination possible. 

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How to go into business with your spouse and succeed

How to go into business with your spouse and succeed...

Starting and running a business is rarely a safe or simple process, and doing so with one's spouse creates an additional layer of complexity. Whether that complexity will have a positive or negative effect depends on several factors. Here are some of the questions you need to discuss before going into business with your spouse.

* How well do you work together at home? If you cooperate and collaborate for domestic chores, you'll probably carry that pattern into your workplace. If you bicker constantly over how to do the laundry or maintain the yard, working together in business might be a risky option.

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Avoid five common mistakes in your 401(k) plan

Avoid five common mistakes in your 401(k) plan

Participating in a 401(k) or similar retirement plan is a tax-advantaged way to save for retirement. If you have the option of participating in a 401(k) plan, avoid these five common mistakes.

* Failing to participate fully. Too many employees opt out of the plan or don't contribute as much as they can afford. At a minimum, try to set aside enough to receive the full employer-matching contribution. For example, your employer might offer to match 30% of the first 3% of payroll. That match is equivalent to a 30% first-year return on the amount you contribute.

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College Tax Savings: 2014 EditionEvery little break helps

 

College Tax Savings: 2014 Edition
Every little break helps

 

With the start of school just around the corner, it is hard to ignore the high cost of funding a college education. Thankfully, there is some help within the tax code. Outlined here are three of the more popular ways to reduce your taxes in 2014 as a result of this educational expense burden.

Who Qualifies:

Typically you, your spouse, or a dependent who can be claimed as an exemption on your individual tax return

Qualified Expenses:

Tuition and fees, course-related books, supplies and equipment

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Dealing with finances after the death of a spouse

The death of a spouse can be a devastating experience, both emotionally and financially. As the survivor, you'll have to make important decisions while you're in what could be the most vulnerable and distracted stage of your life. The suggestions that follow might at least help ease your financial stress.

  • Don't make major decisions right away. Put off selling your house, moving in with your grown children, giving everything away, liquidating your investments, or buying new financial products.
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Oops! You forgot something on your tax return. Now what?

Whew! The rush is over once your personal income tax return is done for another year - or so you thought, right up until the moment you discover information you forgot to include.

Now what?

The action you take depends on the type of information you forgot. For instance, say you reported all your income on the return you mailed to the IRS. But now you realize you neglected to attach a copy of your wage statement.

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Will business growth bring more profits?

Will business growth bring more profits?

My business has not been growing but it seems as though I add more people and equipment without increasing my net profit. What am I doing wrong?

Answer: Let's see what happens in a typical company as the business grows. Suppose that a company is netting $50,000 on total sales of $1,000,000 (a 5% net profit). If this company has a 40% gross profit (on items sold), a $100,000 increase in sales should add $40,000 to the bottom line. I say "should" because the increase in sales may cause the need for more equipment, space, or inventory.

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Understanding Tax Terms: Basis

Understanding Tax Terms: Basis
Covering the bases on basis

Basis is a common term to the IRS, but one that probably does not enter into your everyday conversation. Understanding what it means, however, can have an impact on the taxes you pay.

Definition

Per the IRS;

Basis is generally the amount of your capital investment in a property for tax purposes. Use your basis to figure depreciation, amortization, depletion, casualty losses, and any gain or loss on the sale, exchange or other disposition of the property.

In plain language, basis is the collection of tax rules that establishes the cost of your property. Once the tax basis is established, you can then apply that basis to determine whether there is a gain or loss on your property when it is disposed, exchanged or sold. Unfortunately, it is not quite that easy. There is also Cost Basis, Adjusted Basis, and Basis other than cost.

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Beware the Tax Torpedo - Large retirement account balances can cause Social Security tax problems

Beware the Tax Torpedo
Large retirement account balances can cause Social Security tax problems

W
hen you reach age 70 ½, the trigger requiring distributions from qualified retirement accounts is pulled. This annual Required Minimum Distribution (RMD) applies to Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403(b) and other defined contribution plans. Amounts not distributed on a timely basis could be subject to a 50% penalty. Thankfully, the RMD rules do not apply to Roth IRAs.

The RMD rules are established to ensure the deferred tax benefit for certain retirement accounts does not go indefinitely into the future. In other words, the IRS now wants their cut of your tax-deferred savings accounts. The amount you must take out each year is based upon your age, your spouse’s age and your filing status.

The Tax Torpedo

The Tax Torpedo refers to the surprising event of having your Social Security Income taxed. Depending on your income and filing status, up to 85% of your Social Security Benefit could be subject to income tax.

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Capital Lease or Operating Lease?

Capital Lease or Operating Lease?

Businesses often choose to lease long-term assets rather than buy them for a variety of reasons

  • the tax benefits are greater to the lessor (think seller) than the lessees (the person making payments)
  • leases offer more flexibility in terms of adjusting to changes in technology and capacity needs.

Lease payments create the same kind of obligation that traditional loan payments create, and have to be viewed in a similar light. If a business is allowed to lease a significant portion of its assets and keep it off its financial statements, in particular, the Balance Sheet, the reader of the statements will be given a very misleading view of the company's financial strength, by not showing all the debt. Consequently, accounting rules have been devised to force businesses to reveal the extent of their lease obligations on their books.

There are two ways of accounting for leases.

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In the Military? Special Tax Benefits May Apply

In the Military? Special Tax Benefits May Apply

There are special tax benefits to members of the U.S. Armed Forces. If you or someone you know is in the military, prior to filing a tax return it makes sense to review your situation. Outlined here are some of the more common.

Combat Pay Income Exclusion.

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18 IMPORTANT TIPS!

18 IMPORTANT TIPS!

  1. All of the following are under 140 characters for tweets:
  2. May 15 is the deadline for calendar-year nonprofit organizations to file 2013 information returns.
  3. A recent court ruling will limit IRA rollovers to one per year applied to all IRAs owned by the taxpayer, not one per year, per IRA.
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I Need a Copy of My Tax Return...

I Need a Copy of My Tax Return...

R
etaining copies of your federal tax return is important. Not only will you need the return in case of audit, but the tax return is often used to secure student aid, obtain loans, purchase a home or business, plus much more. What can you do if you cannot find a copy of your tax return?

Bullet
ArrowProfessional Preparers - A professional preparer is required (in most States) to provide you with a copy of your tax return.  Our firm always provides printed copies, which can be archived.  Additionally, you may ask us for a PDF/digital copy of the return.

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New limit on IRA rollovers

WARNING!!   New limit on IRA rollovers

For years, the IRS interpreted the IRA rules to allow taxpayers to do one rollover per year in each IRA he or she owned. In doing a rollover, the taxpayer is not taxed on the funds taken from the IRA so long as the funds are redeposited into an IRA within 60 days of the withdrawal.

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Consider a disciplined investment strategy

Consider a disciplined investment strategy...

In today's rabbit-fast world, it pays to remember that the tortoise won the race. For investors, dollar-cost averaging - a slow and steady investment plan - can be a winning strategy.

With dollar-cost averaging, you invest a set amount of money on a regular basis, typically in a mutual fund. The idea of investing a fixed dollar amount at regular intervals is simple, but the benefits add up. Here are some advantages offered by dollar-cost averaging:

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Save you Vacation Home Deduction!

Save you Vacation Home Deduction!

You can enjoy a vacation home and cut your taxes - with some careful planning and a little discipline.

The IRS rules can be complex and potentially restrictive, so a word of caution is in order as you plan the use of your vacation home.

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Prepare, prepare, prepare if you want to get your bank loan

Prepare, prepare, prepare if you want to get your bank loan...

Getting a bank loan for your business may be more difficult than usual in today's troubled economy. However, if you give your bank a thorough, organized, and well-supported loan proposal, you'll increase your chances of getting the money your business needs.

* Apply early. Applying early shows that you're planning, not reacting. Also, if you wait until the last minute, you're likely to leave out necessary information.

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Is a business valuation useful? Yes!

Is a business valuation useful? Yes!

For many business owners, a business appraisal or "valuation" can furnish vital planning information and help mitigate risk. Consider the following:

* Establishing a verifiable value for your business can show whether assets have appreciated at a reasonable rate. If not, the firm's strategy may need to be adjusted.

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Is your business dependent on too few?

Is your business dependent on too few?

Many small business owners share one problem, especially in their early days. It's being over-reliant on a single customer or supplier for much of their business. If you're in that position, your business is operating with higher risk. Just as with investments, you don't want all your eggs in one basket. Your goal should be a well-diversified portfolio of customers and suppliers.

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