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If you own foreign investments, you may have an additional federal tax filing requirement this year. Read more

Friday, February 3rd, 2012

If you own foreign investments, you may have an additional federal tax filing requirement this year.

Form 8938, “Statement of Specified Foreign Financial Assets,” is due April 17, 2012, and is filed as part of your individual tax return. You’ll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements.

What are the reporting requirements? They vary depending on where you live and your filing status. For example, say you’re married and live in the United States, and you’ll file a joint tax return for 2011. You’ll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2011 is more than $100,000, or if the value exceeds $150,000 at any time during the year.

Tip: In some cases, you may also need to file Form 8938 for tax year 2010.

Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies.

You’ve probably noticed the reporting requirements are similar to the “Report of Foreign Bank and Financial Accounts” (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you’ll still need to complete by June 30.

Penalties for failure to file Form 8938 start at $10,000. We urge you to contact us so we can help you evaluate your filing requirements for foreign investments.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Accounting, General, Individual Tax Issues, Tax Preparation, Tax Updates | No Comments »

Do your children need to file a 2011 tax return?

Wednesday, January 18th, 2012

Check your children’s need to file a 2011 tax return. A return is needed if wages exceeded $5,800, the child had self-employment income over $400, or investment income exceeded $950. If the child had both wages and investment income, other thresholds apply. Contact us for any filing assistance you may need.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Accounting, Individual Tax Issues | No Comments »

Bring your corporate minutes up to date

Tuesday, January 10th, 2012

Writing up the minutes of board of directors’ meetings is not exactly a high priority for most business owners. Yet well-documented corporate minutes can provide valuable supporting evidence if your tax positions are ever questioned.

Minutes are especially important where any kind of related-party transactions occur, such as payments, loans, or distributions between the company and its owners. For example, the IRS may challenge the amount of compensation paid to a business owner as unreasonable. Corporate minutes that document the factors considered by the board in approving the compensation can be a strong defense against such a challenge.

Another area that receives close scrutiny from the IRS is the amount of earnings that are retained in the business rather than distributed as taxable dividends. A penalty applies to retained earnings over a certain limit unless they can be justified by business needs. Corporate minutes can be a strong piece of supporting evidence if they clearly spell out the reasons that the company needs to retain funds — for example, to purchase assets or for working capital.

If your company has a tax-qualified retirement plan or a stock option plan, the minutes should show decisions by the board adopting or modifying the plan. They should also document annual decisions on the percentage of contribution to profit-sharing plans and any decisions on fringe benefits, such as medical reimbursement accounts.

Corporate minutes need not be lengthy, but they should provide a clear record of corporate actions and the business factors that were considered when those actions were taken. You should think of your minutes as a key element of your tax planning strategy.

If your corporate minutes need updating, contact your attorney and take care of this important bit of business housekeeping.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Accounting, Business Tax Issues, Tax Updates | No Comments »

Put financial gifts on your holiday shopping list

Monday, December 19th, 2011

When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come.

Some financial gift options you might consider:

* U.S. savings bonds. Savings bonds are used by many families to introduce children to the savings concept. I bonds are indexed for inflation and can provide relatively attractive rates of return.

* IRAs (regular or Roth). For 2011, you can contribute the lower of $5,000 or the earned income of the child. An early financial start can produce amazing benefits from compounded interest accumulated over several decades.

* Stocks or mutual funds. Equities are a good way to introduce a child to the investment world.

* Collectible stock certificates. Vibrant framed certificates are available for many companies. A Disney, Dream Works, or Coca-Cola stock certificate can provide a colorful reminder of the importance of investing for the future.

* Collectibles. Postage stamps or coin collection kits can provide years of enjoyment and form the basis for some life-long hobbies. An interesting gift idea is an official U.S. mint proof coin set for the year the child was born.

Please call us if you would like to review the tax issues related to any of these financial gift options, especially if you are considering a larger amount.

David Bradsher, CPA is a Washington DC / Northern Virginia area CPA who works with small business owners and non profit leaders on a monthly basis to provide them with guidance and advice on how to grow their organizations, minimize their tax liabilities and increase their bottom line.

Posted in Accounting | No Comments »

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