IRS

401K plan contribution limits for 2011

The 401K contribution limits for 2011 remain unchanged at $16,500, and $22,000 for those age 50 and above.

Schanel & Associates, PA, Certified Public Accountants, located in Jupiter, FL, provides tax, accounting, and consulting services to clients throughout Palm Beach County, South Florida and the United States.

The information contained in this communication is intended as general guidance on matters of interest only. The application and impact of laws can vary widely based on specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions, or inaccuracies in information contained in this transmission. The information contained herein should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisors. Pursuant to Regulations Governing Practice Before the Internal Revenue Service, any tax advice contained in this communication, unless explicitly provided otherwise, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

IRS

IRS announces that “itemizers” will have to wait

 

From CNN money:

The IRS said that it needs until mid- to late-February to reprogram its processing systems because Congress acted so late this year cleaning up the tax code. The bill, which includes deductions for state and local sales taxes, college tuition and teacher expenses, wasn’t signed into law until Dec. 17.

As a result, the 50 million taxpayers who itemize their deductions will have to hold off for a bit before they file. Of course, not everyone files early: only about 9 million of the 140 million U.S. tax filers filed in January or February of last year.

This means that if you itemize, you will not be able to file your tax return with the IRS until mid to late February. It does not mean that you cannot begin the process of having your return prepared, you just won’t be able to finalize it and submit it to the IRS until the IRS gives the okay. 

 

Schanel & Associates, PA, Certified Public Accountants, located in Jupiter, FL, provides tax, accounting, and consulting services to clients throughout Palm Beach County, South Florida and the United States.

The information contained in this communication is intended as general guidance on matters of interest only. The application and impact of laws can vary widely based on specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions, or inaccuracies in information contained in this transmission. The information contained herein should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisors. Pursuant to Regulations Governing Practice Before the Internal Revenue Service, any tax advice contained in this communication, unless explicitly provided otherwise, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

IRS

How long should you keep your tax records?

I am frequently asked by clients how long they should retain their personal income tax records. The records supporting your income tax return may have to be produced if IRS (or a state or local taxing authority) was to audit your return.

In general, the IRS only has three years from the date you filed the return (or, if later, three years after the return was due) to assess additional taxes. For example, if your 2009 individual income tax return is filed by its original due date of April 15, 2010, the IRS will have until April 15, 2013 to assess a tax deficiency against you. If you file your return late, the IRS generally will have three years from the date you filed the return to assess a deficiency.

However, there are exceptions to the three-year rule. The assessment period is extended to six years if the IRS believes that more than 25% of gross income is omitted from a return. Also, if you don’t file a tax return, the IRS has no specific time period which limits their ability to assess additional taxes. If the IRS claims that you never filed a return for a particular year, keeping a copy of the return will help you to prove that you did.

While it’s impossible to be completely sure that the IRS won’t at some point seek to assess tax, retaining tax returns indefinitely and supporting records for six years after the return is filed should be adequate. If you file your returns electronically, be sure to get copy for your records.

One important caveat to this rule applies to a transaction that may occur in one year, but for which the amount that is taxable depends upon a transaction from an earlier year. For example, suppose you bought a home in 1986 for $100,000 and made $20,000 of capital improvements in 1993. To determine the tax consequences of the sale, it’s necessary to know your cost basis. If you sell your home in 2010, and your return for that year is audited, you may have to produce records relating to the original purchase in 1986 and the capital improvement in 1993. So those records should be kept for at least six years after your 2010 return is filed instead of just six years after the transactions they relate to occurred.

Similar considerations apply to other property which is likely to be bought and sold-for example, securities. In particular, remember that if you reinvest dividends to buy additional shares of stock, each reinvestment is a separate purchase of stock. The records of each reinvestment should be kept for at least six years after the return is filed for the year in which the stock is sold.

So, there is a lot of information that you can safely shred. Just keep in mind the six year rule, and avoid the mistake of destroying something that may fall outside the six year window, but might be critical to substantiating a transaction or deduction in the future.

By Glenn Schanel, CPA

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Glenn Schanel, CPA, CFP® is the President of Schanel & Associates, PA, Certified Public Accountants. The firm provides tax, accounting, and consulting services to clients throughout South Florida and the United States.

The information contained in this communication is intended as general guidance on matters of interest only. The application and impact of laws can vary widely based on specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions, or inaccuracies in information contained in this transmission. The information contained herein should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisors. Pursuant to Regulations Governing Practice Before the Internal Revenue Service, any tax advice contained in this communication, unless explicitly provided otherwise, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

IRS

IRS Announced 2006 Retirement Limits

IRS ANNOUNCES NEW RETIREMENT SAVINGS
CONTRIBUTION LIMITS FOR 2006

The following is a summary of the annual contribution limits for retirement savings plans for 2006:

Plan Type	Contribution Limit	Age 50 & Older “Catch Up”
Traditional and Roth IRA	$4,000	$1,000
SIMPLE Plans	$10,000	$2,500
401(k) and 403(b)	$15,000	$5,000
SEP Plans	Lesser of 25% of compensation, or $44,0000	N/A
Defined Contribution Plans	Lesser of 100% of compensation, or $44,000	N/A

Please contact our office at (561) 624-2118 if you have any questions.

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