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Best Savings Account Interest in Durango Colorado - PDF


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   Just a quick chat from your accounting firm
                                                                                   March 2009

                                                                       NEW PROVISIONS
                                                                       Energy Tax Credits
                                                                       Considering an investment in alternative
                                                                       energy property? The act extends the
                                                                       credit for purchases of energy-efficient
                                                                       improvements to existing homes, adds
                                                                       energy efficient biomass fuel stoves as
                                  Hello Durango.                       property eligible for a consumer tax credit,
                                                                       includes an 8 year extension for residen-
                                                                       tial energy efficient solar, eliminates the
                                                                       $2,000 cap on credit for solar electric
                                                                       investments, provides for tax credits for
                                                                       residential small wind energy property and
                                                                       geothermal heat pumps, and includes a
                                                                       $2,500 – $7,500 credit for plug-in electric
                                                                       drive passenger cars and light trucks.
  What a ride it’s been the last year or so. I don’t think any of
  us are surprised that the economy rises and falls throughout         Alternative Minimum Tax (AMT) Relief
  history. It’s just a bit unnerving when we are riding one of the     According to the IRS, more and more
  down cycles.                                                         taxpayers are affected by the AMT.
                                                                       The AMT patch protects most middle-
                                                                       income taxpayers by increasing the AMT
  FredrickZink & Associates is optimistic about the future             exemption amounts ($46,200 for single
  of our economy — both nationwide and locally. And we’re taking       taxpayers and heads of household,
  steps every day to assist our clients and our community to assure    $69,950 for married filing jointly, and
  a smooth ride through some difficult times.                          $34,975 for married filing separately).
                                                                       In addition, taxpayers can now off-set
  Sid Zink is the chair elect for the Colorado Society of CPAs. You    regular tax and AMT liabilities with
  might recall that Chuck Fredrick was the chair for the Society a     non-refundable tax credits.
  few years ago. This involvement is important for our firm and        EXTENDED PROVISIONS:
  benefits our clients in that we maintain a close connection to our   •	 The	exclusion	from	gross	income	for	
  industry and its emerging trends. We’ve added some new people           discharges of qualified principal
  to our fantastic team. Please stop by and welcome Laura E. Lewis,       residence indebtedness originally
  Gina Allman, and Ginny Rogers. Full professional biographies are        enacted in the Mortgage Forgiveness
  available on our website.                                               Debt Relief Act of 2007 has been
                                                                          extended through 2012.
                                                                       •	 The	provision	allowing	the	itemized	
  It’s tax season, so we’ll keep this short. We just wanted to send       deduction of state and local sales taxes
  a message of encouragement and enthusiasm, and offer to assist          rather then state and local income
  you and your business this year and in the years ahead.                 taxes has been extended.
                                                                       •	 The	above	the	line	deduction	for	
  Happy 2009.                                                             qualified higher education expenses
                                                                          has been extended.
                                                                       •	 The	above	the	line	deduction	for	
                                                                          teacher’s educational expenses
                                                                          (up to $250) has been extended.
  Chuck Fredrick, CPA                 Sidny Zink, CPA

                                   Today’s Tax Time Tips
                                   Your	best	strategy	for	minimizing	tax	liability	and	      Keep	in	mind	that	the	value	of	your	itemized	
                                   bolstering your financial position is to stay current     deductions will be reduced if your AGI exceeds
                                   on tax law. However, in a time of sweeping change,        certain limits.
                                   new regulations and unprecedented economic woes,
                                   doing so can be a challenge.                              Above-the-Line Deductions
                                        In 2008, we saw tax law changes that span the        •	   Teacher	classroom	expenses
                                   full range of categories, from tax benefits for middle-   •	   Student	loan	interest
                                   income and energy conscious taxpayers to tax relief       •	   Alimony	expenses
                                   for mortgage-strapped individuals and tax credits for     •	   One-half	of	self-employment	taxes
RETIREMENT                         parents. Yet, what remains constant is the need for       •	   IRA	Contributions	and	one-half	of	contributions	
SAVINgS TAX                        in-depth knowledge when preparing your taxes.
                                                                                                  to SEP, SIMPLE, and qualified plans
                                                                                                  Health	Savings	account	contributions
BREAKS                             TAX SAVINg TIPS fOR 2008                                  •	   Moving	expenses
                                   Tax Saving Tips for 2008 provides an overview of          •	   Penalties	on	early	withdrawals	from	savings	
Individual Retirement                                                                             accounts
Accounts (IRAs)                    key tax law changes that may affect your return,
                                   and the latest information and practical strategies       •	   Tuition	and	fees	deductions
You may contribute up to
                                   for	minimizing	your	tax	bill.
$5,000 to fund a traditional                                                                 Itemized Deductions
or Roth IRA in 2008. Those                                                                   •	 Mortgage	interest,	including	interest	on	home	
age 50 or older can make an
                                   Even	if	you	do	not	itemize	some	above-the-line	              equity loans up to $100,000.
additional catch-up contribution                                                             •	 Points	paid	for	mortgage	or	refinancing
                                   deductions may be available to you. In addition to
of $1,000. Traditional IRA         above-the-line deductions, you can claim the standard     •	 State	and	local	income	taxes	and	personal	
contributions may be deductible    deduction	or	choose	to	itemize	your	deductions.		            property taxes
depending on your AGI and          In	general	you	should	itemize	if	your	total	              •	 Health	insurance	costs	and	medical	expenses	
whether you or your spouse         allowable	itemized	deductions	are	more	than	the	             in excess of 7.5% of AGI
(if filing jointly) are covered    standard deduction, although there are exceptions.           – Prescription eyeglasses, contacts, and
by an employer’s pension plan.                                                                     hearing aids
Roth IRA contributions are not     The basic standard deduction for 2008 is $5,450              – Crutches, canes, and orthopedic shoes
deductible, but the earnings       for single or married filing separately, $10,900 for         – Medical transportation
accumulate tax-deferred and        married filing jointly or qualifying widow(er), and          – Cost of alcohol or drug abuse treatment
may be withdrawn tax-free          $8,000 for head of household. Taxpayers age 65            •	 Charitable	contributions
if you meet the qualified          and older and/or the blind receive an additional          •	 Mileage	and	expenses	associated	with	
                                   standard deduction of $1,050 for married filing              volunteer work
distribution requirements.
                                   jointly or married filing separately, and $1,350          •	 Unreimbursed	casualty	and	theft	losses
                                                                                             •	 Miscellaneous	expenses	(in	excess	of	2%	of	AGI)
Employer-Sponsored                 for single or head of household.
                                                                                                – Income tax preparation software and fees
401(k)s                                                                                         – Job search expenses
Pre-tax contributions to           The standard deduction can be increased up to
                                   $1,000 for a joint return or $500 for a single return        – Investment expenses
employer-sponsored retirement                                                                	 –	Unreimbursed	employee	business	expenses
plans reduce your taxable          if you paid real estate taxes in 2008 but choose not
                                   to	itemize	your	deductions.                                  – Professional investment advisory fees
wages. Matching contributions
and income earned within your
plan are also tax-deferred.
The employee contribution          TAX CONSIDERATIONS FOR INVESTORS
limit for 2008 is $15,500          Long-Term Capital Gains and Dividends | The maximum tax rate on net long-term capital gains remains
($16,500 in 2009). Employees       at 15%. For taxpayers in the 10% and 15% tax brackets, the tax rate on long-term capital gains is zero for
age 50 or older by the end of      2008 through 2010. To qualify as a long-term capital gain, the asset must be held for more than one year
2008 may make an additional        before selling. Capital gains on investments held for one year or less are taxed at regular income tax rates
catch-up contribution of           – as high as 35%. Qualified dividend income from a domestic or qualified foreign company is taxed at a top
$5,000 for 2008 ($5,500            rate of 15% (zero for taxpayers in the 10% and 15% tax brackets in 2008).
for 2009).
                                   Offset Capital Gains with Losses | Net capital losses are fully deductible against capital gains. If your capi-
                                   tal losses exceed your capital gains, you can deduct up to $3,000 against ordinary income ($1,500 if married
                                                       filing separately). Any remaining capital losses may be carried over to the next year.

                                                                                        CHILD	AND	EDUCATION	
                                                                                        RELATED TAX BREAKS

Be prepared                                                                             Dependent Care Credit
                                                                                        Parents who must pay for the care of a
                                                                                        dependent under age 13 in order to work

             for unforeseen events                                                      may be eligible for a tax credit of between
                                                                                        20 and 35% of qualifying expenses. For
                                                                                        2008, the maximum amount of expenses on
                                                                                        which the credit can be claimed is $3,000
                                                                                        for the care of one dependent or $6,000 for
                                                                                        two or more.
On February 22, 2008 disaster struck Durango. A fire started in the duct work at
Seasons Rotisserie & Grill, destroying the restaurant, two neighboring businesses,      Education Tax Credits
                                                                                        Two popular credits can help defray the cost
and damaging five others. A year later, Seasons has announced that they are
                                                                                        of higher education. The Hope Credit, worth
prepared to re-open. Where would you be a year from now if your place of                up to $1,800 for each qualifying student, is
business was destroyed tomorrow?                                                        available for the first two years of college.
     If you’re a business owner ask yourself the following questions: Am I prepared     A Lifetime Learning Credit of up to $2,000
to relocate temporarily? What would happen if any of my suppliers shut down?            per year is available for undergraduate,
Do my employees know what to do in case of an emergency? Do I have the right            graduate, and professional degree courses.
kind of business insurance?                                                             You cannot claim both credits for the same
     According to the Institute for Business and Home Safety an estimated               student in the same year.
25% of businesses do not reopen following a major disaster. Having a disaster           529 Plans
preparedness plan may not prevent a disaster, but it will be an invaluable tool         The tax benefits of 529 college savings
should the unthinkable happen. Here is a list of ideas to help initiate your            plans, which were to expire in 2010,
disaster preparedness plan.                                                             are now a permanent part of the tax code.
                                                                                        These plans give parents and other relatives
•	 Meet	with	your	insurance	provider	and	review	your	policy	for	physical	losses,	
                                                                                        a tax-advantaged way to save money for
   flood coverage, and business interruption. Know what your policy covers              higher education expenses. Funds in the
   and what it doesn’t. Identify what records your insurance company will need          account grow tax-free and withdrawals are
   in an emergency and store them in a safe place. Then create an inventory list        also tax-free if they are used to pay for
   of equipment, computers, software, etc. that you can later provide to your           qualified educational expenses.
   insurance company.
                                                                                        Enhanced or Additional Child Tax Credit
•	 Keep	copies	of	important	records	like	a	building	map,	insurance	policies,	           For 2008, the Child Tax Credit is worth
   employee contact information, bank account information, supplier and client          $1,000 for each qualifying child under age
   contact information, and computer backups in a waterproof and fireproof              17 at the end of the calendar year and who
   container. Keep copies at an off-site location.                                      qualifies as a dependent. The credit begins
•	 Back	up	your	records	and	critical	data	regularly.		Keep	the	backup	off-site.         to phase out when modified AGI exceeds
•	 Create	an	emergency	contact	list	and	plan	how	you	will	communicate	with	             certain limits ($110,000 for married filing
   your employees in an emergency. Make emergency preparedness part of your             jointly, $55,000 for married filing separately,
   company culture and communicate your plan regularly with your employees.             $75,000 for single, head of household, and
•	 Identify	essential	equipment	needed	to	keep	your	business	open	and	create	a	         qualifying widow(er)).
   list of suppliers to replace and/or repair it. Don’t limit yourself to one vendor.
•	 Decide	in	advance	what	you	will	do	if	your	building	is	unusable.	Build	
   relationships with other business owners to use their facilities in the event
   that your building becomes unusable.
•	 If	you	haven’t	already,	buy	a	fire	extinguisher	and	smoke	alarm	and	consider	
   installing automatic sprinklers.
•	 Maintain	an	emergency	supply	kit.	
•	 Maintain	your	HVAC	system	and	make	sure	your	building	meets	current	
   standards and codes.
•	 Develop	a	safety/emergency	response	team	and	provide	the	team	members	
   with proper training.
For	more	information,	visit	the	U.S.	Department	of	Homeland	Security’s	disaster	
preparedness website at www.ready.gov.
                                                                                        Did I receive a
                                                                                        rebate check?
                                                                                        If you’re not certain that you received a rebate check,
                                                                                        or are wondering how much you received, finding
                                                                                        out is easy with the IRS’s How Much Was My 2008
                                                                                        Stimulus Payment? All you need to know is your social
TAX BREAKS fOR HOMEOWNERS                                                               security number, 2007 filing status, and the number of
                                                                                        exemptions you claimed on your 2007 tax return.
Interest and Property Taxes
                                                                                        Go to: http://www.irs.gov and click on “How Much Was
Home mortgage interest on up to $1 million of home acquisition loans secured
                                                                                        My Stimulus Payment?” in the left column under Online
by your principle residence and/or second home is fully deductible. You may also
                                                                                        Services. Follow the instructions to get the amount.
deduct mortgage interest on a home equity loan or line of credit up to $100,000.
Points paid to secure a loan for the purchase or improvements of a principal
residence are usually fully deductible in the year you pay them. Points paid to         EMERGENCY ECONOMIC STABILIZATION
refinance an existing mortgage must be deducted over the life of the loan.              ACT OF 2008. We all know by now that on October 3,
Real estate taxes and local property taxes on all of your real estate are deductible.   2008 President Bush signed into law the Emergency
Exclude Capital gains                                                                   Economic Stabilization Act of 2008, but what does
When you sell your principal residence, you can exclude from income up to               it mean to you? The effects of the act for individual
$250,000 in gains ($500,000 if married and filing jointly). To qualify you must         taxpayers include energy tax credits, alternative
have owned and used your home as a principal residence for at least two years           minimum tax (AMT) relief, and the extension of several
during the five-year period ending on the date of sale. Limitations apply if you        provisions that were set to expire at the end of 2007.
use the property as rental property.

                                       & Associates

        954 East Second Avenue | Durango, Colorado 81301

In times of change, one thing is for sure....
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