If you prepared your 2011 personal taxes with the help of a federally authorized tax practitioner, chances are, you’re glad you did.

That’s because this year was chock-full of new IRS rules and regulations in an effort to help taxpayers save money – and help the IRS better track and recoup what is legally theirs.

If you received a 1099-B for “covered securities” for 2011, you may have noticed some important changes for information pertaining to those securities. For the first time, securities brokers had to provide cost basis information for covered securities. Using a new form titled Sales and Other Dispositions of Capital Assets (IRS Form 89490), filers were required to report 2011 securities transactions, summarizing the information on a Schedule D.

The new reporting can be cumbersome, with these changes coming as a result of recent legislation that phases in new cost basis reporting rules over a three-year period.

Feeling a little unsure about your tax preparation? A free “look” by one of our federally authorized tax practitioners can help you make sure you’re “covered” when it comes to your covered securities!

There seems to be no end to the ins and outs of capital gains and losses, and as federally authorized tax practitioner, we at Sapurstein & Associates spend lots of time answering questions about them.

Here are some of those that keep popping up this year:

• How is a term defined? Capital gains and losses can be classified as long-term or short-term. If you hold a property more than one year, your capital gain or loss is long-term; one year or less is short-term.
• What if you have long-term gains in excess of your long-term losses? The difference is normally a net capital gain. Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.
• What tax rates apply to net capital gains? Long term capital gain tax rates are generally lower than rates on earned income. For 2011, the maximum capital gains rate for most people is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.
• What if your capital losses exceed your capital gains? Then you can deduct the excess on your tax return to reduce other income, such as wages, up to an annual limit of $3,000 (or $1,500 if you are married filing separately).

Good news:  If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

Figuring tax on capital gains is a matter of simple arithmetic, but you have to know which numbers to add and which to subtract!

When it comes to tax preparation, spending a no-obligation hour with the professionals at Sapurstein & Associates can “subtract” headaches and “add” up to a great result!

At our Indianapolis CPA offices, we see plenty of confusion during tax preparation season regarding claiming capital gains and losses on personal income tax returns. We are careful to explain to our clients that virtually everything they own and use for personal or investment purposes is a capital asset.

Capital assets may include your home, household furnishings, boats or cars, as well as more traditionally thought of financial assets such as stocks and bonds held in a personal account.

When you sell a capital asset, the IRS has an interest in the outcome of the sale. The difference between the amount you paid for the asset and its sales price is a capital gain — or capital loss.

The following are some helpful facts about how gains and losses can affect your federal income tax return:

• Just about everything you own and use for personal or investment purposes is a capital asset.
• When you sell a capital asset, the difference between the selling price and your ‘basis’ (in general, what you paid for it) is a capital gain or a capital loss.
• Per IRS rules, you must report all capital gains.
• The IRS allows taxpayers to deduct capital losses on investment property, not on personal-use property.

This year, there is a new, clearer form called ‘Sales and Other Dispositions of Capital Assets’ (Form 8949), used to calculate all capital gains and losses. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated.

For more new IRS information about reporting capital gains and losses, click HERE for Publication 17, Your Federal Income Tax; or HERE for Publication 550, Investment Income and Expenses.

Like keeping your life simple?  Leave the “driving” to the CPA’s and federally authorized tax practitioners at Sapurstein & Associates.

There seems to be no end to the ins and outs of capital gains and losses, and as federally authorized tax practitioner, we at Sapurstein & Associates spend lots of time answering questions about them.

Here are some of those that keep popping up this year:

• How is a term defined? Capital gains and losses can be classified as long-term or short-term. If you hold a property more than one year, your capital gain or loss is long-term; one year or less is short-term.
• What if you have long-term gains in excess of your long-term losses? The difference is normally a net capital gain. Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.
• What tax rates apply to net capital gains? Long term capital gain tax rates are generally lower than rates on earned income. For 2011, the maximum capital gains rate for most people is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.
• What if your capital losses exceed your capital gains? Then you can deduct the excess on your tax return to reduce other income, such as wages, up to an annual limit of $3,000 (or $1,500 if you are married filing separately).

Good news:  If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

Figuring tax on capital gains is a matter of simple arithmetic, but you have to know which numbers to add and which to subtract!

When it comes to tax preparation, spending a no-obligation hour with the professionals at Sapurstein & Associates can “subtract” headaches and “add” up to a great result!

At last count, there were close to two million charitable organizations in the United States. Each organization is required to register with the IRS, and each is subject to strict regulations. The IRS keeps a very close watch on charities and the people who contribute to them. Exactly what is the IRS watching for? Simply put, tax evasion.

In offering tax and accounting advice, the CPAs at Sapurstein & Associates believe in telling true stories to get important points across.

Here’s one cautionary tale:

Several years ago a married couple — both medical doctors — transferred appreciated stock and cash to a charitable foundation. This foundation was created “to benefit not only charitable causes, but also doctors and their families.”

The foundation kept the donated assets in a separate account for each donor. The foundation’s program summary stated “donors and their family members may work for and be compensated . . . for good works they perform on behalf of their family public charities.” This segregated foundation account also allowed donors to direct the use of these funds, specifically including college loans.

The two-doctor couple had the foundation make college tuition payments on behalf of one of their sons. The son signed a “loan agreement” promising to repay the funds five years after graduation, or to provide designated amounts of charitable services. The couple’s taxes listed this as a charitable contribution.

The IRS denied the charitable contribution deduction, and the Tax Court upheld that denial.

Why? The taxpayers had retained control over the stock and cash donated to the foundation. The court also found the couple liable for capital gains tax on the foundation’s subsequent sale of the appreciated stock.  The couple was charged an “accuracy-related penalty” (under Sec. 6662).

This couple was taught a lesson – the hard way. At Sapurstein CPAs we don’t want our clients to take the chance of incurring accuracy related penalties. What lesson can you gain from the doctors’ story?

When donating to a charitable organization and especially when handling foundation funds, consult a CPA or attorney (or both) to be sure you “stay within the lines” – IRS guidelines, that is.

By all means, be charitable.  But, be careful! The penalties for non-compliance can be stiff!

At last count, there were close to two million charitable organizations in the United States. Each organization is required to register with the IRS, and each is subject to strict regulations The IRS keeps a very close watch on charities and the people who contribute to them. Exactly what is the IRS watching for? Simply put, tax evasion.

In offering tax and accounting advice, the CPAs at Sapurstein & Associates believe in telling true stories to get important points across.

Here’s one cautionary tale: Several years ago a married couple — both medical doctors — transferred appreciated stock and cash to a charitable foundation. This foundation was created “to benefit not only charitable causes, but also doctors and their families.”

The foundation kept the donated assets in a separate account for each donor. The foundation’s program summary stated “donors and their family members may work for and be compensated . . . for good works they perform on behalf of their family public charities.” This segregated foundation account also allowed donors to direct the use of these funds, specifically including college loans.

The two-doctor couple had the foundation make college tuition payments on behalf of one of their sons. The son signed a “loan agreement” promising to repay the funds five years after graduation, or to provide designated amounts of charitable services. The couple’s taxes listed this as a charitable contribution.

The IRS denied the charitable contribution deduction, and the Tax Court upheld that denial.

Why? The taxpayers had retained control over the stock and cash donated to the foundation. The court also found the couple liable for capital gains tax on the foundation’s subsequent sale of the appreciated stock.  The couple was charged an “accuracy-related penalty” (under Sec. 6662).

This doctor couple was taught a lesson – the hard way. At Sapurstein CPAs we don’t want our clients to take the chance of incurring accuracy related penalties. What lesson can you gain from the doctors’ story? When donating to a charitable organization and especially when handling foundation funds, consult a CPA or attorney (or both) to be sure you “stay within the lines” – IRS guidelines, that is.

By all means, be charitable.  But, be careful! The penalties for non-compliance can be stiff.

In an interesting verdict by the Federal Tax Court, the CPAs at Sapurstein and Associates have learned that one can write off rental losses even if the property owner does not have current tenants.

Here’s the story: After buying a home, the homeowner moved away and rented her property to tenants for several years. After her last tenant moved out, she was unable to rent the property again, despite her best efforts. The homeowner, who counted on the rent as income, showed the lost rental income as a net loss on her income tax returns last year and the year before that.

An IRS examiner initially denied the homeowner her rental losses. However, after a Tax Court review, the woman won her case. The Tax Court OK’d her rental losses for the two years after the last tenant left.

In the Court’s view, the property was still held for income-producing purposes and because the homeowner actively participated in the rental activity, the Court found in her favor.

This is good news for rental property owners everywhere – especially in the down economy. If you have rental properties, you need to know your rights when it comes to filing taxes. Talk to the small and medium-sized business CPA specialists at Sapurstein & Associates. We can help you with up to the minute IRS guidelines and answer all your questions.

Barry Sapurstein, CEO of Sapurstein & Associates states that your capital gains reporting for 2011 is likely to be more complicated.

The IRS has made it necessary to use two tax forms in 2011, Form 8949 and Schedule D, for more complete records and to be able to cross-check seller information, resulting, they hope, in increased federal tax income for the government.

The reason for the additional forms is because of the basis reporting rules that went into effect for securities bought after 2010 and sold in 2011 and later. All sales will be listed on Form 8949, and the totals must now be carried to Schedule D.

Beginning this tax year, separate 8949s must be filed for sales where the basis is reported by the broker, for sales where the tax basis isn’t reported, and for any disposition where no 1099-B is received reporting the gross proceeds.

In this way, the IRS will be able to cross-check the basis information it receives with the sellers’ returns.

Barry and Leanne can help you navigate through the IRS regulations for federal income taxes. Your first hour is free –so give Sapurstein & Associates a call to set up an appointment.

The CPAs at Sapurstein & Associates have learned that several key retirement plan ceilings will be higher next year. This is good news for many near-retiring baby boomers.

New 2012 Benefit Plan Ceilings:

• The maximum 401(k) contribution rises to $17,000 in 2012. That’s up $500 over 2011. So those born before 1963 can put in as much as $22,500 beginning next year. New contribution limits apply to 403(b) and 457 plans as well.
• The ceiling on SIMPLEs will remain at $11,500 in the coming year. Folks age 50 or older in 2012 can put in an additional $2,500. Plan contributions can be based on up to $250,000 of salary next year.
• The pay-in limitation for DEFINED contribution plans increases to $50,000 in 2012. That’s a $1,000 increase for Keogh plans, profit sharing plans and the like. Anyone making over $115,000 is highly paid for plan discrimination testing. And the benefit limit for pension plans is set to rise to $200,000 next year.
• There’s no change in the pay-in limits for IRAs and Roth IRAs. The limits remain at $5,000, plus $1,000 more for anyone who was born in 1962 or earlier.

Give Barry or Leanne a call or leave a note on our website — if you need additional information.

Are you familiar with the Housing and Economic Recovery Act? You should be. It had far reaching implications for the entire country, many of the provisions still yet to come into effect. One that is now in effect is Section 3091. Section 3091 of the Housing and Economic Recovery Act of 2008 requires that third party payment processors report customer transaction volumes to the IRS with a 1099-K form. The provision was enacted to ensure that business owners file accurate tax returns.

Here’s how it works: If your company generates $500,000 in credit card sales in 2011, which is processed by a merchant services company, HERA section 3091 requires that the processor inform the IRS of your $500,000. This report is transmitted to the IRS through a form (1099-K) with another copy sent to your company.

The law went into effect for tax years beginning after December 31, 2010 which means that we are now well into the first reporting period. Big Merchant Processing has until February 28, 2012 to transmit this information to the IRS (extended to March 31 if they file electronically). Unlike other 1099 forms that simply require annual totals, the 1099-K requires a monthly breakdown of payments processed.

Be sure you and your accountant are prepared this tax season. Your records must match those from your processor. Got a question related to business taxes? Ask the experienced small to medium sized business CPA professionals at Sapurstein & Associates. They have the answers or can obtain them. The CPAs at Sapurstein & Associates recommend beginning to plan for this provision if you haven’t already done so.