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““Annual Year End Tax Planning and Strategies- Annual Year End Tax Planning and Strategies- Must Know Information for 2009 & 2010”Must Know Information for 2009 & 2010”

November 18, 2009

E-Seminar / Conference Call

Host:Mat Sorensen, Attorney At Law

Special Guests:Mark J. Kohler, CPA, Attorney- KKO LawyersBrian K. Brown, CPA- Kohler and Eyre CPAs

Dustyn Johnson, CPA- NumberWon Accountants

www.kkolawyers.comTelephone 435.586.9366Facsimile 435.586.9491

© KKO Lawyers, LLP 2009

www.kohlereyrecpas.comTelephone 435.865.5866Facsimile 435.586.9491

© Kohler & Eyre CPAs, LLC 2009

www.numberwonaccountants.comTelephone 435.865.7820Facsimile 435.586.7702

© NumberWon Accountants, LLC 2009

Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler Ostermiller & Sorensen, LLP, Kohler & Eyre CPAs, LLP, NumberWon Accountants, and Inc It, Inc. is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs.

Instructor NotesInstructor Notes

© Kyler Kohler Ostermiller & Sorensen, LLP 2009

1. Get Organized.2. Get your QuickBooks files up to date

and your checkbooks are reconciled. This will give you the opportunity to take advantage of many of the tax planning techniques discussed below.

3. Gather any credit card statements.4. Print out reports to determine income

and expenses for year-end.

Understanding the Power ofUnderstanding the Power ofBook Keeping at Year EndBook Keeping at Year End

S-Corporation SalaryS-Corporation Salaryfor Year End for Year End

Salary/Dividend SplittingSalary/Dividend Splitting

Sole-Proprietorship

Limited LiabilityCompany S-Corporation

100kRevenue

50kExpenses

50kNet Income

Self Employment Tax 15.3%

$7,500 (approx)

Before regular income taxand itemized deductions

100kRevenue

50kExpenses

21,750kNet-Income from S-Corp

No Self Employment tax on the S-Corp Flow Thru Income

$3,327 SAVINGS!! (approx)

Before regular income taxand itemized deductions

25kSalary

3,825kEmployment taxes(approx)

•This is sample of what one taxpayer may choose to report as payroll. Each taxpayer should analyze their individual situation for the amount of payroll that is appropriate.

Maximize Your Retirement PlanMaximize Your Retirement PlanContributionContribution

Contribution / Deduction 09 & 10

• IRA (Traditional/Roth): $5,000 - $6,000 if you are over 50 years old extra $1K.

• SIMPLE Plan: $11,500 - $14,000

• 401(k), 403(b), 457 Plans: $16,500 with 25% match up to $49,000

• SEP: Maximum $49,000 or 25% of compensation

• Other Defined Benefit Plans: •From $50,000 to $300,000

Phase out limitations/Minimum Payroll amounts

• Single AGI Phase out: 55k – 65k•Roth 105k – 120k

• Married AGI Phase out: 89k – 109k• Roth 166k – 176k•GONE IN 2010 for ROTH

• Equal to Salary amount, not to exceed $11,500, or $14,000 if using catch up provisions

• Catch up provision of $5,500 if over 55 by end of the year.

•Salary Calculations will be specific to each plan using the participant’s age and salary

Retirement PlanningRetirement PlanningDEADLINES:DEADLINES:

• Existing IRA (Traditional/Roth) contributions: 4/15/2010

• Traditional to Roth conversions: 12/31/2009

• Employee contributions to a 401(k): 12/31/2009

• Employer contributions: By tax filing deadline, including extensions

• Note: In order for a self-employed individual or an employee to make a contribution in 2009 or take the accompanying deduction, the Plan must be adopted (or created) by 12/31/2009.

Maximizing Medical Maximizing Medical ExpenseExpense

DeductionsDeductions

- Insurance may be deductible on 1040 if self-employed

ItemizedDeductions

Health SavingsAccount (HSA)

Health Reimbursement

Arrangement (HRA)

- Everything else limited to 7.5% AGI

- Must maintain high deductible insurance policy ($1,150/$2,300)

- Must utilize 3rd party admin

- Fixed payments, balances carry forward.

- $3,000 Individual- $5,950 Family

- No insurance requirement

- Self-administered

- No limits

- Reimbursement procedure

THE HEALTHY HIGH EXPENSES

Paying spouse or children Paying spouse or children before Year Endbefore Year End

S-Corp or C-Corp

Director fee

Employee15.3% FICA

FamilySole Prop

or SMLLC

Pay Children-NO FICA

Standard Deduction$5,700 – 2009

for earned income

Service or management

Fee

FamilyLLC

Over age 18 Under age 18Must be owned 100%

by Mom and/or Dad

Retirement Plan orHealth Reimbursement Plan

OPTION 1

OPTION 2

OPTION 3

529College Savings Plan

Maximize Vehicle ExpensesMaximize Vehicle Expenses

Business2009 – 55 cents

Medical/Moving2009 – 24 cents

Charitable2009 – 14 cents

- Fuel, repairs, maintenance, etc..- Depreciation- Be aware of Depreciation limits * If 6000lb+ vehicle then deduct up to $25,000- If Truck with 6ft bed or greater then deduct up to $250,000

* Recent changes

ALTERNATIVEFUEL CREDITS

1. Fuel Cell2. Lean Burn3. Hybrid4. Alternative Fuels

* $ Savings + Credits + Environment!!

-Business % of Interest on Auto Loan- Business % of

Interest on Auto Loan, parking, business use % of property tax.

*Always keep mileage records if there is personal use

MILEAGE SUV/TRUCK DEDUCTION

Utilizing Cost SegregationUtilizing Cost Segregationand Depreciationand Depreciation

With CostSegregation

Without Cost Segregation

Assumption- $260,000 residential rental purchased in 2009, with a Land value of $65,000 (25%), $20,000 in 5-year property, and $24,000 in 15-year property. Remaining $151,000- Building.

Beware of Depreciation Recapture at Ordinary Rates!

Depreciation Expense- $29,862

*Potential Tax Savings - $9,320

Depreciation Expense w/ §179 -$37,862

Depreciation Expense- $6,795

* Assuming 25% Federal Rate and 5% State.

Gulf Opportunity ZoneGulf Opportunity ZoneGO ZoneGO Zone

- Properties purchased in certain Louisiana parishes or Mississippi counties

- 50% bonus depreciation

- Senate Bills 1761 and 1861 to extend through 12/31/10

- Small Rental Assistance Program (SRAP)

– 5 year forgivable loan up to $40,000

– Must meet certain holding requirements

– Low income (capped rents)

First Time Home Buyer CreditFirst Time Home Buyer Credit(American Recovery & Reinvestment Act Amendment)(American Recovery & Reinvestment Act Amendment)

– Up to $8,000Up to $8,000

– Calculate by 10% of value of home up to $8K. Calculate by 10% of value of home up to $8K.

– Only effective until April 30, 2010 (must close by June 30Only effective until April 30, 2010 (must close by June 30 thth))

– Phase out $125K single and $225K married. These WENT UP!Phase out $125K single and $225K married. These WENT UP!

– First time home buyer is someone who has not owned a First time home buyer is someone who has not owned a home in the last three years.home in the last three years.

– NO REPAYMENT REQUIREMENT, unless you don’t stay for 3 NO REPAYMENT REQUIREMENT, unless you don’t stay for 3 years.years.

– Claim Credit on 2009 or 2010 Tax Return.Claim Credit on 2009 or 2010 Tax Return.

– You don’t have to be a new home buyerYou don’t have to be a new home buyer. There is an additional . There is an additional separate separate $6,500$6,500 credit for buyers who have owned a principal credit for buyers who have owned a principal

residence for at least 5 years.residence for at least 5 years.

Understanding Acceleration Understanding Acceleration or Deferral of or Deferral of

Income/ExpensesIncome/ExpensesGenerally, you should defer income if at all possible. But in certain instances it may pay to accelerate income, for example:

• Too many deductions: If your itemized deductions exceed your taxable income, you should accelerate as much income as possible to fully utilize them.

• Change in income level: Anticipated changes in employment or gains from the sale of assets, etc. next year that could bump you into a higher bracket, making the tax on the accelerated income lower this year.

• Change in filing status: An upcoming marriage or divorce that will put you in a higher tax bracket may warrant the acceleration of income this year.

Understanding Acceleration Understanding Acceleration or Deferral of or Deferral of

Income/ExpensesIncome/ExpensesHere are a couple examples of how to do it:

• Year end bonus: Negotiate with your employer the timing of the bonus.

• Collect receivables: The timing of your collection may be critical.• Payment of expenses: Prepay or defer. Timing, timing, timing. • Incentive Stock Options: Exercise the option and dispose of the

stock (it has to make sense). • IRA or Plan Withdrawals: In the event that you are over 59 ½, you

might consider making withdrawals. • Installment Notes: The sale you made in a previous year can be

undone if you need the income this year rather than in the future. (Early pay-off; Use the note as collateral for a loan; or Sell the note to a third party) Any of these will trigger the otherwise deferred gain.

• Dividends: Timing, timing, timing.

Thank You!!

For more information, please contact us at one of the following:

www.kkolawyers.comTelephone 435.586.9366Facsimile 435.586.9491

© KKO Lawyers, LLP 2009

www.kohlereyrecpas.comTelephone 435.865.5866Facsimile 435.586.9491

© Kohler & Eyre CPAs, LLC 2009

www.numberwonaccountants.comTelephone 435.865.7820Facsimile 435.586.7702

© NumberWon Accountants, LLC 2009