According to CPA Bill Melton of Abbott, Stringham & Lynch, a Silicon Valley accounting firm, the most generous estate and gift tax provisions we have ever seen are set to expire at the end of December. Melton explains that, while transferring assets directly to the recipient without restrictions may be the quickest and least costly in terms of legal or accounting fees and appropriate for some circumstances, “in the case of very large sums, gifts to minor children, or adults with special needs, transferring your assets into trusts may be the best tax strategy as well as a more appropriate alternative to direct gifting.”
In The News
San Jose, Calif. – September 24, 2012 – According to CPA Bill Melton of the Silicon Valley accounting firm Abbott, Stringham & Lynch, the top personal income tax area of concern for tech executives he sees in his client base is equity compensation. “Like all of us, tech executives care about how much tax they’re paying, and there are ways to minimize their tax exposure when receiving stock awards,” says Melton.
“Firms can take action now to correct three common problems that can be costly and time-consuming when you get to the audit process,” says CPA Carol Wagner of Abbott, Stringham & Lynch. To close out your year efficiently and prepare for an audit, Wagner suggests that you review the following “sticky areas” now with your finance team, CPA and lending sources.
The IRS issued new temporary repair and maintenance regulations, Section 162 and Section 263(a), that will likely increase the tax liability of contractors on their 2012 tax returns, according to CPA Rob Trammell, a principal at the accounting firm of Abbott, Stringham & Lynch. “The new regulations fundamentally change the definition of a ‘unit of property’ in a way that significantly restricts the expenditures that can be expensed,” said Trammell.
This tax season was marked by increased IRS scrutiny of 1099 compliance, according to Abbott, Stringham & Lynch Tax Manager Jonathan Laddy, and it is “a trend likely to continue.” Laddy says, “The hidden costs of non-compliance can be significant, but there are steps your company can take now to reduce your risk.”
“If you feel that your loan covenants are unreasonable, the problem may be that your bank does not understand what drives your business,” says Carol Wagner, a principal at the Silicon Valley accounting firm of Abbott, Stringham & Lynch. Wagner advises, “Review your business’ key performance indicators with your accountant or management consultant in relation to the loan covenants. If there is a disconnect between what the bank is expecting and your key performance indicators, go to the bank and request a review.” Wagner says that loan covenants based on inappropriate key performance indicators can adversely affect a business’ line of credit, constraining cash flows and reducing investments.
“Many tax rates are set to increase in 2013,” says Rob Trammell, a principal at the Silicon Valley accounting firm of Abbott, Stringham & Lynch. “This means taxpayers will want to plan now, and monitor that plan to ensure they take appropriate action throughout 2012 before tax rates increase next year.” Trammell says if you wait until next tax season when you file your 2012 return to assess, plan and take action, it may be too late to fully enhance your tax position. Trammell says the scheduled 2013 rate increases include the tax rate on ordinary income, additional tax on investment income for high-income individuals, and long-term capital gains tax rates, “As you consider the impact of these increases, one of the questions you’ll want to ask yourself is does it make sense for me to accelerate income into 2012.”
With the 2012 Tax Season approaching, Abbott, Stringham & Lynch, a CPA firm headquartered in San Jose, provides this tax guide to the media concerning some key issues businesses and individuals should be aware of.
Abbott, Stringham & Lynch Principal of Tax and Construction Rob Trammell, CPA, has been elected to the Builders’ Exchange of Santa Clara County’s board of directors for a three-year term beginning January 2012. The Builders’ Exchange is a member-run, nonprofit association of licensed contractors, suppliers, and construction-related professionals founded in San Jose in 1893. According to the Builders’ Exchange, their goal is to provide a central location to review current construction blueprints and to collect timely construction information.