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I am a Sarasota
, Fl. Luthier, who happens to own and operate a small C.P.A.
firm. I have been in practice for over fifteen (15) years,
and a Member of the American Institute of Certified Public
Accountants (A.I.C.P.A.) and the Florida Institute of Certified
Public Accountants (F.I.C.P.A.). I am a N.A.S.D. Arbitration
Judge/Arbiter, Florida Supreme Court Certified, Family and
County Court Mediator and Florida Supreme Court Certified
Arbitrator.
While you
may call me anytime, to discuss a tax issue, it is best
to consult your own, personal, C.P.A. If you don’t
have one, GET ONE ! Don’t wait too long as some elections
have time limits as to when they must be filed to be effective
for the upcoming year. A C.P.A. is trained, tested, and
certified, to help you make sound business decisions. He/she
usually has many years experience dealing with the I.R.S.
and with many different types of businesses. He/She is licensed,
that means there is a License to lose. Every State has a
Department of Professional Regulation, and each is very
adamant about monitoring CPA’s. Rest assured that
the CPA you hire is aspiring to give you the very best professional
advice available.
Well it’s
almost “Time to File” once again. There are
many changes for 2005 and many in the works for 2006 . Make
sure you set an appointment with your C.P.A. early so you
can take full advantage of them. Many changes in 2006 require
you act now ( i.e. making the “S” election).
In this article
I will discuss some of the new changes and updates that
may have an affect on you this year.. Obviously I can’t
discuss them in depth or with too much detail as it would
require much more space than allowable in this magazine.
Let’s start with some basics:
Changes
affecting Individuals (1040 filers):
1)
Tax rates for 2005 remain the same at 10,15,25,28,33,and
35 percent. The tax brackets have been adjusted for inflation
so make sure you look them up. You may be pleasantly surprised
to find you are in a lower bracket!
2)
You are generally required to file a return if Gross Income
exceeds as follows:
- SINGLE
- under 65 - $8200; Age 65 and older $9200.
- MARRIED
JOINTLY - both under 65 - $16,400 ; one spouse age 65
or over - $17,400; both age 65 or over - $18,400.
- HEAD
OF HOUSEHOLD - under 65 - $10,500; over age 65 - $11,750.
- MARRIED
SEPARATE – under 65 - $13,200; over age 65 - $14,200.
(Most people don’t file in this category because
it usually results in a higher tax bill).
3)
Personal exemption amount has increased to $3200.
4)
Standard
Deduction – increased to $10, 000. for Married filing
joint; $7300 for Head of households; and $5000. for Individuals.
5)
Special rules for D.C. enterprise zone capital gains/losses.
6)
“Above the Line” Credits/ Expenses
– many same as before
7)
Clean Fuel and Electric Car credits – see
your CPA , they are still available and now have even more
models on the approved list.
8)
Many of the credits that were available last year have been
extended to this year. So make sure you ask your CPA about
them.
Business
Expenses:
1)
Automobile Expenses – The Two methods, as
before, remain: 1)Standard Mileage or 2) Actual Costs. You
can choose either as long as you follow the rules. For Standard
Mileage, Congress has changed/raised the rates to 40.5 cents
for business mileage thru August 31st. and raised it even
more to 48.5 cents for business mileage September 1 through
year end ! Many people will likely want to use the standard
mileage method this year.
2)
Depreciation of Business use Automobiles –
is maxed out at $2960 for first year depreciation. Unlike
prior years there is no Special Bonus depreciation ( 30%
and 50% prior). That means, the Lexus you paid $95,000 for
is going to be depreciated over many years. On the other
hand if you did buy a new SUV, with a 6000 lb. rating or
over ( but less than 14000lbs.), you are eligible for a
$25000. section 179 expensing deduction. That can really
help eliminate some of that tax bill !
3)
Depreciation and I.R.C. 179 – Still available
and this year you can take sect. 179 expensing of $105,000
of qualified assets up to your business net income limit.
You CAN NOT create a loss using I.R.C. 179. But you can
expense enough equipment so that your bottom line becomes
zero!
4)
Qualified Leasehold Improvement and Restaurant property
– This is a major change. Prior to this new asset
categorization all leaseholds and restaurant real property
improvements were written off as commercial real property
over 39 years. NOW Congress has created this new classification
that allows you to write off these assets over 15 years.
This is a long/much needed change that will make a lot of
people happy.
5)
Katrina – Related Relief – There are
many credits and relief provisions created for taxpayer
affected by Hurricane Katrina. Too much detail for here.
Look it up if you think you might qualify.
6)
S.E.P. - and similar/other retirement plans are
at all time highs for funding. For example the S.E.P. limit
for the amount of contributions made by an employer is at
$42000. or 25% of the employees compensation (whichever
is lower). It is expected to go even higher for 2006. Word
to the wise…see your CPA and get that retirement plan
into action. You can really put away a good deal of money
and your company gets a tax deduction for it !!!
7)
Health Savings Accounts (HSAs) – these are
still available and contributions to the plan are either
deductible or excluded from income. Now is the time to get
one set up.
8)
Charitable Contributions made by a Corporation
– normally limited to 10 percent of taxable income
, does not apply to cash contributions from August 28, 2005
through December 31, 2005 for the relief efforts related
to Hurricane Katrina.
There are
many other deductions, credits and other rules/laws/treatments
that are new for 2005. Some are taking affect in 2005 or
phasing out/ in 2006. The laws governing how a taxpayer
handles these issues are very complex. As such, I highly
recommend that you seek out a CPA to assist you with the
preparation of your Personal and Corporate income tax returns.
Now is the time to make many of the beneficial elections
and to do some tax planning. Don’t wait until the
end of the year…it’s usually too late then.
Until
next time…Cheers!
David S
Bland, CPA, Luthier, Musician and other things...
Contact
me:
cpa@siestakeyguitars.com
snail
mail to:
David S Bland, CPA, Luthier
2100 Constitution
Blvd. Suite 118
Sarasota,
Fl. 34231
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