Frequently Asked Questions

A CPA In Reno Explains How Getting Married Changes Your Tax Situation

[youtube]http://www.youtube.com/watch?v=7kTXgQ86kZM&feature=channel_video_title[/youtube]

So your big day has come and gone, now what? You have made it through the chaos of the wedding and I am sure taxes are not on your mind, but it is important to understand how getting married can change your tax situation. A married couple should take some time to sit down with their CPA in Reno to discuss how their tax situation will change now that they are married.

Don’t Forget The Little Things

After the marriage, there is usually a move. Whether it is one part of the couple moving in with the other or the couple moving into a new place, a new home means a new address. It is important to remember to update your employer, the post office and even the IRS of your address change. You want to make sure that all of your tax information will arrive at the proper address.

Another thing that commonly happens after marriage is the changing of a last name. Whether a spouse changes their last name to the other’s or adds a hyphen between the names, it is important to remember to notify your employer, the post office, the IRS and, well, everybody. The last thing you want come tax season is confusion over who you are.

Filing Jointly

After getting married, the couple usually files their taxes jointly. By filing a joint tax return, the couple doubles the limitations and deductions that you otherwise would get if you filed two single returns. However, there are certain differences in the tax code where the “marriage penalty” comes into play.

This is a situation where filing jointly causes higher tax than you would pay if you filed two single returns, even though the taxable income is the same. This has largely been eliminated for the lower income tax brackets through 2010, but would apply once you reach a taxable income of $137,300 (in 2010) or higher. For example, assume that a married couple earned $120,000 for one spouse and $100,000 for the other, then the tax as a married couple would be $44,607.50. If they each filed single, the total tax would be $43,782.50, or $825 less than joint filing. The “penalty” increases with the amount of taxable income earned as the couple.

When In Doubt Ask For Advice

After getting married, you do not need the added stress of taxes on your plate. If you are concerned that you may have missed something or just want clarification on how you should file as a couple, you should contact a CPA in Reno. Depending on your tax situation, the CPA will be able to tell you the best way to file. The CPA in Reno will also be able to talk you through the name change and address change process. They may not be able to help you with the actual steps, but they will able to remind you of anything you may have missed.

Reno’s Best CPA,

Tim Nelson

A CPA In Reno Explains How Getting Married Changes Your Tax Situationencpaswp2016-09-22T17:32:13-07:00

A Reno Certified Public Accountant Discusses Divorce and Taxes

[youtube]http://www.youtube.com/watch?v=e1SauCRh6uU&feature=relmfu[/youtube]

Going through a divorce is a very stressful time. You need to figure out child custody, child support, division of property, etc… However, there is one thing that may have not made it on your list of things to remember-taxes.

Marital Status on The Last Day Of The Year Determines Tax Filing Status

Many things come into play as far as taxes are concerned when going through a divorce. The first thing to know is that you are supposed to file based on your status on the last day of the tax year. That means if you get divorced on December 28, you file single for the entire year! Similarly, if you get divorced on January 2, you will need to file jointly (or married filing separately) for the prior year.

Don’t Forget About Alimony

Alimony may be a factor, and is governed by the divorce decree or separation agreement. Note that if you get into a situation where Spouse A owes Spouse B for alimony, and Spouse B owes child support back to Spouse A, do not NET them! The IRS only allows you to take the NET amount as alimony. If you pay the entire amount, and get a separate check back, you can take the FULL amount.

Refund Checks Can Be Tricky

Refund checks (or direct deposits) are always an exciting factor. If you are due a refund with your former spouse, make sure it goes to a neutral party who will give you ONLY the refund you are entitled to. If your former spouse gets you to sign on the back of the check and cashes it into their account, you may never see the refund! Similarly, do not direct deposit it into an account you do not have control of! My recommendation is to have a check sent to the Certified Public Accountant’s office. Then have both spouses come in to sign it. The CPA can then cash the check and remit the appropriate amounts to each spouse.

Get Help!

Even before you get divorced, it is important to get advice to determine the tax issues at hand. For example, what if he gets the primary residence and you get the rental house to live in? The tax bases are likely very different, and you will end up owing tax on a gain of a former rental that he can exclude from his residence since it qualified as a primary residence. There are many other factors to consider in divorce taxation. The IRS publication number 504, Divorced or Separated Individuals, deals with many of these issues, but it is important that you discuss all of these with your Reno Certified Public Accountant before they bite you!

Reno’s Best CPA,

Tim Nelson

A Reno Certified Public Accountant Discusses Divorce and Taxesencpaswp2016-09-22T17:23:20-07:00

Is a Roth IRA Good or Bad?

[youtube]http://www.youtube.com/watch?v=He76DTgDVAw[/youtube]

Like a knife, a Roth IRA is neither inherently good nor inherently bad. In the hands of a thug, a knife can be a deadly weapon. In the hands of a skilled surgeon, a knife is a life-saving device!

Roth IRAs are a special type of individual retirement account (IRA). When “traditional” IRAs were originally made available, it was on a tax-deductible basis. You could contribute up to $3,000 and if you were not participating in another retirement plan or did not make too much money, you could deduct the $3,000 on your tax return.

For 2010 and 2011, the amounts are $5,000 for people under 50 years old and $6,000 if you are 50 or older. If you are a participant in another retirement plan, you cannot contribute to a normal IRA if you make more than $109,000 in AGI (married filing jointly), or $66,000 (single). In a Roth IRA, you cannot contribute if you make more than $177,000 in AGI (MFJ) or $120,000 (single).

Under a Roth IRA, the difference is that these contributions are NOT tax deductible. The tradeoff is that if you meet certain conditions, such as holding the account for at least five years, then the increase in value of the account (interest, dividends, and capital gains) are ALSO not taxable!

Generally, the younger you are, the better it is to start putting into a Roth. The number of years of tax-free earnings will far outweigh the benefit of a traditional IRA. Conversely, the older you are, the less advantageous the few years of tax-free earnings will be. Your income tax bracket also comes into play here. If you are going from a high income tax bracket in your earning years and into a low one in your retirement years, perhaps the deferral is not as attractive.

In 2010, there was a big frenzy to convert traditional IRAs to Roth IRAs. The government was putting this forth as a taxing measure to offset some spending. If you converted to a Roth IRA, be sure to speak with a tax advisor to get the best tax treatment on the conversion.

My biggest concern over Roth IRAs is what I like to call the “Social Security dilemma.” They TOLD us that Social Security would never be taxed, until they needed the revenue from it! I fear that the same thing will happen to Roth IRAs. That they will not allow the tax deduction up front, but will later decide that Roths were a “bad investment” and decide to tax the earnings down the road!

For all of your investment, retirement and financial questions make sure to contact a trusted and experienced financial advisor.

Reno’s Best CPA,

Tim Nelson

Is a Roth IRA Good or Bad?encpaswp2016-09-22T16:39:47-07:00

Ask A Reno CPA: When Is Online Income Taxable?

Hi there,

I have seen many articles about the amount of home-based online businesses that are started up each month and there are many more articles about how big Facebook and other social platforms are getting and how people are making money on them. The problem is there is sometimes a blur between what types of online behavior are taxable and what are not.

Online Garage Sales

For example, if you are having an online garage sale, like selling some items on Craigslist or other such sites, you usually do not have to report sales. This is usually true if you sold the item for less than your cost.

Selling Appreciated Assets

However, if you are selling appreciated assets like paintings, antiques or collectibles and you are selling the item for more than your cost, you usually have to report the transaction as a reportable gain.

Online Businesses or Reoccurring Sales

There are also individuals who either have an online business or have taken the garage sale theory to the next step by buying and reselling items. Any time you may be seen as running a business, especially with how blurry the line is online, you should contact a Reno Certified Public Accountant.

The last thing you want to do is get into tax trouble because of your actions online. Remember when you are making money you should always think about the potential tax implications. When in doubt, ask a Reno CPA about the situation. They will be able to tell you whether you owe taxes and, if so, they will likely be able to help you find deductions.

If you have further questions about this topic you can read more on the Internal Revenue Services’ Website: http://www.irs.gov/businesses/small/industries/article/0,,id=209314,00.html or you can contact Evans Nelson & Company CPAs today. (Contact us online or call 775-825-6008)

Reno’s Best CPA,

Tim Nelson

Ask A Reno CPA: When Is Online Income Taxable?encpaswp2016-09-22T16:13:50-07:00

Business Consulting | Start Up Businesses

[youtube]http://www.youtube.com/watch?v=5iZVXM5yWz4[/youtube]

Have you recently opened a business? Are you starting to find some holes, or need help in your processes and aren’t sure how to fix them? A Reno CPA can help you find the best ways to ensure your business adapts to all rapidly changing needs a new business can go through.

Meeting with your CPA quarterly can keep you on track too. Are you aware you have to pay income taxes on an individual basis for your business earnings? What do you need to do with a person who is helping you out–should they be an employee or a general contractor? Understanding the advantages and disadvantages of both will help you make the best decision for your business—and bottom line.

Evans Nelson & Company CPAs is here to help you with these kinds of questions, decisions and choices. Our business experience and knowledge can help you ensure your new business is financially sound with smart choices that will better enable you to manage your business instead of worry about it.

Say it’s Dec 28th and you realize you have a huge tax liability. What can do you do to avoid paying this? Should you delay income, spend more income, or increase your expenditures before the end of the year to save money? Purchasing capital equipment, or a computer you need may help to actually save money, and help keep your business financially sound.

Many new business owners may not know these effective ways to save money, minimize your tax liability, and many other things that can affect the business long and short term, tax wise and financially. Certified Public Accountants can help businesses that have gotten started but really don’t have a good handle on where they can save money and avoid problems. Reno CPAs are here to help move your business forward to that next level of success.

Business Consulting | Start Up Businessesencpaswp2016-09-22T16:08:55-07:00

Starting Your New Business

[youtube]http://www.youtube.com/watch?v=z8lQMCz5xlc[/youtube]

Are you starting a new business but need some direction? Many potential and new business owners aren’t sure what questions to even ask!

Starting a new business can be exciting adventure or a wide awake nightmare. Think of it as a journey to a place you’ve never been before, while getting there in a borrowed car.

You can try to wing it, maybe jump in the car and just drive. But where do you end up when you don’t have a map to follow? Taking the wrong turn can be painful. Do you really understand the tax consequences of some of the new business choices you are thinking of making?

You may have driven a car before, or even owned another business, but learning and getting answers to questions you should ask before you start, or even while you are on your way, help make any journey (or business) more fun and productive.

There are many frequently asked questions potential and new business owners ask, such as “What business should I choose?” and “What is a business plan and why do I need one?” with plenty of standard answers and advice.

But what about the questions new business owners should ask when they are just starting out? “How much should I pay myself” is a frequently asked question, but the question you should ask is “How should I pay myself?” Or even “Should I pay myself?” How you compensate yourself can have tax ramifications that may be delayed, avoided or eliminated if the propershould askquestions are asked beforehand.

Choosing the right entity during the development stage of your new business can have huge tax implications in the future. A CPA can help you determine the best choice for your business and situation. At Evans Nelson, we have several members of our staff with the business background you need to help inform you of the choices and alternatives. We know what the should ask questions are; determining those answers can help save you valuable time and money!

Get a map for your next adventure. Talk to a Reno CPA with small business consulting experience before starting your new business, ask those frequently asked questions, and be open to the should ask questions–they can help you from getting lost!

Starting Your New Businessencpaswp2016-09-22T15:46:16-07:00

The Mortgage Debt Forgiveness Act

[youtube]http://www.youtube.com/watch?v=BC90YLfX6gg[/youtube]

Are you “upside down” with your mortgage? Do you know how the tax implications of walking away from your home or having short sale can affect you? How can a Reno CPA help you with these types of mortgage issues? What are the tax implications of a short sale, foreclosure and other options? The Mortgage Debt Forgiveness Act ends this year. Do you understand what the benefits can be for you?

Millions of homeowners around the country are “upside down” with their mortgages. Being “upside down” means you owe more on the mortgage than the house is worth. Real estate values have fallen dramatically, especially in Nevada.

So, many people are asking “What are the tax implications of getting rid of my house? Should I short sell it? Foreclose it? Should I stay or just walk away?”

Here’s an example. A house is worth $200,000 but the mortgage is for $400,000. The Bank will usually send a 1099 or 1099C (cancelation of debt) form for that difference of $200,000.

The IRS will normally require you to pay on the tax owed for that $200,000. But you didn’t “receive” that money, the house is still the same house, and you got rid of it. It isn’t worth $400,000 anymore, you can’t sell it for $400,000 but the mortgage is still for that amount.

The Mortgage Debt Forgiveness Act, which runs through the end of 2012 (December 31, 2012) says you don’t have to pay tax on that $200,000.

Many people are worried about that huge tax liability. They are not sure if it would be better to try to short sell or foreclose on their house before the end of 2012 to be able to use the Mortgage Debt Forgiveness Act before it expires and avoid that tax.

Nevada has had its fair share of foreclosures and other mortgage issues. It is very important to sit down with a Reno CPA to discuss the options and tax implications of walking away from the house, vs. short selling, foreclosing or simply keeping it.

A Reno CPA can help you determine the best course of action, based on the many factors of your personal situation, and can help save you thousands of dollars (along with saving you time and frustration) by helping you determine the best choice for you.

Contact Evans Nelson & Company, CPAs for more information today.

The Mortgage Debt Forgiveness Actencpaswp2016-09-22T15:44:22-07:00

Previous 23