No matter what type of work you do, there’s always something new to learn — and when your education is related to your current job, you may be eligible for tax breaks in addition to the satisfaction of increasing your knowledge.

Here are examples of work-related education tax benefits.

• Employer-provided reimbursements. Ask your employer about an educational assistance program. These formal, written plans can provide up to $5,250 of tax-free payments for graduate and undergraduate expenses, including tuition and books.

  Another option: working condition fringe benefits. Your employer can reimburse you for education expenses that you’d otherwise be able to deduct on your personal return. The expenses must relate to your current job — for example, courses taken to improve your skills or courses required for keeping your present position.

• Individual tax deductions. Do you itemize? As an employee, you can claim expenses you pay for education directly related to your current job. Eligible costs include tuition, books, supplies, and travel.

  Don’t have enough to itemize? The tuition and fees deduction is available as an adjustment to income on your federal tax return — with no itemizing necessary. The maximum deduction is $4,000 and income limits apply.

  You can also receive tax benefits when you incur educational expenses in your sole proprietorship. Qualifying costs are deductible on Schedule C of your tax return.

Other education deductions and credits are available when you update work skills. Give us a call if you would like to learn more.

The latest updates to the estate tax rules that took effect in January introduced a new form and a new filing requirement.

The new form is “Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent.” If you’re the executor of an estate opened in 2010, you’ll file Form 8939 when you choose to apply special “basis adjustment” rules. Under these rules, you can elect to increase the basis of certain estate assets passed to spouses and other beneficiaries.

The due date for Form 8939 was extended to January 17, 2012.

Note: If you’re a beneficiary and you’ve already sold property inherited in 2010, the election could affect your individual tax return.

The new filing requirement applies to estates opened in 2011 and 2012. To benefit from “portability,” these estates must file an estate tax return (Form 706), even if a return is not otherwise required.

Why would you want to file a return just to preserve portability? Portability lets married couples shield additional amounts from estate tax by electing to carry any unused portion of the estate tax exclusion from the first estate to the surviving spouse’s estate. The exclusion for each estate is $5 million for 2011 and $5.12 million for 2012.

Please contact us if you would like details about these and other estate tax changes.

Tax Tip of the Week

You’ve probably heard that the IRS has undertaken a new initiative to make sure workers are properly classified as either independent contractors or employees. At issue is the collection of payroll taxes, including FICA taxes (social security and Medicare), which are generally required to be withheld from wages by law.

But did you know some services are specifically excluded from the mandatory FICA rule?

For example, say you work in the election booth for your state or local government. Depending on the agreement your state signed with the Social Security Administration, payments you receive (up to $1,500 for 2011) may qualify for an exclusion from FICA taxes.

Another example: Temporary work you’re hired to do during emergencies, such as fires, earthquakes or floods, can be excluded. The exclusion applies only when you’re a temporary worker. Police officers and firefighters, including volunteer firefighters, do not qualify, even when the work performed is intermittent.

Other exclusions from FICA taxes: Services you provide as a notary public, bankruptcy estate manager, and non-professional personal representative or executor of an estate. If you’re a student or a medical resident working for the college or university where you attend classes, you may also qualify. Just remember all the income you earn from these services is subject to income tax.

If you think an exclusion from FICA taxes applies to services you performed in current or prior years, please contact our office for details.

You might, if your circumstances have changed. For example, say the value of the assets in your new Roth account is currently less than when you made the conversion. Changing your mind could save tax dollars.

Or perhaps you opted to make the one-time election to put off paying the conversion-related federal income tax until this year, and now you need the money for other bills.

In either situation, recharacterizing your Roth conversion lets you go back in time, as if the conversion never happened. You’ll have to act soon, though, because the window for undoing a 2010 Roth conversion closes October 17, 2011.

Before that date, you have the opportunity to undo all or part of last year’s conversion. After October 17, you can change your mind once more and put the money back in a Roth. That might be a good choice when you’re recharacterizing because of a reduction in the value of the account. Just remember you’ll have to wait at least 30 days to convert again.

Give us a call for information on Roth recharacterization rules. We’ll help you figure out if going back is a good idea.

Reductions in business income may have you contemplating how you can cut back on expenses. If one area you’re eyeing is the contributions your business makes to your SIMPLE IRA plan, remember your plan must follow the rules in order to keep the tax benefits for both your business and your employees.

As an employer, that means no changing horses mid-stream. For a SIMPLE IRA, the amount you choose to contribute during the 60-day election period is the amount you must contribute for the entire year.

That’s not to say you can never change how much your business contributes to the plan. In general, you can make an annual election to reduce your contribution to no lower than 1% of employees’ wages. You can do this for up to two calendar years.

Alternatively, you can switch to non-elective contributions. With this option, you contribute a flat 2% of compensation instead of matching contributions made by your employees.

With either choice, you have to notify employees of the change to your SIMPLE IRA plan before that year’s election period. The election period is usually the 60 days beginning in November and ending December 31. The revision will start January 1 of the following year.

Another caution: Be sure you continue to deposit the funds your employees contribute to their accounts on time — no later than 30 days after the month contributions are withheld from paychecks. You have until the due date of your business tax return (including extensions) to deposit your matching contribution.

For more information about your SIMPLE IRA plan options, please contact us. We’re here to help you make the right choice for your business.

Before you do, you may want to take a quick refresher course on the tax consequences of withdrawals.

• Qualified distributions of contributions and plan earnings are tax-free, as long as you use withdrawn amounts to pay qualified higher education expenses.
• Qualified higher education expenses include your out-of-pocket expenses for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Also included is a limited, reasonable amount of room and board costs when you attend at least half-time (defined as half the school’s standard full-time course load). Expenses for special-needs services in connection with enrollment or attendance qualify too.
• As a general rule, an eligible educational institution is a college, university, graduate, technical or vocational school.
• A 10% additional tax applies to the earnings portion of distributions that fail to meet the tax-free criteria – unless an exception applies. Exceptions include withdrawals in cases of a beneficiary’s death, disability or attendance at specified military schools, and certain rollovers or transfers to other 529 plans.

Please call us for more information, including the most tax-efficient way to take distributions from your 529 plan and the interaction of withdrawals with educational tax credits and amounts taken from other tax-advantaged accounts.

A financial affidavit is required within 45 days of service of the petition, therefore it is usually the attorney or their associate that prepare the preliminary financial affidavit.  This financial affidavit becomes the ground work for future financial affidavits prepared by the financial expert which will contain more detailed information and have documentary support and analysis.  Since the attorney or associate is usually preparing the financial affidavit in order to expedite the legal process, any omissions or errors can easily be corrected by the financial expert without having to defend themselves for having made the error.  However, completeness of the preliminary financial affidavit is still critical.  Identification of assets and liabilities is the most important issue, not their values.  The use of “To Be Determined” or “To Be Valued” for the value of assets is preferable when the values are subject to opinion.  This article will provide many helpful hints to the attorney and their associate.

Click here to download the PDF and read the complete article.

Here are three categories of losses.

Business. Casualties affecting the value of property, equipment, or other assets in your for-profit trade or business are deductible. Generally, the amount of your loss depends on the decrease in fair market value or the adjusted tax basis of the asset.

Investment. Losses you incur when seeking a profit that’s not connected with your trade or business may be deductible. While this does not include declines in the value of stock you own due to normal market fluctuations, Ponzi schemes can fit into this category. Under a special ruling, you can deduct investment losses from Ponzi schemes as a theft of income-producing property.

Personal. When your personal property is damaged or destroyed as the result of a fire, storm, shipwreck, or other casualty, you might be eligible for an itemized deduction. Remember that to qualify as a casualty loss, the event has to be sudden and unexpected, such as a tornado or other natural disaster. Damage from corrosive drywall also qualifies.

Give us a call if you think you can claim a casualty, disaster, or theft loss. In some cases, we can amend prior year returns for a quick refund.