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Summer Tax

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The summer months are smack dab in the middle of the tax year. Well after the traditional tax deadline of April 15, and months before December 31, the end of the tax year. While taxes may be far from the mind of any business owner or job holder in August, several leading tax experts say that there are several steps a person can take in the summer to better prepare themselves for tax season.

  1. Check your withholding allowances if you were significantly over or under paid in 2012. It's not too late to change your wit holdings with your employer for the remainder of 2013.
  2. Keep itemized records of Goodwill or other non cash donations to maximize those deductions.
  3. Contact your CPA about a mid year projection to get an idea of your tax situation for 2013. This is especially important if you started a new business in 2013. This step will provide you with an individualized action plan for the remainder of 2013.

  4. Reminder to keep good records of expenses (electronic format suggested)so that it is organized for your 2013 taxes.
Adam Shay, CPA, MBA

What should individuals be doing as a follow up to their financial resolutions?
  • Now is the time to review contributions to your retirement plans (401(k) plans and IRA's). Are you contributing the maximum amount to your retirement plan? If you are over the age of 50, are you taking advantage of the $5,000 catch up contribution?
  • If you have children, start saving for college education. Consider a 529 savings plan for your child, and set a goal to contribute on an ongoing basis. The earnings are tax free if used for qualified higher education expenses.
  • Prepare a family budget and review your expenses. Also, compare this year's expenses to last year's and identify large fluctuations.
  • Take the time to evaluate your real estate tax assessment and determine if there is an opportunity to challenge the assessment and reduce your real estate tax bill.
  • Make it a point to review your insurance policies on a regular basis to determine of you have adequate insurance coverage. Are you protected against a potential catastrophic event? Do you have adequate disability and life insurance coverage to protect your loved ones? In light of the recent natural disasters, also review your homeowner's coverage to determine if you are adequately insured against a natural disaster.
  • Individuals should review their beneficiary designations for their IRA's, 401(k)'s, life insurance policies on a regular basis. Many individuals tend to overlook this area particularly in light of any life changing event (birth of a child, death, divorce, marriage).
How to get back on track?
  • Try a fresh start approach, and always set goals that are reasonable and attainable.
  • Prioritize your goals, reduce or eliminate debt and make sure you have a savings cushion to last at least 6 months in case of unforeseen events.
  • Once you have set attainable goals, be diligent and stick to it!
  • Evaluate yourself based on the goals you have set. Are you meeting your goals? Are you falling short? If so, where? Are there areas of improvement?
  • Don't be afraid to seek assistance. Discuss your concerns with your CPA or other trusted advisors.

Mid-year Assessment:
  • For those with flexible spending accounts, make sure you are on track to spend the entire balance in your account. Don't forget if you don't use it, you lose it. Some plans have a grace period provision that allows you to spend the balance by March 15, 2014. Please check with your plan administrator.
  • It's never too early to start thinking about your 2013 taxes. There are many tax law changes that became effective in 2013. The Affordable Care Act has added a Net Investment Income Tax of 3.8% and an Additional Medicare Tax of 0.9% on individuals whose modified adjusted gross income exceeds $250,000 for married filing joint and $200,000 for single taxpayers.

Please let me know when you would like do to speak to a principal at MBAF and I will be happy to coordinate, or feel free to use the tips and credit Morrison, Brown, Argiz & Farra (MBAF).

Andrew Siskin, CPA
Direcotor in the Tax and Accounting Department
Morrison, Brown, Argiz & Farra (MBAF)
  1. Clean the closets out and make noncash charitable contributions (remember to get receipts from the charities);
  2. Plan elective medical procedures for 2013 or early 2014 to get paid in 2013 for deduction and to increase chance of exceeding the medical hurdle rate.
  3. Bunch up the miscellaneous itemized deductions into 2013 that may be paid in early 2014 for deduction in 2013.
  4. Check portfolio for realized capital gains to date that need to be offset with unrealized capital losses in portfolio by year end.
  5. Consider taking capital gains and be taxed on them in 2013 to beat any tax rate rise (this will get the appreciation taxed in lower rates and if you like the stock repurchase the stock for increase basis and wash rules do not apply to gains only losses).
  6. Generally Accelerate income into 2013 for lower rates - but hold large deductions like state taxes, mortgage interest, etc for 2014 assuming rates are going up.
  7. Consider ROTH IRA conversions while rates are low.
  8. If you own a C corporation consider dividending out the retained earnings while dividends have low rates (in some cases 15%).
Timothy Gagnon
Accounting Specialist at D'Amore-McKim School of Business, Northeastern University.

Here are some tax tips I believe that people can start thinking about during this "off season":
  • Clothing/household goods donation deduction: One of the easiest win-win scenarios tax deductions that people miss is to value the clothing and household goods you donated to charity. You can deduct the lower of the cost or fair market value. If the donation is over $500 you are required to supply detailed information on who you gave it to, date given, original cost and fair market value.
  • Miles for Charity: For 2013 you can deduct miles you travel on behalf of a charity at 14 cents per mile; don't forget to keep track of this.
  • Job Hunting Expenses: If you are looked for a job in your current occupation do not forget to deduct your mileage you travel to look for a job, employment and outplacement agency fees, mailing costs to prospective employers, entertainment while networking for a job and other ordinary and necessary expenses.
  • New Business: Do you have your own business in 2013? Some people ignore the business they have and/or do not properly spend time learning what is exactly deductible. You might even have a loss at the business which you can use to offset other income. You have to look into whether you should you take the home office deduction, how to treat start-up expenses, what is the best way to deduct my auto expenses? Etc, etc...
  • Refinance: If you refinanced in 2013 keep your closing documents for any deductible expenses including to remember that you might be able to deduct old points that you previously paid.
  • College Credits: Credits available for costs paid for college which is a great tax deduction.
  • Medical expenses - keep track of medical expenses including medical miles which is deductible at 24 cents a mile in 2013.
  • Child care credits: so many people miss the child care credit which is a credit (even better than a deduction). People do not realize that even day camps count (not sleep away camp) if it allows you to work because someone is watching your child(ren) under age 13.

Gail Rosen CPA

Labor Day not only marks the end of the summer, but it also signifies the end of vacation season for many people. Hopefully, you took some time off this summer and went on a great trip. Upon returning from your trip, there is one more thing to do besides looking at the pictures and watching the videos. You need to figure out whether you can deduct the cost of your vacation on your tax return.

Here are some of the specific rules for deducting your travel expenses:

Travel Within the U.S.

When traveling within the U.S., the trip must be primarily for business to be fully deductible. By meeting this threshold, you get to deduct all of your travel and lodging expenses, as well as 50% of the cost of your meals and entertainment, incurred while away from home. Non-business activities and side trips are never deductible.

What if your travel was primarily for personal reasons? You can still deduct the money spent on travel, lodging, and meals and entertainment incurred in connection with any business related activities. So if you met with a colleague to discuss business or had a job interview during your vacation, make sure to deduct that day's hotel and restaurant bills.

Travel Outside the U.S.

The threshold for international travel is much higher. To be deductible, your trip must be entirely devoted to your business activities. Fortunately, there are a few loopholes which makes it easier to deduct your foreign travel. If the trip was for a week or less, or you spent at least three-quarters of the time working, that's good enough in the eyes of the IRS.

Here's another hint. When traveling abroad, make sure to work the day after arriving and the day prior to departing. By doing so, your travel days count as business days.

Travel With Family Members or Friends:

When traveling with other people, the money spent on your companion's travel generally isn't deductible As a matter of fact, you're required to limit the deduction for your hotel room to the single rate charged by the hotel.

To make your companion's travel deductible, that person needs to be an employee of your company. There also must be a business purpose for the companion traveling with you.


For conventions in North America, you can deduct travel and lodging expenses, and 50% of the cost of meals and entertainment, incurred while attending a convention that benefits your business or profession. The cost of attending investment, political, and other types of conventions generally isn't deductible.

Did you attend a convention outside of North America? If so, you can only deduct the travel costs incurred if the meeting is directly related to your profession or business. Plus, there must also be a reasonable expectation that a similar meeting could have been held within North America. Who comes up with this stuff?

Saturday Night Stay:

If you extend your trip to stay over a Saturday night to qualify for reduced air fare, the costs associated with that extra day are deductible, even if the business portion of your trip has ended. Evidently, cheaper fares qualify as a legitimate business reason for spending an extra day away from home.

Keep Good Records

Whether you maintain your checkbook on Quicken or Microsoft Money, use a separate credit card just for business related expenditures, or diligently file away your receipts in a separate folder, finding a record keeping system that works for you makes it easier to figure out your deductions at tax time.

Andrew Schwartz CPA
Schwartz & Schwartz, P.C.

During this time of year most people aren't thinking of taxes. However, this is really the best time to get tax planning done. With half the year complete it is vital to review where you're at year to date to ensure no surprises in April.

At our firm this is when we're meeting with out self-employed clients to project out their year and make sure enough estimated taxes have been paid so far. For those self-employed clients this is also the time where major business purchases are discussed as possible expenses against income, retirement savings plans are being formulated as a tax tool as well.

For our employed clients mid-year represents a good time for a check up. Making sure they haven't withheld too much or too little on their paychecks. (We feel that too much is just as bad since its a interest free loan to the government). This is also the time where we begin to discuss any potential bonuses or stock options that may be exercises as both of these can create large swings in year over year income and could potentially trigger Alternative Minimum Tax (AMT) which is often a surprise to clients.

We stress for all our clients that a quick mid-year check in is helpful and avoids surprises in April. This is vital because the tools we have at our disposal to mitigate taxes dwindle after December 31st.

William Slade
Slade and Company
  1. Set up an organization system. Don't wait til the end of the year. Instead, set up a simple system now to organize receipts and records for any expenses that might qualify for a credit or deduction. Use last year's and this year's tax returns for guidelines.
  2. Do a test run. Find a copy of this year's tax form, either from computer software or at the IRS website. Fill it out, using this year's numbers so far, to estimate whether the tax filing season will bring a refund or a bill.
  3. Plan donations to get deductions. When donating household items and clothing to a charity during the year, be sure to get a receipt. Use free online tools, such as ItsDeductible <>, to help calculate the value of some donations.
  4. Plan to spend FSA dollars. Many employers offer flexible spending accounts (FSAs). These accounts can reduce tax bills by letting tax payers use pre-tax dollars for medical care and/or child care. Employees who do not use the money in their accounts by the end of the FSA year lose that money. Some FSAs expire at year-end, others at a different time during the year. To use up remaining funds, learn more about FSA-qualifying expenses from the IRS web site. These can include medications, contact lenses, household first-aid products, doctor and dentist visits and more.
  5. Add up medical bills. If medical and dental expenses the year add up to more than 10 percent of household adjusted gross income (7.5 percent if you or your spouse is 65 or over), they might be tax-deductible. At that point, all medical expenses for the year can reduce the tax bill. Tax payers who may have expenses close to that amount as they approach the second half of the year might think about scheduling other needed care to reach the deduction and minimize out-of-pocket costs.
  6. Save for retirement, planning savings throughout the year. Many retirement contributions are tax-deductible. Check with a tax planner to see how best to make tax-deductible investments for the future.
  7. Review significant events. Any of the following might have repercussions that affect income taxes. U.S. taxpayers should pay attention to their summer activities, and keep appropriate financial records.
  • A wedding. A new marriage has several tax implications. No matter when during the year a couple marries, they will file as married, either jointly or separately, for that tax year. A tax professional can guide couples on the best filing method.
  • Graduation of a child. A child's graduation from high school or college might have several tax ramifications. If the child no longer is the parents' dependent, that will affect the parents' income taxes. Parents should keep careful records of the educational expenses they paid for a dependent child. Additionally, if parents begin to repay loans taken for a child's education, the interest might be tax-deductible.
  • Job bonus/commission. As the economy recovers, it may bring higher income this year for some workers, due to bonuses or higher commissions. People who are self-employed or hold contract positions (such as some sales personnel) should carefully review income and self-employment tax due. Be sure you pay enough in quarterly income tax payments (or save enough if you do not pay quarterly) so that you are not hit with penalties and interest. The IRS provides a worksheet to calculate payments
  • Job hunting. On the other hand, those who are out of work and looking for a job, or looking to move up, might have tax deductions to soften the blow of unemployment. Examples of deductible job-search expenses might include employment agency fees, resume-printing costs, and travel expenses for interviews (even mileage to drive to a local interview). The job-seeker must be looking for work in his or her current profession. These expenses are usually not tax-deductible when searching for a first job.
  • Buying or selling a house. Those who have purchased a home this summer should be careful to keep all paperwork. Some expenses are typically deductible, such as points paid (or a loan origination fee recorded as points), and mortgage interest and property taxes paid.
  • Moving. Summer is a popular season for moving. People who move to another location because of a job can usually deduct moving expenses, as long as certain conditions are met. Keep detailed records of moving expenses and retain all receipts.
  • Taking a summer job. A summer job -- whether for a student or an unemployed adult -- can affect income tax obligations. All U.S. workers are required to pay income taxes if they earn enough money. Tips, babysitting income, lawn-mowing money or sporadic consulting work all are liable for income taxes, although some workers will not earn enough to owe income tax. Be sure your employer has you complete a W-4 form and withholds taxes. If not, be certain you understand how to manage self-employment tax payments.
  • Yard sale income. As with income from a summer job, remember that money earned on that summer garage sale could be considered income. However, if items are sold for less than was paid for them, the income is not taxable. (The same rule applies to income from items sold occasionally on eBay or similar sites.) People who sell items regularly for profit, whether at yard sales or online, should consider the money they make to be business income and pay taxes accordingly.

Jeff Staley, managing partner
Freedom Tax Relief (FTR) division of Freedom Financial Network, LLC
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