TODAY at RSH CPA December 26, 2011 Merry Christmas - from Congress!  You may have heard that the payroll tax reduction was extended for two months.  The tax break applies to all wage earners and to the self employed.  For employees it results in a 2 percent reduction in the amount of social security tax withheld from paychecks for January and February.  If your gross pay is, say, $500 per week, your net pay is $10 higher each week as a result of this tax break.  Of course, this reduction was in effect for the entire year 2011, so you'll really notice no change in net pay during January and February.  Congress is expected to extend the payroll tax reduction for the entire year.  There is a potential tax trap in the legislation for those earning more than $110,100 per year (ie those earning more than the social security wage base).  If the tax cut is not extended beyond two months, and you've received more than $18,350 in gross pay (that amount being more than two-twelfths of the social security wage base), you'll have some extra tax to pay when you file your 1040.  Example:  You're paid $20,000 in wages through February 29, 2012.  Congress does not extend the tax break.  You will owe $33 in social security tax on your 2012 form 1040.  Congress put in this provision to avoid saddling business owners with the need to amend payroll tax returns to recapture social security tax that should have been withheld.  Note that this same provision prevents savvy business owners from prepaying thier salaries during the first two months of 2012 to lock in the two percent reduction on the full $110,100 wage base.  Bah humbug! December 5, 2011 Carol Palmer has achieved the Quickbooks ProAdvisor designation.  Carol serves as Quickbooks specialist and bookkeeper for our firm.  As a Quickbooks Pro Advisor she will be provided with software, support, information and other resources necessary to give outstanding service and support to our many clients using Quickbooks software.  Carol provides bookkeeping services as well as Quickbooks consulting to many of our clients.  Feel free to phone Carol with your Quickbooks questions! October 5, 2011 RSH CPA as implemented a new secure email function to facilitate secure communication, including file transfers.  The link for this feature can be found at the bottom of our "Welcome" page.  July 1, 2011 Welcome Donald A. and Marthe Bissonnette!  Don and Marthe and their staff have joined our firm.  See "Our People" for further details. February 25, 2011 INSURANCE CREDIT TURNS OUT TO BE A WINNER Here we are deep into another "tax season".   We're keeping an eye out for credits and deductions that our clients can use to reduce or elimiinate tax liabilities.  With regard to our business clients, the winners so far appear to be the new small employer health insurance tax credit and the enhanced domestic production deduction.  Officially known as the "Credit for Small Employer Health Insurance Premiums" - the insurance credit is calculated on federal form 8941.  It is part of the sweeping Obama administration health insurance reform package being phased in over the next several years.  We were initially skeptical about how many of our clients would benefit from this credit.  The maximum credit can only be achieved if an employer has fewer than 10 employees and pays average wages of $25,000 or less.  It is phased out completely at 25 employees or average wages above $50,000.  However, as we've run the calculations for our clients we've been surprised at how many have qualified and at the size of some of the credits.  The largest credit we've seen to date was in excess of $8,000.  Since the credit means a dollar for dollar reduction in tax liability, we can say with assurance, that client was smiling. The domestic production activities deduction, calculated on form 8903, has been around several years now so it's not new.  But the change this year is that the deduction percentage jumped another 3 percent and is now 9 percent of "qualified" net income.  To some businesses this has become a very significant tax deduction.  We've seen deductions of $50,000 or more.  Clients conducting a wide variety of manufacturing and contracting businesses qualify for this deduction.  If you think you might be missing out, contact us and we'd be happy to review prior year tax returns at no charge to you. Individual tax clients are still benefitting from the residential energy credit which remains in effect for 2010.  This popular and very generous credit is equal to 30 percent of the cost of qualified residential home improvements, with a maximum credit of $1,500 avaiable.  Replacing exterior doors or windows, insulating, or purchasing efficient heating appliances such as boilers, hot water heaters or wood stoves may qualify you for this credit. The American Opportunity education credit is another very important credit that is easy to miss.  The credit provides up to $2,500 of tax savings for clients whose dependents are attending college.  The credit can be claimed, with limitations, by either the parents or their college-age children and a common error is the failure to plan appropriately so that the tax savings is maximized.