[h=1]Those Gold Sales May Be Taxable[/h]If you took advantage of the escalating gold and silver prices and made any sales of gold, silver, gems, jewelry, or the like during 2011, you are required to report the sales on your tax return. Whether or not the sales are subject to tax, and at what tax rate, depends upon the type of item sold and your tax basis for the item.
Determining Basis - Generally, your tax basis is what you originally paid for the item, assuming that you can recall the amount. It may be difficult to remember how much you paid for an item; however, if the cost was significant, you hope fully have documentation that can verify the price. Without documentation, you are at the mercy of the IRS should you be audited! Even more complicated is determining the value of an item acquired as a gift. Your tax basis for a gift generally is the same basis as it was for the item in the hands of the individual who gave you the gift. Meanwhile, the basis for an item acquired by inheritance is generally the fair market value of the item on the date of the inheritance. As you can see, simply determining the basis for the items that you sold can be complicated.
Types of Items Sold - Not all items are taxed the same. The percentage depends on whether the item was held for personal use or for investment purposes and whether or not the item is classified as a collectible. A higher maximum tax rate applies to collectibles than to other capital assets.
The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious e-mails, phone calls, faxes, or notices claiming to be from the IRS. If you find something suspicious, you should immediately call this office before responding. In fact, it is a good policy to check with this office before responding to any inquiry from the IRS or state or local tax agencies.
Here are some tips you should know about phishing scams.
1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords, or similar secret access information for credit card, bank, or other financial accounts.
2. The IRS does not initiate contact with taxpayers by e-mail to request personal or financial information. If you receive an e-mail from someone claiming to be a representative of the IRS or directing you to an IRS site:
4. If you receive a phone call, fax, or letter in the mail from an individual claiming to be from the IRS but you suspect he or she is not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious e-mail to [email protected].
If you have any questions or doubts related to a letter, phone call, or e-mail from the IRS or other taxing authorities, please call this office before responding or providing any financial or personal information. Better safe than sorry![h=1]It’s Not Too Late[/h]It’s not too late to make an IRA and/or SEP contribution or undo a Roth IRA conversion for 2011.
Generally, after the close of the year you can no longer take steps to alter the outcome of your tax return. However, both IRA contributions and SEP contributions can be made for a year after it has closed, and if you converted a traditional IRA into a Roth IRA, you can undo that conversion after the close of the year. Here are the details:
Traditional IRA Contributions - IRA contributions (tax-deductible and non-deductible) for 2011 can be made up to and including the un-extended filing due date for your 2011 tax return, which is April 17, 2012. The maximum contribution allowed is $5,000 ($6,000 if age 50 or over) for each taxpayer. The annual maximum must be allocated between traditional and Roth IRA contributions.
If you are an active participant in an employer-sponsored plan, the IRA contributions are phased out for higher income taxpayers. The traditional IRA AGI phase-outs for 2011 are: between $90,000 and $110,000 for married individuals filing jointly and individuals qualifying as a surviving spouse, $56,000 and $66,000 for unmarried individuals, and $0 to $10,000 for married individuals filing separately.
Where one spouse participates in an employer plan but the other does not, the non-participating spouse’s phase-out is between $169,000 and $179,000 for 2011.
SEP Plan Contributions – SEP plans are tax-deductible retirement plans for self-employed individuals. Contributions can be made up to and including the extended due date, which for the 2011 tax return is October 15, 2012. The maximum annual contribution to a SEP plan is the lesser of “25% of compensation” (20% of net profit after deducting the SEP contribution for the self-employed proprietor’s contribution) or $49,000. SEP plans have no AGI phase-out limitations and no catch-up contributions for older individuals.
Roth IRA Conversions – If you made a conversion from a traditional to a Roth IRA, there is a good chance the entire conversion is taxable. Generally, people plan those conversions for years with low income or when the stock market is down and the IRA value at the time of the conversion is low. However, if subsequent to the conversion conditions change, and you wish you hadn’t made the conversion, or you simply decide you can’t afford to pay the tax on the conversion, you can undo the conversion up to and including the extended due date of the return (October 15, 2012 for 2011 returns). However, don’t wait until the last minute to make that decision because it will require some paperwork on the part of the trustee (bank, broker, etc.).
Other plans – Other plans such as Simple Plans and Keogh plans also permit contributions in 2012 for 2011.
For additional information related to making retirement plan contributions after the close of the tax year, please give this office a call
Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039 Fax: (704) 739-3934
e-mail: [email protected]
Web Site: http://prep.1040.com/frankstax
Franklin Katz, ATP, PA, PB,
Providing Professional Accounting, Bookkeeping, Payroll and Income Tax Preparation Services
Circular 230 Disclaimer – Any tax advice in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding related
penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or tax
related matters addressed herein.
.
Determining Basis - Generally, your tax basis is what you originally paid for the item, assuming that you can recall the amount. It may be difficult to remember how much you paid for an item; however, if the cost was significant, you hope fully have documentation that can verify the price. Without documentation, you are at the mercy of the IRS should you be audited! Even more complicated is determining the value of an item acquired as a gift. Your tax basis for a gift generally is the same basis as it was for the item in the hands of the individual who gave you the gift. Meanwhile, the basis for an item acquired by inheritance is generally the fair market value of the item on the date of the inheritance. As you can see, simply determining the basis for the items that you sold can be complicated.
Types of Items Sold - Not all items are taxed the same. The percentage depends on whether the item was held for personal use or for investment purposes and whether or not the item is classified as a collectible. A higher maximum tax rate applies to collectibles than to other capital assets.
- Jewelry - Generally, jewelry that is held for personal use is excluded from the definition of collectibles and is taxed the same as any other personal use property. Losses are thus not allowed, and gains are taxed as either short-term or long-term capital gains. For the most part, jewelry that an individual may choose to sell will have been owned for over a year, and the gain will be taxed at the long-term rate, which, for 2011, is a maximum of 15% (0% to the extent that the taxpayer is in the 15% regular tax bracket or lower). Beware, however, as some jewelry may include gold or silver coins that are considered collectible items and thus may be taxed at a higher rate, as explained below.
- Collectibles - Gold and silver coins and bullion are included on the IRS’s list of collectibles. Unlike jewelry, the sale of “collectibles” can result in either a taxable loss or a taxable gain. In addition, collectible gains are taxed at a maximum rate of 28%, as opposed to a maximum of 15% for other capital assets that are held long-term. The maximum rate does not imply that all collectible gains are taxed at 28%. A taxpayer in a lesser tax bracket will be taxed at that lesser rate.
[h=1]Don’t be Scammed by Tax Season Cyber Criminals[/h]Now that tax season is upon us, so are the e-mail scammers pretending to be the IRS. Most of these scams fraudulently use the IRS name, logo, and/or website header as a lure to make the communication appear more authentic and enticing. They lead you to believe you had a refund of some sort coming and request personal information. The goal of these scams - known as phishing - is to trick you into revealing your personal and financial information. The scammers can then use your information - like your Social Security number, bank account, or credit card numbers - to commit identity theft or steal your money.
DON’T BE A VICTIM – THE IRS DOES NOT INITIATE E-MAIL CORRESPONDENCE
DON’T BE A VICTIM – THE IRS DOES NOT INITIATE E-MAIL CORRESPONDENCE
The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious e-mails, phone calls, faxes, or notices claiming to be from the IRS. If you find something suspicious, you should immediately call this office before responding. In fact, it is a good policy to check with this office before responding to any inquiry from the IRS or state or local tax agencies.
Here are some tips you should know about phishing scams.
1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords, or similar secret access information for credit card, bank, or other financial accounts.
2. The IRS does not initiate contact with taxpayers by e-mail to request personal or financial information. If you receive an e-mail from someone claiming to be a representative of the IRS or directing you to an IRS site:
- Do not reply to the message.
- Do not open any attachments. Attachments may contain malicious code that will infect your computer.
- Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, you may have compromised your financial information. If you entered your credit card number, contact the credit card company for guidance. If you entered your banking information, contact the bank for the appropriate steps to take. The IRS website provides additional resources that can help. Visit the IRS website and enter the search term “identity theft” for additional information.
4. If you receive a phone call, fax, or letter in the mail from an individual claiming to be from the IRS but you suspect he or she is not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious e-mail to [email protected].
If you have any questions or doubts related to a letter, phone call, or e-mail from the IRS or other taxing authorities, please call this office before responding or providing any financial or personal information. Better safe than sorry![h=1]It’s Not Too Late[/h]It’s not too late to make an IRA and/or SEP contribution or undo a Roth IRA conversion for 2011.
Generally, after the close of the year you can no longer take steps to alter the outcome of your tax return. However, both IRA contributions and SEP contributions can be made for a year after it has closed, and if you converted a traditional IRA into a Roth IRA, you can undo that conversion after the close of the year. Here are the details:
Traditional IRA Contributions - IRA contributions (tax-deductible and non-deductible) for 2011 can be made up to and including the un-extended filing due date for your 2011 tax return, which is April 17, 2012. The maximum contribution allowed is $5,000 ($6,000 if age 50 or over) for each taxpayer. The annual maximum must be allocated between traditional and Roth IRA contributions.
If you are an active participant in an employer-sponsored plan, the IRA contributions are phased out for higher income taxpayers. The traditional IRA AGI phase-outs for 2011 are: between $90,000 and $110,000 for married individuals filing jointly and individuals qualifying as a surviving spouse, $56,000 and $66,000 for unmarried individuals, and $0 to $10,000 for married individuals filing separately.
Where one spouse participates in an employer plan but the other does not, the non-participating spouse’s phase-out is between $169,000 and $179,000 for 2011.
SEP Plan Contributions – SEP plans are tax-deductible retirement plans for self-employed individuals. Contributions can be made up to and including the extended due date, which for the 2011 tax return is October 15, 2012. The maximum annual contribution to a SEP plan is the lesser of “25% of compensation” (20% of net profit after deducting the SEP contribution for the self-employed proprietor’s contribution) or $49,000. SEP plans have no AGI phase-out limitations and no catch-up contributions for older individuals.
Roth IRA Conversions – If you made a conversion from a traditional to a Roth IRA, there is a good chance the entire conversion is taxable. Generally, people plan those conversions for years with low income or when the stock market is down and the IRA value at the time of the conversion is low. However, if subsequent to the conversion conditions change, and you wish you hadn’t made the conversion, or you simply decide you can’t afford to pay the tax on the conversion, you can undo the conversion up to and including the extended due date of the return (October 15, 2012 for 2011 returns). However, don’t wait until the last minute to make that decision because it will require some paperwork on the part of the trustee (bank, broker, etc.).
Other plans – Other plans such as Simple Plans and Keogh plans also permit contributions in 2012 for 2011.
For additional information related to making retirement plan contributions after the close of the tax year, please give this office a call
Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039 Fax: (704) 739-3934
e-mail: [email protected]
Web Site: http://prep.1040.com/frankstax
Franklin Katz, ATP, PA, PB,
Providing Professional Accounting, Bookkeeping, Payroll and Income Tax Preparation Services
Circular 230 Disclaimer – Any tax advice in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding related
penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or tax
related matters addressed herein.
.