Khaas Baat : A Publication for Indian Americans in Florida



By Kamlesh H. Patel, CPA

As a business owner, you know the price of inaction is missed opportunity. That’s true in tax planning, too, which is why now is the time to start taking actions to save money on your 2011 federal income tax return. Here are ideas to implement before year-end.

Know your basis. As a partner or a shareholder in an S corporation, your investment in your company is a factor in determining how much of a business loss you can deduct on your personal income tax return.

Draw up loan documents. To preserve interest deductions, loans you make to your business should be documented, with an interest rate and maturity date specified. In addition, reference specific loans in your corporate minutes.
Pay health insurance premiums. When you own 2 percent or more of your S corporation, premiums you pay personally for your health and long-term care insurance must be reimbursed to you in order to get the most benefit. When accounted for properly, premiums are included on your Form W-2 as wages, and are deductible on your individual income tax return, whether you itemize or not.

Establish a retirement plan. Already have a retirement plan? Verify that you’ve provided employees with required annual notices. Keeping your plan compliant with the law keeps your deductions safe.

Check your estimated tax liability. Increasing the amount of withholding from your last few paychecks of the year can help minimize estimated tax underpayment penalties. While you’re reviewing your tax situation, make sure you’ve drawn a reasonable salary.
Put equipment to work. To benefit from Section 179 and bonus depreciation expensing, assets you purchase must actually be placed in service — that is, ready and available for use in your business.


Though 2011 is slipping away, the same does not have to be true of tax savings. Here are actions to take before the end of the year to get a handle on your tax bill.

Check your bracket. As you know, federal income tax rates increase as your income rises. When you’re bumping against the upper limit of your current bracket, increase your pre-tax retirement contributions or accelerate deductions.

Adjust your withholding. Increase the income tax withheld from your paycheck through year-end to cover extra amounts due from Roth conversions or other taxable income increases in order to avoid underpayment penalties. Alternatively, reducing your withholding to account for an overpayment puts money in your pocket now, instead of next year when you file your return.

Schedule charitable contributions. Cash and checks mailed by year-end count as 2011 deductions, as do credit card charges you make by Dec. 31. Donations of appreciated securities are deductible when you relinquish control. Allow extra time for stock transfers handled by your broker or a mutual fund company.

Make family gifts. For 2011, the annual amount you can give away to any individual, free of gift tax, is $13,000 ($26,000 when you’re married and make the gift with your spouse).

Plan for elective health care expenses. Use up the balance in your flexible spending arrangement by year-end, and figure out how much you’ll contribute in 2012. No FSA? You still have time to set up a health savings account and make a deductible contribution.

Remember required minimum distributions. Failing to take a required distribution from your traditional IRA before year-end could cost you 50 percent of the amount you should have withdrawn.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or


Two Plans Are Better Than One – Part 1


New Opportunities Lie Ahead
In the past, most companies had a choice of adopting either a Defined Contribution Plan, such as a 401(k) Profit Sharing Plan or a Defined Benefit Plan. Each of these types of plans has advantages and disadvantages to the employer and employees. This article will focus on the advantages and disadvantages of certain plans from the employer’s perspective.

Defined Contribution (DC) Plans


Defined Benefit (DB) Plans
A paired plan can maximize the benefits and minimize the shortcomings of each type of plan.


Paired Plan
Based on the above, it is easy to understand why over the past two decades so many defined benefit plans have been terminated and replaced by defined contribution plans. When we run a paired plan, we are able to maximize the benefits and minimize the shortcomings of each type of plan.

Some of the advantages of a paired plan include:
Higher Contribution Limits: An employer can take advantage of both the DC and DB Plan limits. These limits may allow highly compensated individuals to receive far in excess of the $49,000 DC limit. All employer contributions to a qualified retirement plan are tax-deductible to the company and are non-taxable to the employee.

Cost of Retirement is Shared: Employees can take advantage of the tax-deductible salary deferral 401(k) contribution and the employer commits to funding the DB plan. In this way, the burden of providing retirement benefits does not rest solely on the employer.

Investment Risk is Shared: Investments held in the 401(k) Profit Sharing Plan are employee directed. Each employee assumes the risk of his or her choices. They may be as conservative or as aggressive as the plan allows. The employer assumes the investment risk of the DB plan only.

Some Flexibility in Contribution: The defined contribution portion of a paired plan may change from year-to-year. The salary deferral portion is never required and if the non-discrimination testing allows, the employer contribution may be lowered as well.

An employer contribution to the defined benefit portion of a paired plan is required. However, we do have some flexibility as to when that contribution is made. The Pension Protection Act (PPA) of 2006 made it allowable for an employer to fund beyond the minimum contribution in any given year. Employers may fund their plan up to 150% of the accrued liability. These contributions are fully tax-deductible. In essence, the pension is accumulating a credit balance. Should the company have an “off-year” fiscally the company can utilize the credit balance to meet its required contribution to the plan. The ability to over-fund the plan in good years and carry a credit balance to use in bad years was a major gift of the PPA.

This is being provided to you as a courtesy from Bijan Mohseni, CFP®, MBA, Financial Professional, AXA Advisors, LLC. The opinions expressed in this article will not necessarily be those of AXA Advisors, LLC. AXA Advisors is not a legal or tax advisor and does not endorse or recommend the advice or products contained in this article. Bijan Mohseni, CFP®, MBA offers securities and investment advisory services, through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC, and insurance and annuity products are offered through AXA Network, LLC and its subsidiaries, an affiliated insurance general agency. Heritage Administrative Services LLC is not affiliated with AXA Advisors or AXA Network. AGE 64746 (9/11)

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