DECEMBER 2015
Khaas Baat : A Publication for Indian Americans in Florida

ACCOUNTING

december TAX TIPS

By SURESH KUMAR, CPA

The year is almost over, and this is a good time to prepare for the upcoming tax filing season. Here are some year-end tips to consider: 

  1. Record keeping: A good record keeping/filing system is helpful in filing the tax returns efficiently. It’s always a good idea to save tax-related receipts and records. Keeping good records now will save time and help you file a complete and accurate tax return next year.

  2. Make charitable contributions: If you plan to give to charity, consider donating before the year ends. That way you can claim your contribution as an itemized deduction for 2015. This includes donations you charge to a credit card by Dec. 31, even if you don’t pay the bill until 2015. A gift by check also counts for 2015 as long as you mail it in December. Remember that you must give to a qualified charity to claim a tax deduction. Make sure to save your receipts. You must have a written record for all donations of money in order to claim a deduction. Special rules apply to several types of property, including clothing or household items, cars and boats.

  3. Contribute to retirement accounts: If you participate in a retirement account, consider maximizing the contribution limits. You need to contribute to your 401(k) or similar retirement plan by Dec. 31 to count for 2015. On the other hand, tax payers have until April 15, 2016, to set up a new IRA or add money to an existing IRA and still have it count for 2015.

Traditional IRAs: Individuals who are not active participants in an employer pension plan may make deductible contributions to an IRA. The annual deductible contribution limit for an IRA for 2015 is $5,500. For 2015, a $1,000 “catch-up” contribution is allowed for taxpayers age 50 or older by the close of the taxable year, making the total limit $6,500 for these individuals. Individuals who are active participants in an employer pension plan also may make deductible contributions to an IRA, but their contributions are limited in amount depending on their AGI. In addition, an individual will not be considered an “active participant” in an employer plan simply because the individual's spouse is an active participant for part of a plan year. Thus, you may be able to take the full deduction for an IRA contribution regardless of whether your spouse is covered by a plan at work, subject to a phase-out if AGI exceeds certain limit.

IRA Rollovers: As of 2015, taxpayers may make only one IRA-to-IRA rollover per year. (Direct rollovers from trustee to trustee are not affected.) An attempted rollover after the first will be treated as a withdrawal and taxed at regular rates, plus a possible 10% early withdrawal penalty.

Spousal IRA: If an individual files a joint return and has less compensation than his or her spouse, the IRA contribution is limited to the lesser of $5,500 for 2015 plus age 50 catch-up contributions ($1,000 for 2015), or the total compensation of both spouses reduced by the other spouse's IRA contributions (traditional and Roth).

Roth IRA: This type of IRA permits nondeductible contributions of up to $5,500 for 2015, but no more than an individual's compensation. Earnings grow tax-free, and distributions are tax-free provided no distributions are made until more than five years after the first contribution and the individual has reached age 591/2. Distributions may be made earlier on account of the individual's disability or death. The maximum contribution maybe phased out if the AGI exceeds certain limits.

  1. Filing status: There are several ways in which a tax payer can file an income tax return: married filing jointly, head of household, single, and married filing separately. A married couple may elect to file one return reporting their combined income, computing the tax liability using the tax tables or rate schedules for “Married Persons Filing Jointly.” If a married couple files separate returns, in certain situations they can amend and file jointly, but they cannot amend a jointly filed return and file separately. A joint return may be filed even though one spouse has neither gross income nor deductions. If one spouse dies during the year, the surviving spouse may file a joint return for the year in which his or her spouse died. Certain married persons who do not elect to file a joint return may be entitled to use the lower head of household tax rates. Generally, in order to qualify as a head of household, you must not be a resident alien, you must satisfy certain marital status requirements, and you must maintain a household for a qualifying child or any other person who is your dependent, if you are entitled to a dependency deduction for the taxable year for such person.

  2. Deferring income to 2016:

Delay billing: If you are self-employed and on the cash-basis, delay year-end billing to clients so that payments will not be received until 2016.

Interest and dividends: Interest income earned on Treasury securities and bank certificates of deposit with maturities of one year or less is not includible in income until received. To defer interest income, consider buying short-term bonds or certificates that will not mature until next year. If you have control as to when dividends are paid, arrange to have them paid to you after the end of the year.

There are various limitations, thresholds and procedures for many of the deduction and filings. Please consult your CPA/Tax attorney/or tax consultant for proper guidance with the above subject matter.

In accordance with IRS Circular 230, the above information is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.

Suresh Kumar, CPA, MBA is the Principal of Kumar Consulting, PA, a CPA & Consulting firm licensed in the states of FL, KS and MO and maybe reached at (813) 421-5068 or [email protected]/www.kumarconsultingcpa.com


FINANCE

Why You Need Auto Insurance

By ADI KHORSANDIAN

Each year, more cars and drivers hit the highways. With so many vehicles on the road, crashes will happen. Automobile insurance can be the difference between a minor inconvenience and a major hassle. But why do you need insurance and just how much should you buy?

Auto insurance protects you by paying for damage or injury you cause others while driving your car, damage to your car or injury to you or your passengers in your car from a crash, plus certain other occurrences, such as theft. Auto insurance is required by law in all states and provinces. Without insurance, you risk having to pay the full cost of any harm you cause others or of repairing or replacing your car if it is damaged or stolen.

Coverage requirements vary by state/province but usually include the following:

Liability: It pays for damages due to bodily injury and property damage to others for which you are responsible. Bodily injury damages include medical expenses, lost wages and pain and suffering. Property damage includes damaged property and loss of use of property. If you are sued, it also pays your defense and court costs. State laws usually mandate minimum amounts, but higher amounts are available and usually recommended.

Personal injury protection: This is required in some states and is optional in others. It pays you or your passengers for medical treatment resulting from a crash, regardless of who may have been at fault, and is often called no-fault coverage. It may also pay for lost earnings, replacement of services and funeral expenses. State law usually sets minimum amounts.

Medical payments: This coverage is available in non-no-fault states; it pays regardless of who may have been at fault. It pays for an insured person’s reasonable and necessary medical and funeral expenses for bodily injury from a crash.

Collision: This pays for damage to your car caused by collision.

Comprehensive: This applies if your car is stolen or damaged by causes other than collision, including fire, wind, hail, flood or vandalism.

Uninsured motorist: This pays damages when an insured person is injured in a crash caused by another person who does not have liability insurance or by a person who cannot be identified (usually a hit-and-run driver).

Underinsured motorist: This pays damages when an insured person is injured in a crash caused by another person who does not have enough liability insurance to cover the full amount of the damages.

Other coverage, such as emergency road service and car rental is also available.

What you pay for auto insurance will vary by company and will depend on several factors, including:

* What coverage you select

* The make and model of the car you drive

* Your driving record

* Your age, sex and marital status and

* Where you live

Many people think of auto insurance as a necessary evil, but it can save your financial well-being. Evaluate your needs, do your research and with the help of your insurance agent make the decision that best suits you.

DISCLAIMER: Before investing, consider the funds' investment objectives, risks, charges and expenses. Contact State Farm VP Management Corp (1-800-447-4930) for a prospectus or summary prospectus containing this and other information.

Securities, insurance and annuity products are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

Neither State Farm nor its agents provide investment, tax, or legal advice.

State Farm VP Management Corp. is a separate entity from those State Farm entities which provide banking and insurance products.

Prior to rolling over assets from an employer-sponsored retirement plan into an IRA, it's important that customers understand their options and do a full comparison on the differences in the guarantees and protections offered by each respective type of account as well as the differences in liquidity/loans, types of investments, fees, and any potential penalties.

Adi Khorsandian, a State Farm agent providing insurance and financial services, can be reached at (813) 991-4111 or visit www.adikinsurance.com

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