Greetings,

Hope everyone had a wonderful 4th of July. This time around I wanted to share a couple of tax tips and an explanation of how my office deals with extensions. If you read the letter that accompanied your organizer, there was a paragraph that indicated that if I filed an extension, I would not be able to work on individual returns until after June 15th. That is because my office handles each deadline as it approaches. After April 15th, we switched gears and started working on payroll taxes that were due on April 30th. Then we worked on returns that were due on May 15th, when those were done we worked on returns due on June 15th. Now we are working on returns that are due on July 15th. Once those are done, we will work on returns that are due on July 31st and August 15th. I wanted to explain this because some clients think that once April 15th is over, we don't do too much. To the contrary, we stay busy most of the year. If you are on extension and we have your information, I anticipate that your return will be done by August 15th.

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New rules on non-cash contributions

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One tax tip that I have not shared is that the deduction for non-cash contributions has changed. If you donate items that aggregate $5,000, you MUST have an appraisal for all of it. That means that if you gave items to charity on 10 different occasions during the year and each one was for $500, once the total goes over $5,000 you need a certified appraisal on the Form 8283 for all of it.

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The IRS has just made life a little easier for those

with flexible spending accounts.

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Flexible spending accounts (FSAs) let employees set aside pre-tax dollars to pay for medical expenses and dependent care costs. The problem has been that it could be difficult to determine the right amount needed for a year's worth of expenses, and if a worker set aside more than he or she needed, the excess was forfeited at the end of the year.

Now the IRS has eased the "use it or lose it" rule. In a new ruling, the IRS will permit employers to modify the ompany's plan to extend the FSA reimbursement deadline for a given year by 2½ months. Employees will then be allowed to receive reimbursements from their flexible spending account for a previous year up until March 15 of the following year. This should help to eliminate the end of year scramble to use up remaining dollars in an FSA or risk forfeiting them.

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Find tax savings in your summer activities

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Summertime can be a great time for cutting taxes. Some possibilities:

* If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.

* That summer clean-up around the house will probably locate outgrown clothing and household items you no longer want. Donate them to a charity for a tax deduction.

* If you mix business with summer vacation travel, the business portion will be deductible. That includes your lodging, meals (50%), transportation, and incidental expenses (such as tips) to the extent they are business-related.

* Consider hiring your children to help out in your business for the summer. The wages you pay them are deductible to your business and will be taxed in the children's lower or zero bracket. If your business is unincorporated, there's no social security tax to pay on wages paid to your children who are under age 18.

* Summer is a good time to do business entertaining. Be sure you keep complete records of the cost, the date, who was entertained, and what the business purpose was. Your deduction is limited to 50% of the cost.

Enjoy your summer - and save taxes! Please give us a call; we are here to help you with your tax planning.

Until next time,

Linda