October is here, and so is our October client bulletin. As a top accounting firm in San Francisco, we strive to keep ourselves up-to-date about tax and accounting issues and of course our clients. To read the bulletin in PDF, simply click here. In a hurry? Highlights are listed below – or just call us at 415-742-4949, or email us.
Tax Planning Tips for Same-Sex Couples
The Supreme Court rules in June this year that the DOMA (Defense of Marriage Act) was unconstitutional, and in addition many states such as California now allow same-sex marriages. These marriages now face a complicated tax and regulatory environment as the laws are not consistent across the states. This month’s bulletin explores tax tips for same-sex couples. Issues include what happens if the couples moves to a different state, one that does not allow same-sex marriage. Another complicated tax issue is whether the couple should file joint returns or “married filing separately.” Other tax issues for same-sex couples include estate and gift tax issues, employee benefits, and IRAs. For individuals who own businesses or are high income, good tax planning is part of the package in marriage: whether it’s a heterosexual or homosexual couple.
529 Tax Benefits: Planning for College
College is more important than ever, and more expensive than ever. So many parents, grandparents, and others are planning for the college years of their loved ones through 529 plans, also known as Qualified Tuition Plans (QTPs). But you can then pull too little or too much money from your plan. Here’s an example from the tax bulletin:
Example 1: Art and Kim Wilson open up a 529 account for their daughter, Eve. After Eve graduates and gets a full time job, there is still $20,000 left in the 529 account. The senior Wilsons have no younger children to whom they might transfer the account. If the Wilsons want to use that $20,000 for purposes other than education, distributions will be taxable. The taxable amount will depend on the ratio of earnings to the overall account value. The Wilsons also will owe a 10% penalty on the amount included in income. Qualified (that is, tax-free) distributions from a 529 plan may cover tuition, fees, books, supplies, and equipment, as well as room and board, in many cases. However, money spent by the Wilsons or by Eve to repay student loan debt will not be considered a qualified 529 expense, for this purpose. Ideally, 529 account owners should fully draw down 529 accounts for qualified higher education costs before all the likely beneficiaries are finished attending classes.
Good News: the IRS Approves Simpler Home Deductions
Many San Franciscans now work from home, but having a home office in San Francisco can be confusing in terms of taxes. Fortunately the IRS has simplified some of the deductions for home offices. If you have a home business or work from home, please consult with us to minimize your tax liabilities. There are many wonderful tax advantages to using a home office but they can be complex!
IRS Circular 230 Notice
The Internal Revenue Service requires Safe Harbor LLP to inform the reader that any tax advice contained in this correspondence cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing or recommending to another party any transaction or matter addressed.
About Safe Harbor LLP – a Professional CPA Firm in San Francisco
Safe Harbor LLP is a CPA firm that specializes in accounting and tax services for individuals and businesses throughout the San Francisco Bay Area and greater California. Safe Harbor CPAs helps both individuals and businesses with tax preparation, IRS audit defense, and audited financial statements. The firm prides itself on friendly yet professional service and utilizes state-of-the-art Internet technology to provide quality customer service.