Author: Leon Clinton

Financial Planning Tax

Tax Incentives for Higher Education

The tax code provides a variety of tax incentives for families who are saving for, or already paying, higher education costs or are repaying student loans.

You may be able to claim a credit for the qualified tuition and related expenses of the students in your family who are enrolled in eligible educational institutions. The types of credits available are the Lifetime Learning Credit and the American Opportunity Tax Credit.

Different rules apply to each credit. If you claim an American Opportunity Credit for a particular student, none of that student’s expenses for that year may be applied toward the Lifetime Learning Credit.

You may be able to claim a tuition deduction of up to $4,000 of qualified education expenses paid during the year for yourself, your spouse, or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.

You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.

Tax

Six Facts about the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for tax year 2010.

  1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher income taxpayers who could claim so many deductions they owed little or no income tax.
  2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
  3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.
  4. The AMT exemption amounts are set by law for each filing status.
  5. For tax year 2010, Congress raised the AMT exemption amounts to the following levels: $72,450 for a married couple filing a joint return and qualifying widows and widowers; $47,450 for singles and heads of household; $36,225 for a married person filing separately.
  6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2010.

If you want further information on the AMT and your tax situation, please let us know.

Accounting Business Quickbooks

Cash Management Tips for Small Businesses

Cash is the lifeblood of any small business. Here are some tips to help your business maintain a sufficient cash flow to meet its financial goals and run efficiently:

Toughen up your credit policies. Review the payment terms you offer to customers and tighten them up if slow payment is a problem area for your business. For instance, how long are customers given to pay? What action will be taken if a payment is missed? Be sure your credit terms are communicated effectively to customers before transactions are entered into.

Tip: Consider requiring advance payments – at least in part – for new customers.

 

Tip: For many businesses, a routine credit check should be performed before a sales or service transaction is entered into with a new customer.

Come up with a budget – and stick to it. Surprisingly, many small businesses do not engage in the budgeting process. A budget can be extremely effective in helping you keep track of whether cost- and revenue-related goals are being met. Depending on the size and complexity of the business, the budget process might be informal or formal, lengthy or simple. Projected revenues and expenses should be broken down by months.

Tip: If you don’t already do so, budget for next year’s revenues and expenses near the end of each year. Review budgeted to actual results monthly.

 

Tighten up billing. If collecting bills has become a problem for your business, you might want to consider increasing the intervals at which customers are billed–e.g., from three months to one month, or from one month to two weeks.

Tip: Review your accounts receivable weekly or even daily to make sure slow payers are not allowed to slide.

 

If you have questions regarding your company’s cash flow and credit/collection policies, give us a call. We can help.

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