There is one thing that remains constant in these uncertain financial times, a person faced with the potential for a reduction in his or her personal net worth or income may be tempted to do whatever it takes to preserve that financial situation. As a result, forensic accounting is becoming more mainstream, financial investigations are becoming more common, and fraud risk awareness continues to grow in the divorce area. Allegations of unreported income, hidden assets, and other forensic financial issues are becoming more relevant in divorce cases.  Fraud risks often exist in matrimonial matters and may not be uncovered except in a forensic financial investigation. To be effective, forensic financial investigators must possess a skill set above and beyond that which is customary for certified public accountants. Many forensic accountants earn advanced credentials in a financial oriented and investigated discipline as evidence of their expertise. In a domestic relations matter, consideration should be given to experts with an understanding and background in accounting and tax compliance and interviewing skills among other things.

There always is a potential for fraud in divorce matters, but in these uncertain times that potential may increase. If you have any questions or require a forensic financial investigation please contact Ken Morris or one of our CPAs at Wallace Neumann & Verville, LLP.

With mortgage rates hitting record lows and government programs such as the Home Affordable Refinance Program (HARP) 2.0, many Las Vegas homeowners and real estate investors took advantage of the opportunity to refinance the loans on their properties in 2012.  However, correctly deducting the costs of a refinance may be a complicated matter requiring professional services from a qualified CPA or tax preparer.

At closing, borrowers typically sign a settlement statement (also known as a HUD-1 or closing statement) that gives a detailed list of refinancing costs.  Because settlement statements are usually long and difficult to understand, tax deductible items from these documents are sometimes overlooked.  For personal residences, the tax deductible costs may include points and prorated real estate taxes.  For rental and commercial properties, settlement statements contain many types of loan fees, prorated association dues and utilities expenses that may be deductible.

Generally, points paid for refinancing are amortized and deducted over the life of the new mortgage.  However, if the mortgage is later refinanced or paid off early, the unamortized points may be fully deductible in the year of the payoff or subsequent refinance.  For this reason, it is important to carefully track the unamortized balance of points from year to year so a significant deduction is not missed.

There are several special rules.  For example, a taxpayer that uses part of the refinanced mortgage proceeds to improve his or her main home and meets other requirements may be able to fully deduct the part of the points related to the improvements in the year of refinance.

Be sure to read our disclaimer and consult with your tax advisor regarding deductions for refinancing costs.  For a free no obligation consultation with one of our Las Vegas CPAs, please contact Dustin Wheeler.

There are over one million charities and foundations in the United States and these organizations rely on contributions to carry out their missions. The deduction on your tax return remains a nice incentive regardless of the various reasons donors contribute. Internal Revenue Code Section 170 outlines the deductibility of charitable contributions, including provisions on substantiation requirements. If substantiation requirements are not met, the deduction could be disallowed by tax court.

Code Section 170 outlines general substantiation requirements for cash donations above and below $250. For donations below $250, the requirements are pretty straight forward. A donor should maintain a bank record of the donation or have a letter from the donee stating the name of the charity, date and amount contributed. The requirements for donations greater than $250 are more rigid. Section 170(f)(8) outlines that you must have obtained a written communication at the time the tax return is filed from the charity. This document must state the amount of the donation, whether goods or services were provided in exchange for the money, and a good-faith estimate of the value of any goods or services the charity provided. If the contributions were given to a church, there must be a statement that says “goods or services received consist solely of religious intangible benefits” or a statement to that effect. Make sure you have properly substantiated your charitable contribution before you deduct it on your return.

The case of Durden, T.C. Memo. 2012-140 is an example of the IRS cracking down on substantiation requirements and shows how a minor omission of the substantiation requirements may cost you. The Durdens donated around $22,000 to their church in 2007 and were asked by the IRS to provide evidence. The Durdens gave a letter from the church along with cancelled checks which supported the amount. The IRS disallowed the deduction based on the substantiation failing to explicitly state that no goods or services were received for the contributions. The Durdens went back to the church and had them produce a letter that complied with the required statement. However, this communication was also denied because the letter wasn’t contemporaneous with the filing date of the return.

While it may be obvious that the Durdens’ contributions were legitimate, the tax code is very specific. Meeting all of the required specifications is essential. If you have questions regarding charitable contributions or the specifics of an accounting transaction, feel free to contact Ronnie Withaeger or one of the CPAs at Wallace, Neumann & Verville, LLP.

If you contribute to a 401k or other type of retirement plan, you may be able to take advantage of larger tax deductions in 2013 due to increases in contribution and phase out limits.

On October 18, 2012, the Internal Revenue Service (IRS) announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2013.

Below are the key changes which are effective January 1, 2013, as well as a reference to the 2012 limits for comparison purposes (increased amounts are in bold).

In addition, some of the phase out ranges for IRA contributions are set to change in 2013.  See the IRS news release for details.

The CPAs and accountants at Las Vegas-based Wallace Neumann & Verville LLP offer services including tax compliance and planning as well as audits for employee benefit plans.  If you have questions or would like to schedule a free no obligation consultation, feel free to contact Marian Guerra.

With President Obama earning four more years in the White House and the Supreme Court upholding the Patient Protection and Affordable Care Act (PPACA, aka “Obamacare”), it’s time for us to get an understanding of how this law affects our taxes and what we can do to prepare.

Here are some of the changes that are coming for 2013:

• The law creates two tax increases for taxpayers with a modified adjusted gross income above $200,000 for single filers and $250,000 for married filing joint filers beginning Jan. 1, 2013.  See Approaching the fiscal cliff – Watch your step! for specific details.
• The Medical and Dental Expense deduction on schedule A has been deductible to the extent that it exceeds 7.5% of your AGI.  If you are under 65 years old, the new threshold will be 10%.  The Healthcare Flex-Spending accounts previously had no maximum contribution limit.  Under the new law, there will be a cap of $2,500.

The Medicare Contribution tax of 3.8% is applied to “net investment income.”  It is important to note that the tax will not be imposed on certain types of income. Income and distributions from “Active” LLCs, partnerships and S corporations are not subject to the 3.8% tax.

Taxpayers have about one month to implement tax planning strategies before the law kicks in.  When Congress eventually addresses the expiration of the Bush Tax Cuts, the changes listed above could be in addition to marginal tax rate increases due to that expiration.  If you are interested in talking about strategies that could better prepare you for increases or active/passive rules for your business, please contact Ronnie Withaeger or one of the Las Vegas CPAs at Wallace, Neumann & Verville, LLP.

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