W. Edward Newton Jr., CPA, CFP | 13850 Ballantyne Corporate Place, Suite 500 | Charlotte, NC 28277 | 704-552-8689

 

 

Financial Services by Newton Financial Network

Ed Newton, CPA, CFP

As a Certified Financial Planner I recently attended a financial services workshop in Indianapolis, IN.

It was hosted by Archer Funds, the registered advisor firm we work through to provide financial advice to our clients here in the Charlotte / Mecklenburg County area.

This forum allowed for two days of learning and networking. Speakers included the President of Archer Funds, Troy Patton, who spoke on the state of the market.

Troy is known for understanding how world events and complex factors affect our U.S. Market.

Steve Demas, Portfolio Manager, spoke on client services. Steve has a long history of working with clients on their personal finances and individual investments before dedicating all of his time to researching appropriate investments for the Archer portfolios.

John Rosebrough, Chartered Financial Analyst, provided insight into the technical aspects of portfolio management.

Troy, Steve and John actively manage the Archer Funds and the portfolios that are built around these funds. We offer investment advice through our Newton Financial Network.

For a free review of your investments, give me a call at 704-552-8689 or download one of my 4 FREE reports on investing at my Newton Financial Network website.  Thanks!  Ed

 


 

 

Ed Newton, CPA


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Filing Options for Your

Final Form 1040

 

Although we can't escape death or taxes, we may be able to minimize the federal income taxes due on our final Form 1040.

Filing a tax return after we die (we are then known as the "decedent") is probably not something most of us think much about.

But, a final Form 1040 generally must be filed for the year of our death and, just as in life, is typically due by April 15th of the following year.


Normal tax accounting rules regarding the recognition of income and deductions generally apply for this final return. And, as is the case during life, tax planning opportunities are available both when death is imminent and after death. For instance, several decisions can affect the income or deductions reported on that final return. However, as we will discuss below, a major decision for married individuals concerns whether to file a joint return for the year of death.

When a married taxpayer dies and the surviving spouse does not remarry during the year, the spouse may file a joint return with the decedent for the year of death, but is not required to do so. The joint return will include income and deductions for the decedent prior to the date of death and the surviving spouse's income and deductions for the entire year.

 

If the surviving spouse remarries before the close of the tax year that includes the date of death, the spouse may not file jointly with the decedent. Instead, a separate return must be prepared for the decedent. Listed below are some of the advantages and disadvantages for joint filers to consider when filing that final return.

Advantages of Filing a Joint Return.

 

Since the surviving spouse's tax year does not end upon the death of the decedent, it may be possible to reduce their combined income tax liability by accelerating or postponing income or deductions to maximize use of the joint tax rates. Some other benefits include, but are not limited to: (a) use of one spouse's excess deductions against the income of the other spouse (e.g., excess charitable contributions); (b) an increase in the IRA contribution limit (because of the spousal IRA rules); and (c) the ability of the decedent's net operating loss (NOL), capital loss, and passive activity loss (subject to the limitation) carryovers to offset income of the surviving spouse. Note that any NOL or capital loss carryover of the decedent that is not used on the final return (whether separate or joint) will expire unused.

Disadvantages of Filing a Joint Return.

 

Filing a joint return with the surviving spouse is not always the best option. One disadvantage of filing a joint return for the decedent's final tax year is that the decedent's estate and the surviving spouse are jointly and severally liable for any tax, interest, and penalties due on the joint return. In addition, when the surviving spouse is not the sole beneficiary of the estate, the decedent's personal representative may not be willing to expose the estate to potential unknown liabilities (e.g., tax on the surviving spouse's unreported income). Potentially, this exposure may be avoided because of the innocent spouse rules.

 

Also, filing a joint return can negatively impact the amount of the decedent's deductions that are subject to adjusted gross income (AGI) limitations (e.g., medical, casualty, miscellaneous itemized) since AGI is based on joint income rather than separate income. Finally, the surviving spouse must cooperate with the decedent's personal representative by sharing the information necessary to prepare the return and by signing the return once it is prepared.

Planning for that final 1040 is something we may not think much about, but it is a good idea all the same.

 




Maximizing the Deduction for Start-up Expenses

Individuals starting a new business or acquiring the assets of an existing business often incur start-up expenses, which can be considerable, in the investigation and acquisition phase before actual business operations begin.

 

Most start-up expenditures can be segregated into two broad categories: (a) investigatory expenses and (b) business preopening costs.

Taxpayers can immediately deduct up to $5,000 of start-up expenses in the year when active conduct of a business begins.  However, the $5,000 instant deduction allowance is reduced dollar for dollar by cumulative start-up expens-es in excess of $50,000 for the business in question.

 

Start-up expenses that cannot be immediately deducted in the year a business begins must be capitalized and amortized over 180 months on a straight-line basis. In many cases, start-up expenses for small businesses will be modest enough to qualify for immediate deduction under the $5,000 instant deduction allowance in the year when active conduct of business commences.

Example: Claiming the deduction for start-up expenses.

Suzie (a calendar-year taxpayer) incurs $4,200 of start-up expenses in 2012 before opening her new car wash in November of 2012. Suzie's 2012 deduction is $4,200. Since her start-up expenses did not exceed $50,000, she can deduct the entire $4,200 in 2012.

 

NOTE: A taxpayer is not considered to be engaged in carrying on a trade or business until the business has begun to function as a going concern and has performed the activities for which it was organized.

 

To read this or any other past article online please click here and then scroll down to our newsletter archive.
 



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As always you can call our offices if you have any questions about these or any other accounting, tax, financial planning or Quickbooks related issues, at 704-552-8689. 

 

Regards, W. Edward Newton Jr., CPA, CFP

Certified Public Accountant

 

 

 

W. Edward Newton Jr., CPA, CFP | Certified Public Accountant

13850 Ballantyne Corporate Place, Suite 500 Charlotte, North Carolina 28277 Phone: (704)552-8689 | Email: info@ednewtoncpa.com