5 Year-End Tax-Planning Moves for Business Owners .

Posted on 29/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on 5 Year-End Tax-Planning Moves for Business Owners .

5 Year-End Tax-Planning Moves for Business Owners .

The end of the year is usually a hectic time for business owners like me, who are scrambling to wrap up activities while planning ahead for the new year. This December is particularly challenging because of continuing tax uncertainty. As a small-business owner and tax expert, I’ve decided to focus on what is known rather than on what is not known about tax rules, and to take year-end actions that are helpful regardless of possible changes to tax rules.

Here are five steps that I recommend taking before year’s end.

1. Bring your books up-to-date. Before any tax planning can be done, it’s vital to know whether your company made or lost money for the year. To do this, accounting records must be up-to-date. Some business owners I know let this task slide for months and, unfortunately, may not be prepared to think about year-end tax planning at this time.

2. Consider a retirement plan. Profits can be sheltered in qualified retirement plans, and the 2010 rules remain relatively unchanged from 2009. For example, a corporate owner or self-employed person whose salary or net earnings are sufficient can contribute a maximum of $49,000 to a SEP (Simplified Employee Pension) plan, scoring a tax deduction while saving for one’s golden years. Owners who don’t yet have qualified retirement plans for their companies need to complete the paperwork (provided by their financial institution or mutual fund) by Dec. 31. Then they’ll have until the extended due date of their 2010 return to make their contributions for the year.

It’s wise to discuss the wide range of plan options with a CPA or other financial adviser. Keep in mind, if you do miss the Dec. 31 for setting up a qualified retirement plan, you still have one plan option – the SEP – which can be set and funded as late as the extended due date of the return.

3. Don’t forget health coverage. Owners (other than those with a C corporation) who pay for their health coverage can deduct it, but only as a personal expense rather than as a business expense. However, for 2010, if you are self-employed you can use the premiums to offset the amount of net earnings used to calculate self-employment taxes (which cover mandatory Social Security and Medicare contributions). Because of the tax savings, owners may want to reduce their estimated taxes. The last payment for 2010 is due on Jan. 18, 2011.

Those who use the cash-basis accounting method might also want to pre-pay their 2011 premiums to boost their write-off for 2010 while saving on self-employment taxes.

If the insurance qualifies as a high-deductible health plan, then you’re allowed a tax-deductible contribution to a Health Savings Account, or HSA, for 2010. (To be considered “high deductible” in 2010, the policy’s deductible must be at least $1,200 for individuals and $2,400 for families and meet certain other tests.) While the HSA 2010 contribution can be made as late as April 18, 2011, the sooner it is made, the more earnings you can build up on a tax-advantageous basis. Earnings will never be taxed if withdrawn to pay qualified medical costs.

4. Donate to charity. Business owners who have had a good year can share their good fortune with charities. The donations are tax-deductible within the limits allowed by law. For example, if you own a C corp, your charitable deductions are limited to 10% of taxable income.

For owners who record business income on personal tax returns (such as sole proprietors, or owners of S corporations or limited liability companies), it’s helpful to note a change for 2010: There’s no phase-out of itemized deductions for high-income taxpayers. That’s a shift from prior years, when contributors lost part of their charitable deductions when income exceeded a threshold amount. If you’re unsure whether an organization qualifies for tax-deductible contributions, check IRS Publication 78.

5. Upgrade equipment. If you need to invest in new business equipment or upgrade old machines, now is a great time to act. I’m buying a new smart phone and other business owners I know have made similar buying plans. Whether the business is profitable or not, there is a tax break to help.

—If the business is profitable, elect first-year expensing for the cost of equipment up to $500,000. (This dollar limit is up from $250,000 in 2009). If the cost is more than the dollar limit, you can also use 50% bonus depreciation and a regular depreciation allowance to effectively write off most of the cost of the purchase. The bonus depreciation option is set to expire on Dec. 31.

—If the business is not profitable, rely on 50% bonus depreciation to write off half the cost (plus a regular depreciation allowance on the other half). This write-off can create or increase a net operating loss, which can result in a carryback that can generate a cash refund.

While first-year expensing can be used for new or pre-owned equipment, bonus depreciation is limited to new equipment. However, the purchase of equipment for both first-year expensing and bonus depreciation can be financed in whole or in part without any impact on the tax write-off.

A final word: I’m waiting to see what Congress does with taxes—the extension to 2010 of provisions that expired in 2009, as well as the possible extension for 2011 of Bush-era tax cuts—before making any dramatic tax moves, such as deferring income and accelerating deductions. Hopefully there will still be enough time to act.

Gustavo A Viera CPA

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Tax Season will Start Late This Year

Posted on 27/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on Tax Season will Start Late This Year

Tax Season will Start Late This Year

Following last week’s tax law changes, the Internal Revenue Service announced today the upcoming tax season will NOT start on time for most people, but taxpayers affected by three recently reinstated deductions need to wait until mid- to late February to file their individual tax returns. In addition, taxpayers who itemize deductions on Form 1040 Schedule A will need to wait until mid- to late February to file as well.

The start of the 2011 filing season will begin in January for the majority of taxpayers. However, last week’s changes in the law mean that the IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17.

People claiming any of these three items — involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A — will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.

“The majority of taxpayers will be able to fill out their tax returns and file them as they normally do,” said IRS Commissioner Doug Shulman. “We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS will work through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season.”

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the late tax law changes. In the interim, people in the affected categories can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes.

The IRS urged taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax changes and ensure accurate tax returns.

Taxpayers will need to wait to file if they are within any of the following three categories:

  • Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
  • Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students — covering up to $4,000 of tuition and fees paid to a post-secondary institution — is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.
  • Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23, and Form 1040A, Line 16.

For those falling into any of these three categories, the delay affects both paper filers and electronic filers.

The IRS emphasized that e-file is the fastest, best way for those affected by the delay to get their refunds. Those who use tax-preparation software can easily download updates from their software provider. The IRS Free File program also will be updated.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure a smooth tax season.

Updated information will be posted on IRS.gov. This will include an updated copy of Schedule A as well as updated state and local sales tax tables. Several other forms used by relatively few taxpayers are also affected by the recent changes, and more details are available on IRS.gov.

In addition, the IRS reminds employers about the new withholding tables released Friday for 2011. Employers should implement the 2011 withholding tables as soon as possible, but not later than Jan. 31, 2011. The IRS also reminds employers that Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov

Gustavo A Viera CPA

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7 Tax-Saving Year-End Tax-Planning Tips

Posted on 27/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on 7 Tax-Saving Year-End Tax-Planning Tips

Despite confusion created by recent and probable year-end tax legislation changes, the 2010 federal income tax environment is still quite favorable.

“We may not be able to say that after 2010; therefore, tax planning actions taken between now and year-end may be more important than ever,” said Gustavo A Viera CPA, managing partner for the Tax & Accounting firm, in a statement. “Be careful, though—Congress could change the ball game before the end of the year.”

Following are seven planning ideas for your clients to consider while there is still time to act before the end of the year.

1. Accelerate Itemized Deductions into this Year. If your Adjusted Gross Income will be more than $170,000 ($85,000 if you are married and file separately) next year, you may want to accelerate into 2010 your state and local tax payments that are due early next year. You may also want to prepay in 2010 some charitable donations that you would normally make in 2011. Why? Because for 2010, the phase-out rule that previously reduced write-offs for the most popular itemized deduction items (including home mortgage interest, state and local taxes, and charitable donations) is gone, but is scheduled to come back in 2011, unless Congress takes action to prevent it, which looks increasingly unlikely.

If the phase-out rule comes back as expected, it will wipe out $3 of affected itemized deductions for every $100 of AGI above the applicable threshold. For 2011, the AGI threshold will probably be around $170,000, or about $85,000 for married individuals who file separate returns. Individuals with very high AGI may have up to 80% of their affected deductions wiped out.

2. Think Twice Before Deferring Income into 2011. This strategy makes sense if you are confident you will be in the same or lower tax bracket next year, but the tax picture for 2011 is blurry. With just weeks left in 2010, the fate of many tax provisions for 2011 and beyond is still unknown. The top two rates have widely been expected to increase in 2011 from the current 33 percent and 35 percent to 36 percent and 39.6 percent, respectively—at least for taxpayers earning $250,000 or more ($200,000 or more if single). Therefore, if you fall into this group, you might want to consider reversing the traditional strategy and accelerating income into 2010 to take advantage of this year’s presumably lower rates. However, legislators could still vote to delay any tax increase to after 2011.

3. Time Your Investment Gains and Losses and Consider Being Bold. As you evaluate investments held in your taxable brokerage firm accounts, consider the impact of selling appreciated securities this year instead of next year. The maximum federal income tax rate on long-term capital gains from 2010 sales is 15 percent. However, that low rate only applies to gains from securities that have been held for at least a year and a day. In 2011, the maximum rate on long-term capital gains is scheduled to increase to 20 percent. That will happen automatically unless Congress takes action, which currently seems unlikely.

To the extent you have capital losses from earlier this year or a capital loss carryover from pre-2010 years (most likely from the 2008 stock market meltdown), selling appreciated securities this year will be tax-free because the losses will shelter your gains. Using capital losses to shelter short-term capital gains is especially helpful because short-term gains will be taxed at your regular rate (which could be as high as 35 percent) if they are left unsheltered.

What if you have some poor performing securities (currently worth less than you paid for them) that you would like to dump? Biting the bullet and selling them this year would trigger capital losses that you can use to shelter capital gains, including high-taxed short-term gains, from other sales this year. If you think your investments that are currently underwater are poised for a comeback, you can buy them back after taking a loss as long as you do not reacquire them within 30 days before or after the sale.

If selling many poor performing securities would cause your capital losses for this year to exceed your capital gains, no problem. You will have a net capital loss for 2010. You can then use that net capital loss to shelter up to $3,000 of this year’s high-taxed ordinary income from salaries, bonuses, self-employment, etc. ($1,500 if you are married and file separately). Any excess net capital loss gets carried forward to next year.

Selling enough poor performing securities to create a big net capital loss that exceeds what you can use this year might turn out to be a good idea. You can carry forward the excess net capital loss to 2011 and beyond and use it to shelter both short-term gains and long-term gains recognized in those years, plus up to $3,000 of ordinary income each year—all of which may well be taxed at higher rates after 2010. This can also give you extra investing flexibility in future years because you will not necessarily have to hold appreciated securities for more than a year to get better tax results.

4. Maximize Contributions to 401(k) Plans. If you have a 401(k) plan at work, you can tell your company how much you want to set aside on a tax-free basis for next year. Contribute as much as you reasonably can, especially if your employer makes matching contributions. You turn down “free money” when you fail to participate to the maximum match.

5. Take Advantage of Flexible Spending Accounts. If your company has heath or child care FSAs, before year-end you must specify how much of your 2011 salary to convert into tax-free plan contributions. You can then take tax-free withdrawals next year to reimburse yourself for out-of-pocket medical and dental expenses and qualifying child care costs (depending on the type of plan). Watch out, though, FSAs are “use-it-or-lose-it” accounts—you do not want to set aside more than what you will likely have in qualifying expenses for the year. And, starting in 2011, over-the-counter drugs (e.g., aspirin and antacids) will no longer qualify for reimbursement by health FSAs, so you may need to consider that when determining your 2011 contribution amount.

If you currently have an FSA, make sure you drain it by incurring eligible expenses before the deadline for this year. Otherwise, you will lose the remaining balance. For health FSAs, it is not difficult to drum up some items such as: new glasses or contacts, dental work you may have been putting off, or prescriptions that can be filled early. Also, for 2010, over-the-counter drugs still apply.

6. Adjust Your Federal Income Tax Withholding. If it looks like you are going to owe income taxes for 2010, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year. When you file your return, you will still have to pay any taxes due less the amount paid in. However, as long as your total tax payments (estimated payments plus withholdings) equal at least 90 percent of your 2010 liability or if smaller, 100 percent of your 2009 liability (110 percent if your 2009 adjusted gross income exceeded $150,000; $75,000 for married individuals who filed separate returns), penalties will be minimized, if not eliminated.

7. Make Energy Efficiency Improvements to Your Home. A great way to cut energy costs and save up to $1,500 in federal income taxes this year is to make energy efficiency improvements to your principal residence. Basically, if you install energy efficient insulation, windows, doors, roofs, heat pumps, furnaces, central A/C units, hot water heaters or boilers, or advanced main air circulating fans to your home during 2010, you may be entitled to a tax credit of 30 percent of the purchase price. However, the maximum total credit you can claim for 2009 and 2010 combined is limited to $1,500. Without Congressional action, the credit will not be available after 2010.
Taxpayers should consult with a personal tax advisor before applying these or other tax strategies.

Gustavo A Viera CPA

CPA firms, Accountants in Miami | Accounting Services in Miami | Accountants Miami | Certified Public Accountant in Miami | CPA in Miami | CPA Miami | Miami Accountants | Miami Accounting Firms | Miami CPA Firm | Miami CPA

7 Tax-Saving Year-End Tax-Planning Tips

Posted on 24/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on 7 Tax-Saving Year-End Tax-Planning Tips

Despite confusion created by recent and probable year-end tax legislation changes, the 2010 federal income tax environment is still quite favorable.

“We may not be able to say that after 2010; therefore, tax planning actions taken between now and year-end may be more important than ever,” said Gustavo A Viera CPA, managing partner for the Tax & Accounting firm, in a statement. “Be careful, though—Congress could change the ball game before the end of the year.”

Following are seven planning ideas for your clients to consider while there is still time to act before the end of the year.

1. Accelerate Itemized Deductions into this Year. If your Adjusted Gross Income will be more than $170,000 ($85,000 if you are married and file separately) next year, you may want to accelerate into 2010 your state and local tax payments that are due early next year. You may also want to prepay in 2010 some charitable donations that you would normally make in 2011. Why? Because for 2010, the phase-out rule that previously reduced write-offs for the most popular itemized deduction items (including home mortgage interest, state and local taxes, and charitable donations) is gone, but is scheduled to come back in 2011, unless Congress takes action to prevent it, which looks increasingly unlikely.

If the phase-out rule comes back as expected, it will wipe out $3 of affected itemized deductions for every $100 of AGI above the applicable threshold. For 2011, the AGI threshold will probably be around $170,000, or about $85,000 for married individuals who file separate returns. Individuals with very high AGI may have up to 80% of their affected deductions wiped out.

2. Think Twice Before Deferring Income into 2011. This strategy makes sense if you are confident you will be in the same or lower tax bracket next year, but the tax picture for 2011 is blurry. With just weeks left in 2010, the fate of many tax provisions for 2011 and beyond is still unknown. The top two rates have widely been expected to increase in 2011 from the current 33 percent and 35 percent to 36 percent and 39.6 percent, respectively—at least for taxpayers earning $250,000 or more ($200,000 or more if single). Therefore, if you fall into this group, you might want to consider reversing the traditional strategy and accelerating income into 2010 to take advantage of this year’s presumably lower rates. However, legislators could still vote to delay any tax increase to after 2011.

3. Time Your Investment Gains and Losses and Consider Being Bold. As you evaluate investments held in your taxable brokerage firm accounts, consider the impact of selling appreciated securities this year instead of next year. The maximum federal income tax rate on long-term capital gains from 2010 sales is 15 percent. However, that low rate only applies to gains from securities that have been held for at least a year and a day. In 2011, the maximum rate on long-term capital gains is scheduled to increase to 20 percent. That will happen automatically unless Congress takes action, which currently seems unlikely.

To the extent you have capital losses from earlier this year or a capital loss carryover from pre-2010 years (most likely from the 2008 stock market meltdown), selling appreciated securities this year will be tax-free because the losses will shelter your gains. Using capital losses to shelter short-term capital gains is especially helpful because short-term gains will be taxed at your regular rate (which could be as high as 35 percent) if they are left unsheltered.

What if you have some poor performing securities (currently worth less than you paid for them) that you would like to dump? Biting the bullet and selling them this year would trigger capital losses that you can use to shelter capital gains, including high-taxed short-term gains, from other sales this year. If you think your investments that are currently underwater are poised for a comeback, you can buy them back after taking a loss as long as you do not reacquire them within 30 days before or after the sale.

If selling many poor performing securities would cause your capital losses for this year to exceed your capital gains, no problem. You will have a net capital loss for 2010. You can then use that net capital loss to shelter up to $3,000 of this year’s high-taxed ordinary income from salaries, bonuses, self-employment, etc. ($1,500 if you are married and file separately). Any excess net capital loss gets carried forward to next year.

Selling enough poor performing securities to create a big net capital loss that exceeds what you can use this year might turn out to be a good idea. You can carry forward the excess net capital loss to 2011 and beyond and use it to shelter both short-term gains and long-term gains recognized in those years, plus up to $3,000 of ordinary income each year—all of which may well be taxed at higher rates after 2010. This can also give you extra investing flexibility in future years because you will not necessarily have to hold appreciated securities for more than a year to get better tax results.

4. Maximize Contributions to 401(k) Plans. If you have a 401(k) plan at work, you can tell your company how much you want to set aside on a tax-free basis for next year. Contribute as much as you reasonably can, especially if your employer makes matching contributions. You turn down “free money” when you fail to participate to the maximum match.

5. Take Advantage of Flexible Spending Accounts. If your company has heath or child care FSAs, before year-end you must specify how much of your 2011 salary to convert into tax-free plan contributions. You can then take tax-free withdrawals next year to reimburse yourself for out-of-pocket medical and dental expenses and qualifying child care costs (depending on the type of plan). Watch out, though, FSAs are “use-it-or-lose-it” accounts—you do not want to set aside more than what you will likely have in qualifying expenses for the year. And, starting in 2011, over-the-counter drugs (e.g., aspirin and antacids) will no longer qualify for reimbursement by health FSAs, so you may need to consider that when determining your 2011 contribution amount.

If you currently have an FSA, make sure you drain it by incurring eligible expenses before the deadline for this year. Otherwise, you will lose the remaining balance. For health FSAs, it is not difficult to drum up some items such as: new glasses or contacts, dental work you may have been putting off, or prescriptions that can be filled early. Also, for 2010, over-the-counter drugs still apply.

6. Adjust Your Federal Income Tax Withholding. If it looks like you are going to owe income taxes for 2010, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year. When you file your return, you will still have to pay any taxes due less the amount paid in. However, as long as your total tax payments (estimated payments plus withholdings) equal at least 90 percent of your 2010 liability or if smaller, 100 percent of your 2009 liability (110 percent if your 2009 adjusted gross income exceeded $150,000; $75,000 for married individuals who filed separate returns), penalties will be minimized, if not eliminated.

7. Make Energy Efficiency Improvements to Your Home. A great way to cut energy costs and save up to $1,500 in federal income taxes this year is to make energy efficiency improvements to your principal residence. Basically, if you install energy efficient insulation, windows, doors, roofs, heat pumps, furnaces, central A/C units, hot water heaters or boilers, or advanced main air circulating fans to your home during 2010, you may be entitled to a tax credit of 30 percent of the purchase price. However, the maximum total credit you can claim for 2009 and 2010 combined is limited to $1,500. Without Congressional action, the credit will not be available after 2010.
Taxpayers should consult with a personal tax advisor before applying these or other tax strategies.

Gustavo A Viera CPA

CPA firms, Accountants in Miami | Accounting Services in Miami | Accountants Miami | Certified Public Accountant in Miami | CPA in Miami | CPA Miami | Miami Accountants | Miami Accounting Firms | Miami CPA Firm | Miami CPA

5 Year-End Tax-Planning Moves for Business Owners .

Posted on 22/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on 5 Year-End Tax-Planning Moves for Business Owners .

5 Year-End Tax-Planning Moves for Business Owners .

The end of the year is usually a hectic time for business owners like me, who are scrambling to wrap up activities while planning ahead for the new year. This December is particularly challenging because of continuing tax uncertainty. As a small-business owner and tax expert, I’ve decided to focus on what is known rather than on what is not known about tax rules, and to take year-end actions that are helpful regardless of possible changes to tax rules.

Here are five steps that I recommend taking before year’s end.

1. Bring your books up-to-date. Before any tax planning can be done, it’s vital to know whether your company made or lost money for the year. To do this, accounting records must be up-to-date. Some business owners I know let this task slide for months and, unfortunately, may not be prepared to think about year-end tax planning at this time.

2. Consider a retirement plan. Profits can be sheltered in qualified retirement plans, and the 2010 rules remain relatively unchanged from 2009. For example, a corporate owner or self-employed person whose salary or net earnings are sufficient can contribute a maximum of $49,000 to a SEP (Simplified Employee Pension) plan, scoring a tax deduction while saving for one’s golden years. Owners who don’t yet have qualified retirement plans for their companies need to complete the paperwork (provided by their financial institution or mutual fund) by Dec. 31. Then they’ll have until the extended due date of their 2010 return to make their contributions for the year.

It’s wise to discuss the wide range of plan options with a CPA or other financial adviser. Keep in mind, if you do miss the Dec. 31 for setting up a qualified retirement plan, you still have one plan option – the SEP – which can be set and funded as late as the extended due date of the return.

3. Don’t forget health coverage. Owners (other than those with a C corporation) who pay for their health coverage can deduct it, but only as a personal expense rather than as a business expense. However, for 2010, if you are self-employed you can use the premiums to offset the amount of net earnings used to calculate self-employment taxes (which cover mandatory Social Security and Medicare contributions). Because of the tax savings, owners may want to reduce their estimated taxes. The last payment for 2010 is due on Jan. 18, 2011.

Those who use the cash-basis accounting method might also want to pre-pay their 2011 premiums to boost their write-off for 2010 while saving on self-employment taxes.

If the insurance qualifies as a high-deductible health plan, then you’re allowed a tax-deductible contribution to a Health Savings Account, or HSA, for 2010. (To be considered “high deductible” in 2010, the policy’s deductible must be at least $1,200 for individuals and $2,400 for families and meet certain other tests.) While the HSA 2010 contribution can be made as late as April 18, 2011, the sooner it is made, the more earnings you can build up on a tax-advantageous basis. Earnings will never be taxed if withdrawn to pay qualified medical costs.

4. Donate to charity. Business owners who have had a good year can share their good fortune with charities. The donations are tax-deductible within the limits allowed by law. For example, if you own a C corp, your charitable deductions are limited to 10% of taxable income.

For owners who record business income on personal tax returns (such as sole proprietors, or owners of S corporations or limited liability companies), it’s helpful to note a change for 2010: There’s no phase-out of itemized deductions for high-income taxpayers. That’s a shift from prior years, when contributors lost part of their charitable deductions when income exceeded a threshold amount. If you’re unsure whether an organization qualifies for tax-deductible contributions, check IRS Publication 78.

5. Upgrade equipment. If you need to invest in new business equipment or upgrade old machines, now is a great time to act. I’m buying a new smart phone and other business owners I know have made similar buying plans. Whether the business is profitable or not, there is a tax break to help.

—If the business is profitable, elect first-year expensing for the cost of equipment up to $500,000. (This dollar limit is up from $250,000 in 2009). If the cost is more than the dollar limit, you can also use 50% bonus depreciation and a regular depreciation allowance to effectively write off most of the cost of the purchase. The bonus depreciation option is set to expire on Dec. 31.

—If the business is not profitable, rely on 50% bonus depreciation to write off half the cost (plus a regular depreciation allowance on the other half). This write-off can create or increase a net operating loss, which can result in a carryback that can generate a cash refund.

While first-year expensing can be used for new or pre-owned equipment, bonus depreciation is limited to new equipment. However, the purchase of equipment for both first-year expensing and bonus depreciation can be financed in whole or in part without any impact on the tax write-off.

A final word: I’m waiting to see what Congress does with taxes—the extension to 2010 of provisions that expired in 2009, as well as the possible extension for 2011 of Bush-era tax cuts—before making any dramatic tax moves, such as deferring income and accelerating deductions. Hopefully there will still be enough time to act.

Gustavo A Viera CPA

CPA firms, Accountants in Miami | Accounting Services in Miami | Accountants Miami | Certified Public Accountant in Miami | CPA in Miami | CPA Miami | Miami Accountants | Miami Accounting Firms | Miami CPA Firm | Miami CPA

7 Tax-Saving Year-End Tax-Planning Tips

Posted on 21/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on 7 Tax-Saving Year-End Tax-Planning Tips

Despite confusion created by recent and probable year-end tax legislation changes, the 2010 federal income tax environment is still quite favorable.

“We may not be able to say that after 2010; therefore, tax planning actions taken between now and year-end may be more important than ever,” said Gustavo A Viera CPA, managing partner for the Tax & Accounting firm, in a statement. “Be careful, though—Congress could change the ball game before the end of the year.”

Following are seven planning ideas for your clients to consider while there is still time to act before the end of the year.

1. Accelerate Itemized Deductions into this Year. If your Adjusted Gross Income will be more than $170,000 ($85,000 if you are married and file separately) next year, you may want to accelerate into 2010 your state and local tax payments that are due early next year. You may also want to prepay in 2010 some charitable donations that you would normally make in 2011. Why? Because for 2010, the phase-out rule that previously reduced write-offs for the most popular itemized deduction items (including home mortgage interest, state and local taxes, and charitable donations) is gone, but is scheduled to come back in 2011, unless Congress takes action to prevent it, which looks increasingly unlikely.

If the phase-out rule comes back as expected, it will wipe out $3 of affected itemized deductions for every $100 of AGI above the applicable threshold. For 2011, the AGI threshold will probably be around $170,000, or about $85,000 for married individuals who file separate returns. Individuals with very high AGI may have up to 80% of their affected deductions wiped out.

2. Think Twice Before Deferring Income into 2011. This strategy makes sense if you are confident you will be in the same or lower tax bracket next year, but the tax picture for 2011 is blurry. With just weeks left in 2010, the fate of many tax provisions for 2011 and beyond is still unknown. The top two rates have widely been expected to increase in 2011 from the current 33 percent and 35 percent to 36 percent and 39.6 percent, respectively—at least for taxpayers earning $250,000 or more ($200,000 or more if single). Therefore, if you fall into this group, you might want to consider reversing the traditional strategy and accelerating income into 2010 to take advantage of this year’s presumably lower rates. However, legislators could still vote to delay any tax increase to after 2011.

3. Time Your Investment Gains and Losses and Consider Being Bold. As you evaluate investments held in your taxable brokerage firm accounts, consider the impact of selling appreciated securities this year instead of next year. The maximum federal income tax rate on long-term capital gains from 2010 sales is 15 percent. However, that low rate only applies to gains from securities that have been held for at least a year and a day. In 2011, the maximum rate on long-term capital gains is scheduled to increase to 20 percent. That will happen automatically unless Congress takes action, which currently seems unlikely.

To the extent you have capital losses from earlier this year or a capital loss carryover from pre-2010 years (most likely from the 2008 stock market meltdown), selling appreciated securities this year will be tax-free because the losses will shelter your gains. Using capital losses to shelter short-term capital gains is especially helpful because short-term gains will be taxed at your regular rate (which could be as high as 35 percent) if they are left unsheltered.

What if you have some poor performing securities (currently worth less than you paid for them) that you would like to dump? Biting the bullet and selling them this year would trigger capital losses that you can use to shelter capital gains, including high-taxed short-term gains, from other sales this year. If you think your investments that are currently underwater are poised for a comeback, you can buy them back after taking a loss as long as you do not reacquire them within 30 days before or after the sale.

If selling many poor performing securities would cause your capital losses for this year to exceed your capital gains, no problem. You will have a net capital loss for 2010. You can then use that net capital loss to shelter up to $3,000 of this year’s high-taxed ordinary income from salaries, bonuses, self-employment, etc. ($1,500 if you are married and file separately). Any excess net capital loss gets carried forward to next year.

Selling enough poor performing securities to create a big net capital loss that exceeds what you can use this year might turn out to be a good idea. You can carry forward the excess net capital loss to 2011 and beyond and use it to shelter both short-term gains and long-term gains recognized in those years, plus up to $3,000 of ordinary income each year—all of which may well be taxed at higher rates after 2010. This can also give you extra investing flexibility in future years because you will not necessarily have to hold appreciated securities for more than a year to get better tax results.

4. Maximize Contributions to 401(k) Plans. If you have a 401(k) plan at work, you can tell your company how much you want to set aside on a tax-free basis for next year. Contribute as much as you reasonably can, especially if your employer makes matching contributions. You turn down “free money” when you fail to participate to the maximum match.

5. Take Advantage of Flexible Spending Accounts. If your company has heath or child care FSAs, before year-end you must specify how much of your 2011 salary to convert into tax-free plan contributions. You can then take tax-free withdrawals next year to reimburse yourself for out-of-pocket medical and dental expenses and qualifying child care costs (depending on the type of plan). Watch out, though, FSAs are “use-it-or-lose-it” accounts—you do not want to set aside more than what you will likely have in qualifying expenses for the year. And, starting in 2011, over-the-counter drugs (e.g., aspirin and antacids) will no longer qualify for reimbursement by health FSAs, so you may need to consider that when determining your 2011 contribution amount.

If you currently have an FSA, make sure you drain it by incurring eligible expenses before the deadline for this year. Otherwise, you will lose the remaining balance. For health FSAs, it is not difficult to drum up some items such as: new glasses or contacts, dental work you may have been putting off, or prescriptions that can be filled early. Also, for 2010, over-the-counter drugs still apply.

6. Adjust Your Federal Income Tax Withholding. If it looks like you are going to owe income taxes for 2010, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year. When you file your return, you will still have to pay any taxes due less the amount paid in. However, as long as your total tax payments (estimated payments plus withholdings) equal at least 90 percent of your 2010 liability or if smaller, 100 percent of your 2009 liability (110 percent if your 2009 adjusted gross income exceeded $150,000; $75,000 for married individuals who filed separate returns), penalties will be minimized, if not eliminated.

7. Make Energy Efficiency Improvements to Your Home. A great way to cut energy costs and save up to $1,500 in federal income taxes this year is to make energy efficiency improvements to your principal residence. Basically, if you install energy efficient insulation, windows, doors, roofs, heat pumps, furnaces, central A/C units, hot water heaters or boilers, or advanced main air circulating fans to your home during 2010, you may be entitled to a tax credit of 30 percent of the purchase price. However, the maximum total credit you can claim for 2009 and 2010 combined is limited to $1,500. Without Congressional action, the credit will not be available after 2010.
Taxpayers should consult with a personal tax advisor before applying these or other tax strategies.

Gustavo A Viera CPA

CPA firms, Accountants in Miami | Accounting Services in Miami | Accountants Miami | Certified Public Accountant in Miami | CPA in Miami | CPA Miami | Miami Accountants | Miami Accounting Firms | Miami CPA Firm | Miami CPA

Set Small Goals and Look Out for Yourself

Posted on 21/12/2010Categories Business TrendsTags , , , , , , , , , ,   Leave a comment on Set Small Goals and Look Out for Yourself

Set Small Goals and Look Out for Yourself

How did you start your small business? What was the deciding factor that convinced you to take the leap?

I used to be a Director of Finance and we were coming up with some new marketing methods. The company chose a method that caused people to lose their jobs. This upset me and I felt that I had to move on. I wanted to hire employees and care about them. I feel that you need to care about your employees and not just the bottom line. People are your biggest asset and giving them job security is important.
What is the toughest challenge you faced in your experience as a small business owner?  How did you meet that challenge?

Getting the ball rolling was the toughest for me. When you decide to start a business, sometime it is hard to predict what challenges you will meet. You will face many challenges before you even start the business. Once you get the ball rolling, you then need to keep it rolling. There is no room to relax when you are starting.  If I stop working or stop giving my full attention, I do not make money. I overcame the challenge by continuing to push. I worked hard and reinvested into my business.

The rough economy in 2009 put me at a crossroads. Was I going to continue pushing my small business or do I need to go back into the regular workforce? I decided to stick with it and it ended up working out well for me.

What were some of the lessons I learned that I could share with other business owners?

Set realistic goals. You need to come up with a good game plan. By setting smaller goals, you can accomplish them. Having goals that you are not planning on accomplishing can just clutter up your time and does not push you in the right direction.

I also found that setting short-term goals for 3-6 months out make them easier to handle. When starting and running a small business, many factors will change. Goals with long time frames may become irrelevant. If you want to open a storefront, what small goals do you need to accomplish before you actually open the doors?

If you were to give a person who wants to start a business one piece of advice what would it be?

Stick to your game plan and do not change it all the time. Many small business owners spend all their time chasing different directions and leads. Others will change anytime someone has a suggestion or they read about a new technique.

Another good skill to have is to understand all the finances. Finances are the most important part of a starting business because that is usually the limiting resource. Keep your personal and business expenses separate so you can see where the money is going and coming from. If the lines blend, it is hard to control the amount you are investing and the revenues business is making. Taxes can get confusing, but you should not rely completely on someone else. Hire an accountant.

What resources do you use when deciding what direction to take your small business?

I do a lot of reading both online and offline. You do not need to go out and buy a million “how to” books on business. I use the library and bookstores to look through books. I also talk with people about their personal experiences and opinions, but remember with all advice pertaining to your business, take it with a grain of salt. It is your business and you need to feel confident on what you are doing. Take the advise and the adapt it to your business plan and your business.

Gustavo A Viera CPA

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12 Sure-Fire Steps to Improve Your Retail Sales

Posted on 20/12/201006/07/2020Categories Business TrendsTags , , , , , , , , , ,   Leave a comment on 12 Sure-Fire Steps to Improve Your Retail Sales

12 Sure-Fire Steps to Improve Your Retail Sales

The purpose of any business is to bring in customers, and it can only be accomplished through marketing. If your cash registers don’t ring, something is wrong and you had better find out what is wrong fast. Because in today’s competitive retail world…getting results is what counts.

Successful retailers aren’t any more talented or intelligent than you are—they simply have learned to do things in a different way and make money in the process. Use the following 12 steps to improve your retail sales, you’ll simplify your efforts, multiply profits, and increase the odds of success.

1. Know Yourself
Having your own business is more than just creating a job for yourself. Your basic roles are in marketing, finance, administration and the responsibility of personnel. To get the best results, it is rare for one person to play all these roles equally well. You must know which parts you can handle yourself and which parts you’re going to need help with.

2. Plan Ahead
Many stores are run by well-intended people but who don’t have all the information they need to do their job. This includes a clear idea of market segment, target markets, customer service, product selection, marketing mix, promotional activities and pricing tactics. If you want to succeed you need a well thought out business plan that helps you make the right decisions.

3. Know the Industry
You can gain the greatest competitive edge if you have an intimate knowledge of your business. To thrive and prosper, you must be committed to learn and have the desire and energy to accomplish your goals. These are five main reasons why most businesses fail:

1. Lack of Industry Knowledge
2. Lack of Vision
3. Poor Market Strategy
4. Failure to Establish Goals
5. Inadequate Capitalization

4. Understand Your Customer
Make it your business to give your customers what they want, and they will do business and buy from you. The products and services you provide should reflect your customers needs and wants. Think in your customers’ terms; buy, show, sell and say things that interest them, not just what interests you. Remember, it is the customer that determines whether or not you succeed.

5. Keep Good Financial Records
If you don’t know where your money is going, it will soon be gone. The “game of business” is played with computers—and the score is evaluated in dollars and cents. Good financial records are like the instruments on an airplane, they keep you posted of your height, direction, and speed. Without them you’re flying blind with no controls to guide you to your destination.

6. Manage Your Cash
It doesn’t matter how unique and wonderful your store is, your business can’t survive without cash flow. Money coming in your store is the vital component that keeps your business financially healthy. If you budget wisely and know the interval of your monthly income and expenses, you won’t have to worry about running out of money.

7. Use Sound Management Practices
As a store owner, you are also a manager. You have to make decisions, offer customer service, manage time and resources, and know how to merchandise and run the business better than anyone working for you. Give your employees the opportunity for growth, treat them fairly, pay them what they’re worth and they will help make your business successful.

8. Develop a Distinctive Image
Your image is important and is a function of your marketing efforts and materials. Customer’s create their perceptions of your business from your name, Web site appearance, store location, products, prices, visual merchandising, signs, displays,
business cards, newsletters, advertising material, customer service and anything else that relates to your business.

9. Control Your Inventory
All retail stores need to manage inventory. It is your money sitting on a shelf and represents a large portion of your business investment. The retailer who merely watches the store’s shelves can’t maintain a proper balance between the right amount of merchandise and probable customer demand. Without adequate control, slow-moving inventory becomes dated and very costly.

10. Buy and Price For Profit
To understand retailing, one must start with the concept that the price of your merchandise is nothing more than a temporary estimate of what the customer is willing to spend. In devising your overall pricing strategy, a practical approach can be based on the function of supply and demand. To be more competitive, join buying groups and seek out manufacturer discounts that allow you to purchase merchandise below wholesale prices. By offering better values, you’ll be able to attract more customers, and offer more opportunities to shop at your store.

11. Learn From The Pros
In today’s explosive markets, making the right moves is absolutely essential, there is little room for error. Without knowing how to navigate through these fast-moving times, it can be a tricky and even a self-destructive experience. Because of the emotional and sometimes difficult decisions that must be made, the crucial difference is having fresh ideas with an impartial business position.

12. Ask For Help When You Need It
Remember, getting results is what counts. Don’t be too proud to ask for help, we all need help sometimes. It is important to recognize that what you don’t know can end up costing you money, hurt the odds of success, and greatly reduce the chance of achieving your business goals. Hiring an expert with specialized skills can be the most profitable decision you can make to protect both your business and financial future.

Gustavo A Viera CPA

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7 Tax-Saving Year-End Tax-Planning Tips

Posted on 18/12/2010Categories TaxTags , , , , , , , , , ,   Leave a comment on 7 Tax-Saving Year-End Tax-Planning Tips

Despite confusion created by recent and probable year-end tax legislation changes, the 2010 federal income tax environment is still quite favorable.

“We may not be able to say that after 2010; therefore, tax planning actions taken between now and year-end may be more important than ever,” said Gustavo A Viera CPA, managing partner for the Tax & Accounting firm, in a statement. “Be careful, though—Congress could change the ball game before the end of the year.”

Following are seven planning ideas for your clients to consider while there is still time to act before the end of the year.

1. Accelerate Itemized Deductions into this Year. If your Adjusted Gross Income will be more than $170,000 ($85,000 if you are married and file separately) next year, you may want to accelerate into 2010 your state and local tax payments that are due early next year. You may also want to prepay in 2010 some charitable donations that you would normally make in 2011. Why? Because for 2010, the phase-out rule that previously reduced write-offs for the most popular itemized deduction items (including home mortgage interest, state and local taxes, and charitable donations) is gone, but is scheduled to come back in 2011, unless Congress takes action to prevent it, which looks increasingly unlikely.

If the phase-out rule comes back as expected, it will wipe out $3 of affected itemized deductions for every $100 of AGI above the applicable threshold. For 2011, the AGI threshold will probably be around $170,000, or about $85,000 for married individuals who file separate returns. Individuals with very high AGI may have up to 80% of their affected deductions wiped out.

2. Think Twice Before Deferring Income into 2011. This strategy makes sense if you are confident you will be in the same or lower tax bracket next year, but the tax picture for 2011 is blurry. With just weeks left in 2010, the fate of many tax provisions for 2011 and beyond is still unknown. The top two rates have widely been expected to increase in 2011 from the current 33 percent and 35 percent to 36 percent and 39.6 percent, respectively—at least for taxpayers earning $250,000 or more ($200,000 or more if single). Therefore, if you fall into this group, you might want to consider reversing the traditional strategy and accelerating income into 2010 to take advantage of this year’s presumably lower rates. However, legislators could still vote to delay any tax increase to after 2011.

3. Time Your Investment Gains and Losses and Consider Being Bold. As you evaluate investments held in your taxable brokerage firm accounts, consider the impact of selling appreciated securities this year instead of next year. The maximum federal income tax rate on long-term capital gains from 2010 sales is 15 percent. However, that low rate only applies to gains from securities that have been held for at least a year and a day. In 2011, the maximum rate on long-term capital gains is scheduled to increase to 20 percent. That will happen automatically unless Congress takes action, which currently seems unlikely.

To the extent you have capital losses from earlier this year or a capital loss carryover from pre-2010 years (most likely from the 2008 stock market meltdown), selling appreciated securities this year will be tax-free because the losses will shelter your gains. Using capital losses to shelter short-term capital gains is especially helpful because short-term gains will be taxed at your regular rate (which could be as high as 35 percent) if they are left unsheltered.

What if you have some poor performing securities (currently worth less than you paid for them) that you would like to dump? Biting the bullet and selling them this year would trigger capital losses that you can use to shelter capital gains, including high-taxed short-term gains, from other sales this year. If you think your investments that are currently underwater are poised for a comeback, you can buy them back after taking a loss as long as you do not reacquire them within 30 days before or after the sale.

If selling many poor performing securities would cause your capital losses for this year to exceed your capital gains, no problem. You will have a net capital loss for 2010. You can then use that net capital loss to shelter up to $3,000 of this year’s high-taxed ordinary income from salaries, bonuses, self-employment, etc. ($1,500 if you are married and file separately). Any excess net capital loss gets carried forward to next year.

Selling enough poor performing securities to create a big net capital loss that exceeds what you can use this year might turn out to be a good idea. You can carry forward the excess net capital loss to 2011 and beyond and use it to shelter both short-term gains and long-term gains recognized in those years, plus up to $3,000 of ordinary income each year—all of which may well be taxed at higher rates after 2010. This can also give you extra investing flexibility in future years because you will not necessarily have to hold appreciated securities for more than a year to get better tax results.

4. Maximize Contributions to 401(k) Plans. If you have a 401(k) plan at work, you can tell your company how much you want to set aside on a tax-free basis for next year. Contribute as much as you reasonably can, especially if your employer makes matching contributions. You turn down “free money” when you fail to participate to the maximum match.

5. Take Advantage of Flexible Spending Accounts. If your company has heath or child care FSAs, before year-end you must specify how much of your 2011 salary to convert into tax-free plan contributions. You can then take tax-free withdrawals next year to reimburse yourself for out-of-pocket medical and dental expenses and qualifying child care costs (depending on the type of plan). Watch out, though, FSAs are “use-it-or-lose-it” accounts—you do not want to set aside more than what you will likely have in qualifying expenses for the year. And, starting in 2011, over-the-counter drugs (e.g., aspirin and antacids) will no longer qualify for reimbursement by health FSAs, so you may need to consider that when determining your 2011 contribution amount.

If you currently have an FSA, make sure you drain it by incurring eligible expenses before the deadline for this year. Otherwise, you will lose the remaining balance. For health FSAs, it is not difficult to drum up some items such as: new glasses or contacts, dental work you may have been putting off, or prescriptions that can be filled early. Also, for 2010, over-the-counter drugs still apply.

6. Adjust Your Federal Income Tax Withholding. If it looks like you are going to owe income taxes for 2010, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year. When you file your return, you will still have to pay any taxes due less the amount paid in. However, as long as your total tax payments (estimated payments plus withholdings) equal at least 90 percent of your 2010 liability or if smaller, 100 percent of your 2009 liability (110 percent if your 2009 adjusted gross income exceeded $150,000; $75,000 for married individuals who filed separate returns), penalties will be minimized, if not eliminated.

7. Make Energy Efficiency Improvements to Your Home. A great way to cut energy costs and save up to $1,500 in federal income taxes this year is to make energy efficiency improvements to your principal residence. Basically, if you install energy efficient insulation, windows, doors, roofs, heat pumps, furnaces, central A/C units, hot water heaters or boilers, or advanced main air circulating fans to your home during 2010, you may be entitled to a tax credit of 30 percent of the purchase price. However, the maximum total credit you can claim for 2009 and 2010 combined is limited to $1,500. Without Congressional action, the credit will not be available after 2010.
Taxpayers should consult with a personal tax advisor before applying these or other tax strategies.

Gustavo A Viera CPA

CPA firms, Accountants in Miami | Accounting Services in Miami | Accountants Miami | Certified Public Accountant in Miami | CPA in Miami | CPA Miami | Miami Accountants | Miami Accounting Firms | Miami CPA Firm | Miami CPA

President will sign Bush Tax Cuts and Unemployment Benefits

Posted on 17/12/201006/07/2020Categories TaxTags , , , , , , , , , ,   Leave a comment on President will sign Bush Tax Cuts and Unemployment Benefits

President will sign Bush Tax Cuts and Unemployment Benefits

The House approved an $858 billion extension of the Bush-era tax rates and unemployment benefits late Thursday night, a day after the Senate approved the bill, sending the bill to President Obama’s desk.

Nancy Pelosi

 

After procedural hurdles held up the vote for much of the day on Thursday, the House reconvened in the evening to settle the terms of the debate. Amid widespread dissatisfaction among House Democrats over the terms of the deal struck by President Obama and Republican congressional leaders, especially on setting the estate tax at a rate of 35 percent for estates over $5 million, they agreed to first hold a vote on an amendment by Rep. Earl Pomeroy, D-N.D., which would set the estate tax rate at 45 percent for inheritances over $3.5 million. That amendment was defeated by a vote of 233 to 194.

The House next proceeded to a vote on the bill passed by the Senate on Wednesday, and that passed by a vote of 277-148

The bill includes a two-year extension of the Bush-era income tax rates, including those for dividends and capital gains. It also extends emergency unemployment insurance for another 13 months. The bill would also lower Social Security payroll taxes by 2 percentage points from 6.2 percent to 4.2 percent for a year. Several lawmakers, however, criticized that provision, saying it would weaken the Social Security trust fund and pointing out that it would not be open to those government employees who do not pay Social Security withholding taxes.

The bill would also extend the Child Tax Credit, the Earned Income Tax Credit, and the American Opportunity Tax Credit for college tuition. It would also allow businesses to deduct 100 percent of investments in plant and equipment in the first year, and extend for two years the state and local sales tax deduction. In addition the bill would “patch” the AMT, extending Alternative Minimum Tax relief for two years to prevent the AMT from ensnaring millions more taxpayers. The bill also includes extensions of the Research and Experimentation Credit for businesses.

It also would extend a variety of popular tax breaks, including the ability of schoolteachers to expense purchases of school supplies. The bill also includes energy tax breaks for biodiesel fuel, ethanol and renewable energy sources.

During the debate earlier in the evening, many of the lawmakers expressed misgivings about the bill and its effect on the deficit, but said they felt the need to pass the legislation outweighed those concerns. Others could not bring themselves to support the bill and denounced the continuation of the Bush tax cuts for the wealthy, especially the exemption on estate taxes for inheritances below $5 million for individuals and $10 million for couples.

Gustavo A Viera CPA

CPA firms, Accountants in Miami | Accounting Services in Miami | Accountants Miami | Certified Public Accountant in Miami | CPA in Miami | CPA Miami | Miami Accountants | Miami Accounting Firms | Miami CPA Firm | Miami CPA