Save on pet costs
Studies have shown that over 60% of all families in the United States own a pet, and pets aren’t cheap. The cost of basic food, supplies, medical care, and training for a dog or cat often runs $700 to $875 annually. Add to that surgeries, grooming, kennel boarding, and miscellaneous costs, and you may end up spending $10,000 or more to keep your pet healthy and happy throughout its life. Fortunately, many of the costs associated with responsible pet ownership can be controlled or at least reduced. Here are a few ideas.
- Buy a mutt. Besides being cheaper, mongrel pets often have fewer health problems than purebreds. One study found that caring for a mixed-breed dog was about a third as expensive as caring for a pet with a sterling pedigree.
- Get it spayed or neutered. Animal shelters often provide this procedure at relatively low cost. Unless you want to open a pet store, this step should be first on your to-do list. Getting your dog or cat “fixed” may also mean fewer health problems down the road.
- Buy food in bulk. For most pet owners, food is their largest ongoing expense. So reducing that cost often generates the greatest savings. Although big-box retailers offer substantial cost reductions for large quantities of pet food, it always makes sense to shop around. (Specialty stores have sales, too.) Generally speaking, the more you buy, the cheaper the food. But be careful. Though there’s no legal definition of “premium” in terms of pet food nutritional quality, think twice before grabbing the cheapest bag off the shelf. Long-term health problems may result from routinely feeding non-nutritional meals — food that’s mostly filler — to your dog or cat.
- An ounce of prevention… Regular exercise and routine veterinary visits often reduce long-term health care costs. And don’t forget their teeth. Severe gingivitis may lead to serious health problems in your pet, including kidney and lung disease. If you don’t want to brush your dog’s ivories, consider dental chews that release teeth-cleaning enzymes.
- Go cheap on toys. Shopping at your local dollar store can save lots on balls, chew bones and all those other baubles your pet adores.
- Go slow on pet insurance. Budgeting and contributing to your own “pet emergency fund” may be cheaper than paying insurance premiums. Do the math before buying.
Foreclosure may require more tax forms
If you went through a foreclosure or had home mortgage debt forgiven last year, you might have income to report on your federal tax return — and you might see forms that are new to you.
- Forms from the lender. You may receive Form 1099-A, Acquisition or Abandonment of Secured Property, when your lender forecloses on your home or you give the lender a deed-in-lieu of foreclosure. Form 1099-A shows your outstanding debt and the fair market value of the property when the lender took it back.
You use Form 1099-A to determine the amount of gain or loss from relinquishing your home.
Did your lender forgive all or part of your mortgage? In that case, you’ll also get Form 1099-C, Cancellation of Debt, which reports the amount you no longer have to repay.
Note: When foreclosure occurs in the same year as debt is forgiven, lenders are only required to send Form 1099-C.
- Forms filed with your federal income tax return. While cancelled debt is generally taxable, debt forgiven on your principal residence can be excluded from income on your federal return. Form 982 tells the IRS you qualify for the exclusion.
In addition to income from cancellation of debt, a foreclosure is considered a sale of your home and can result in a capital gain or loss.
As you know, you can generally exclude gain from the sale of your principal residence (up to $500,000 when you’re married filing jointly). However, to report the foreclosure you may need to file a form that’s new for 2011: “Form 8949, Sales and Other Dispositions of Capital Assets.”
Foreclosures of property other than your home and cancellation of income from debts such as credit cards require additional reporting. Please give us a call here at Dye & Whitcomb, LLC, Fort Collins Colorado CPA’s We’ll help you work through the tax issues. 970.207.9724
New law extends payroll tax cut
The temporary reduction in the FICA tax rate that began in January 2011 as a replacement for the “Making Work Pay Credit” has been extended through December 2012. The 2% rate cut applies to wages, salaries and self-employment income of up to $110,100.
- If you’re an employee, your portion of FICA wages — the part deducted from your paycheck — will remain at 4.2% for the rest of the year. There’s no effect on your future social security benefits, and no need to change your withholding allowance certificate (Form W-4).
- If you’re self-employed, the combined rate for your 2012 self-employment taxes will continue to be 10.4%. In addition, you may have noticed the federal tax deduction you claim as an adjustment to income was revised on your 2011 income tax return to reflect the new self-employment tax rate. That revision applies to 2012 as well.
- If you’re an employer, your portion of the FICA tax has not changed. You’ll continue to pay the 6.2% “match” on your employees’ wages.
- One change to note: The recapture provision affecting high income earners that took effect in January 2012 was repealed.
Got payroll tax questions? Give us a call. We’re ready to help.
New foreign investment filing is required.
New form alert! If you own foreign investments, you may have an additional federal tax filing requirement this year. Form 8938, “Statement of Specified Foreign Financial Assets,” is due April 17, 2012, and is filed as part of your individual tax return. You’ll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements. What are the reporting requirements? They vary depending on where you live and your filing status.
For example, say you’re married and live in the United States, and you’ll file a joint tax return for 2011. You’ll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2011 is more than $100,000, or if the value exceeds $150,000 at any time during the year.
Tip: In some cases, you may also need to file Form 8938 for tax year 2010. Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies. You’ve probably noticed the reporting requirements are similar to the “Report of Foreign Bank and Financial Accounts” (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you’ll still need to complete by June 30. Penalties for failure to file Form 8938 start at $10,000. We urge you to contact us here at Dye and Whitcomb LLC so we can help you evaluate your filing requirements for foreign investments.