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News added, Los Angeles, November 25th, 2008: Residential Energy Credit:
The Residential Energy Credit will return for 2009. Save your energy efficiency home improvements until January to take advantage of the 10% tax credit.
Biomass fuel stoves will be added to the list of qualifying energy efficiency improvements.
News added, Los Angeles, November 21st, 2008: Social Security Wage Limit:
The Social Security wage limit will rise to $106,800 for 2009.
The IRS estimates that more than half of schedule E filers are underreporting their net income from rental properties. The Service hopes to
improve compliance by sending reminders about correctly filing schedule E. About 30,000 renters will receive the reminders next year.
News added, Los Angeles, November 3rd, 2008: Basis Reporting:
Brokers will be required to report the basis for securities sold by their clients.
This will facilitate correct tax reporting for individuals.
To give financial institutions time to comply, the reporting requirement will only affect securities bought after 2010.
Keep yourself covered in the event of an audit of misclassified workers.
1. The contract between the outside contractor and employer should clearly state disqualification for employee benefits. Pay should be per project as opposed to hourly rates. Do not include restrictions on how they run their business.
2. Be sure to have the independent contractor’s EIN, business name and address. Also hold on to their business card or letterhead stationary. This will help support their status as independent.
3. Don’t treat them as you would employees. Do not give them an employee handbook or a company email address. Do not invite them to events held for company employees.
4. Do not pay independent contractors through your payroll account. Treat them as an ordinary accounts payable payee, and issue payment after they bill you for services.
News added, Los Angeles, October 9th, 2008: Real Estate Taxes:
For 2008, taxpayers can claim credit for paying real estate taxes, even if they do not itemize their deductions. Married filers can add up to $1,000 to their standard deduction. For singles the maximum is $500.
News added, Los Angeles, October 1st, 2008: First Time Home Purchase Tax Credit:
Taxpayers with a first time home purchase after April 8, 2008 and before July 1, 2009 are eligible to receive a tax credit of up to $7,500. Married filers with an adjusted gross income of more than $170,000, and singles with an AGI of over $95,000 are not eligible for this credit.
News added, Los Angeles, September 25th, 2008: IRS Crackdown:
The IRS continues to crackdown on employers who misclassify employees as outside contractors. Besides partnering with state payroll agencies and use of computer matching programs, the IRS will accept leads from workers. If a worker feels he/she has been misclassified, they may file form 8919 along with their tax return. There appears to be a big incentive for the filing of form 8919. It will save the filer from having to pay self-employment tax.
News added, Los Angeles, July 23rd, 2008: Shortened Extension Period:
Shortened Extension Period for Calendar Year Partnerships and Trusts
Entities that are required to issue Schedule K-1 forms to partners or beneficiaries and are required to file by April 15, will have a reduced extension to file period.
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Previously, these entities did not have to file until October 15 when on extension. With the new change, the filing deadline is September 15. The IRS made the change to help individuals who need the K-1’s to file their 1040’s in an accurate and timely matter. The individual extension deadline remains October 15.
News added, Los Angeles, July 17th, 2008: Business Mileage Rate:
Generally the IRS sets new mileage rates once a year. Due high gas prices, the IRS has increased the gas mileage rate mid year.
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For the second half of 2008, the business mileage rate will be 58.5 cents per mile, an increase of 8 cents. Medical and moving expense miles will increase to 27 cents per mile. Charitable miles remain 14 cents a mile.
News added, Los Angeles, July 14th, 2008: Gym Fee Reimbursement:
If you reimburse a traveling employee for fees related to gym use, the payments are taxable and subject to payroll taxes.
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Gym use during business travel is considered a personal expense since the facility is not located on the business premises.
News added, Los Angeles, July 10th, 2008: S Corporation Elections:
The general rule for business entities who want to elect to become S companies or corporations is that they must file form 2553 within the first 2 ½ months into the fiscal year they want to elect.
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More recently, the IRS has been accepting late filing if there is reasonable cause. Reasonable cause includes reliance on a tax preparer who was negligent.
News added, Los Angeles, July 1st, 2008: Getting the Most Out of Your Contributions:
If you are planning to make a charitable contribution, you may want to consider donating appreciated stock instead of cash.
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If the stock is a long-term investment (more than 12 months) and it substantially increased in value, you have a significantly greater tax advantage if you donate the stock over a cash donation. You do not pay capital gains tax because you have not actually sold the stock, and the amount you deduct from your taxes is the current market value. The more the stock appreciated, the greater the tax advantage of making a contribution in this why. That explains why Warren Buffet opted for this method!
News added, Los Angeles, June 28th, 2008: Audit Alert:
The IRS will be more likely to perform a payroll tax audit if an employer issues a W-2 and a 1099 to a worker in the same year.
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This is part of the IRS’s continued crack down on misclassification of employees as outside contractors to avoid paying payroll taxes.
Employers offering SEP-IRA’s will be audited more frequently this year as the IRS suspects compliance with federal regulations are not up to par. Make sure as an employer that you are contributing uniformly to all participating employees and that you update the plan as the pension laws change.
The IRS will start enforcing minimum payouts on retirement plans. This affects those over 70 ½ years of age with traditional IRAs, SEP IRAs and Simple IRAs. If minimum distributions are not taken, the IRS will send notification and mandate catch up distributions as necessary. They can also charge a steep 50% penalty. Roth IRAs do not have minimum distributions
News added, Los Angeles, June 15th, 2008: Your Business SUV:
Business owners will want to limit their personal use of company trucks and heavy SUVs.
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The tax court recently ruled that the IRS can recapture tax breaks on business truck purchases if business use falls below 50%. The recapture period is for the first five years after purchase.
News added, Los Angeles, June 11th, 2008: Funding Your Child’s IRA:
If your child or grandchild is working this summer, he/she can contribute up to $5,000 or their total wages, whichever is less, to an IRA.
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If you want to fund the IRA for them, the gift is covered by the annual gift tax exclusion of $12,000, so neither the gift giver or gift receiver is taxed. Roth IRA’s are the IRA of choice for a young person since they can withdraw the contribution amounts when needed. Only gains on the Roth IRA contribution are taxed if withdrawn before 59 ½.
News added, Los Angeles, June 3rd, 2008: Health Savings Accounts:
A Health Savings Account is a medical savings account for taxpayers covered by a high deductible health plan. The account has tax advantages similar to IRAs.
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Deductible contributions to HSA accounts will increase for 2009. For 2008, the limit is $2,900 for an individual and $5,800 for a family. The 2009 limits will be $3,000 and $5,950 respectively. Those over age 55 can contribute an additional $1,000 tax free.
News added, Los Angeles, June 2nd, 2008: New Taxpayer Service from the IRS:
By the end of 2008, taxpayers will be able to access their tax information from the IRS via a secure web portal.
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Tax filers can review their account and up to three years of filed returns.
News added, Los Angeles, June 1st, 2008: Retirement Accounts:
If you have an IRS levy on your pension plan, the IRS can not seize the funds until you withdraw them from the account.
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You can choose to delay your distributions however, bear in mind you may be subject to additional interest and penalties.
News added, Los Angeles, May 23rd, 2008: Businesses:
Business owners who sell their companies to sole competitors may no longer be able claim that a portion of the proceeds of the sale is for goodwill
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The IRS determined that since in reality the sales contract is a covenant not to compete, the seller’s proceeds are taxed at the regular income rate.
News added, Los Angeles, May 15th, 2008: Individuals:
Despite claims to beef up enforcement, in 2007 the IRS face-to-face audited only about 240,000 individuals. This amounts to about one in 561.
Smaller scale reviews by mail were performed on 1.1 million filers. These correspondence audits will probably predominate over the next few years.
News added, Los Angeles, May 7th, 2008: Keep Track of Your Roth IRA Contributions:
Roth IRA contributions can be withdrawn before age 59 ½ without tax or penalty if the account has been held for more than five years.
Investment companies issue form 5498 around this time of year. This form reports how much of the Roth IRA account came from contributions and
how much is from earnings. Earnings withdrawn before age 59 ½ are subject to tax and penalty. Pension funds converted to a Roth IRA also
count as contributions as well but cannot be withdrawn within five years to avoid penalty.
News added, Los Angeles, May 1st, 2008: Foreign Taxpayers:
For the first time, the IRS will be doing random audits of tax returns for foreigners with US Income.
This new effort is part of a larger project to improve its enforcement.
The US tax court recently ruled that income earned by a US citizen while working +in international waters is taxable income. International waters are not under the sovereignty of any country and therefore would not create a situation of double taxation.
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Proactive tax planning to take advantage of timely tax saving opportunities.
Comprehensive business services that integrate income tax compliance
and planning with investments and insurance choices.
Consulting services that review businesses to find hidden opportunities to
increase wealth accumulation and retention.
Foreign investor tax services.
Individualized accounting system setup for new businesses.
State of the art payroll tax services and sales tax preparation.
Preparation of business and individual tax returns and financial
statements.
Budgeting and projection preparation and monitoring, facilitating the
creation and tracking of events.
Assistance in selection and installation of computer hardware and
software, ongoing monitoring and updating of systems.
