Tax
News January-April 2010
What we feel the immediate future holds for businesses in California is still not encouraging. Consumer spending continues to be tentative. Most people opting to pay down credit debt as opposed to increasing debt. We still feel October last year was the reconning month. Inflation stays a distant reality
California has made its' budget for this year without raising taxes more than the original increases to personal taxes, sales taxes and motor vehicle fees.Should we run goverment like a business?? Make more than we spend and give back "dividends" to taxpayers?? Are our responsibilities to the less fortunate an over riding factor in this equation? I would like to see budget details which address these issues. Why do we always cut education first??
The Journal of Accountancy, January 2010, reports most CPA's that are financial executives see a delayed US recovery untill the second half of 2010.They see customer demand, health care costs and material and supply costs as leading factors in a delayed recovery.
Stock brokers have about one more year to gear up to the new reporting requirements for stock sales. They must report to the IRS sales price and cost basis on all stock sales. I foresee some problems in the first few years as many brokers do not have your cost basis available. Especially if you transfered stocks between brokers. You need to pay close attention to your portfolio reports this year to make sure your broker has all the costs for your stocks.
According to Business Week November 9,2009, Medical care prices are rising faster than inflation (no surprises there). They estimate a 6% increase in medical care expenses from 2007 to 2008.
Tax News
The First Time Homebuyer credit has been extended to April 30,2010 up to 10% of purchase price or $8000 for Federal returns. Also, a $6,500 credit for buyers of a new personal residence who have owned a home for five out of last eight years.
Because of all the effort to pass health care reform, many tax breaks and even the Estate Tax itself have expired.Congress is expected to extend and pass laws affecting these items retro active to the first of the year.Tax hike ideas are taking shape in Washington . Look for possible increases in taxes becase of health care.(If it indeed passes) According to the Kiplinger Tax Letter of August 7,2009, expect a tax increase in 2011 to help fund the health care program.Alcoholic beverages and sugar sweetened beverages taxes could also increase.Estate taxes are being overhauled. Expect a 3.5 million exemption limit and a top rate of 45% of excess.
The IRS is cracking down on firms using workers as independent contractors instead of employees. You can file Form 8919 with ithe IRS if you believe you are mis-classified as an employee/subcontractor. If you receive a 1099 MISC for non employee compensation, you are considered a business and need to file Form Schedule C on your personal income tax returns. We can help you through the maize of possible tax deductions associated with Schedule C.
Here's a thought if your child or grandchild had a summer job. Consider making a contribution to their ROTH IRA up to $5k of earned income. A nice nest egg for their future retirement.
Anew tax schedule debuts in 2009. Schedule L for non itemized filers who pay property tax and those claiming additional sales tax on new vehicle purchases etc.
Did you know that the highest 5% paid individuals make up 37.4% of all taxes paid??(Kiplingers newsletter August 7,2009)The top 10% AGI of $113,000 bore 71.2% of the overall tax burden.
Small Business Tax Breaks
Carryback of NOL's for five years instead of three. Section 179 expense to $250,000 with phaseout at $800,000.Work Opportunity Credit for net increase in number of full time employees.California offers a $3000 credit as well
Take advantage of the US Small Business Administrations' American recovery Loan Program. Loans from $5 thousand to $35,000
Individual Tax Breaks
529 Plans may now include costs for computers and related technology equipment.Individuals who purchase a new home never previously occupied between March 1,2009 and March 1,2010 will be eligible in California for a 5 percent or $10k credit against their Ca income taxes. Must be pre approved before claiming on tax returns.
You can convert a traditional IRA to a Roth IRA in 2010 and not pay the tax untill 2011 and 2012. The conversion must be made in 2010.Your personal goals and income levels today and in the future help determine if this is good for you or not good for you.
A new credit called" Make Work Pay" credit is available this year (2009 tax returns). It is up to $400 for each taxpayer (dependents don't qualify) who have enough earned income.The credit phases out at $75,000 single and $150,000 married taxpayers.
Board of Accountancy News
The Ca Board of Accountancy is requiring all CPA's to have engagement letters each year for all tax returns and business engagements such as compilations and reviews. Before, only insurance companies required engagement letters
And lastly, Business Week of August 17,2009 reports that health insurers are deftly maneuvering behind the scenes in Washington to profit from health reform. Should we be surprised??
That's all for now. Hope your new year starts off well
