I have just ran across an article by Christopher P.
Hill
a financial planner from the east coast. I try to
cover end of life planning in my webinars, but have
never said it this well. I know that the articles is a
tad bit aged, and that congress has worked their way
through the Bush tax cuts, which affects end of life
tax planning, but I encourage all of you to read this
article and take it to heart. I have had a personal
experience which causes me to believe that every
married couple should have a Living Trust, no matter
what their economic position. I truly believe that the
use of a Family Living Trust is not so much about the
size of the estate, but more about the ability of the
survivors to go on, without having to make detailed
decisions at a vulnerable time and at a time that they
may or may not have all of the information necessay to
make the decision. If you want more information on
Living trusts, give me a call, I will be glad to share
my story with you. Where Christopher has used the term
Married Men, I would change it to read, "married men
and women."
Married men: Do not make a will. For a married man,
the security he believes a will provides is a
dangerous illusion. In order to truly provide the
security he desires for his survivors, he must heed
the following advice, including changing the names on
his accounts and house.
The will illusion
We have all heard the TV and radio ads that tell you
that wills are necessary, and that you can use a
computer, rather than hire an expensive lawyer, to
make your will. I tell married clients that often,
making a will creates an illusion of security that
lulls them into a dangerous complacency. It is worse
when a husband wants to make a will without his wife’s
participation.
Why have a will?
Most married men who sign a will want to accomplish
the following objectives: Make sure their property
goes to their spouse and children; designate who will
be the guardian of their children; make sure things go
smoothly when they die; and protect the inheritance of
their children. For the typical married man, none of
these objectives are likely to be accomplished through
the creation of a will, as can be seen in the
following scenarios.
Ensure property goes to spouse
Seventy percent of married men own their house, bank
and brokerage accounts, and household goods jointly
with their wives. The number is higher for those in
their first marriage. These men also usually designate
their wives as the sole beneficiary of their
retirement accounts and life insurance policies. They
then sign a will, thinking they have protected their
wives and children.
Most men die before their wives. When the man dies,
everything goes to his wife, because their property is
owned jointly, and the will has no effect on the
beneficiary designations on their insurance or
retirement accounts. There is no protection of his
wife of against her creditors, and her disability and
estate taxes will be higher. This is because the title
to property overrides any provision of the will. If
the man named his parents as the beneficiaries on his
insurance or retirement accounts and did not change
the beneficiary designations when he got married, then
these accounts go to his parents if they survive him,
or to a probate estate if they do not. Beneficiary
designations override the provisions of a will.
Protect his children
Often, the married men I advise want to make sure that
after taking care of their wives and that their
property goes to their children, and they want their
will to reflect that. But, if the wife survives the
husband, everything goes directly to her, either by
title or because the will says so. If the wife
remarries, then there is no protection for the
children. The share of the property will go to the
next husband and his children if the next husband
survives his wife or, in the case of a divorce, one
half of the first husband's share will go to the
second husband. I have talked to many children who
were unintentionally disinherited this way.
Guardians for his children
A husband dies first, survived by his wife. The wife
is now the guardian of the children, and the wife now
decides who will be the guardian of his children if
she then dies. The husband’s will is irrelevant at
this point. Also, if the children are minors or
disabled and if the wife does not have a will, in most
states, the court will appoint the guardian and
supervise the finances of the children until they are
18, depending upon the legal age for children in their
state.
The problem of probate
Many people I have advised think that a will avoids
probate. Not so. The will’s purpose is to direct the
probate process. Instead, any property passing under a
will must be probated. Probate is the state legal
process requiring that the will and a detailed list of
assets are filed on the public record. Someday soon,
your neighbor may be able to go online and see to whom
you left your property. There are notice and
accounting requirements which vary from state to
state, and in some states, they are quite onerous and
expensive to comply with. Probating a will is like
filing a lawsuit against yourself, with a notice for
everyone who has a claim to join in the lawsuit
without the need to hire an attorney or file their own
case.
Solutions that do not work
The solution is not to make sure the wife dies first.
Even if a husband and wife make identical wills and
the husband dies first, none of the above is really
changed, because the wife has a will. Non-married
couples come out ahead if they do not own their
property jointly, because the non-married man’s will
determines who inherits his separately owned property.
Some married couples go so far as to get rid of
jointly owned property, thereby requiring a probate
when the husband dies, and then again when the wife
dies. This enables probate lawyers to collect a lot of
fees.
Solutions that work
To accomplish his goals, the married man needs to set
up a living trust and put the name of the trust on his
accounts and real estate. He then must name his trust
as the death beneficiary of his insurance and
retirement accounts. To have an estate plan which
accomplishes your goals, I strongly suggest you sit
down with a seasoned estate planning attorney. If you
need help finding one, I can help direct you to some
great places to start.
WASHINGTON — The Internal Revenue Service announced
today a special voluntary disclosure initiative
designed to bring offshore money back into the U.S.
tax system and help people with undisclosed income
from hidden offshore accounts get current with their
taxes. The new voluntary disclosure initiative will be
available through Aug. 31, 2011.
“As we continue to amass more information and pursue
more people internationally, the risk to individuals
hiding assets offshore is increasing,” said IRS
Commissioner Doug Shulman. “This new effort gives
those hiding money in foreign accounts a tough, fair
way to resolve their tax problems once and for all.
And it gives people a chance to come in before we find
them.”
The IRS decision to open a second special disclosure
initiative follows continuing interest from taxpayers
with foreign accounts. The first special voluntary
disclosure program closed with 15,000 voluntary
disclosures on Oct. 15, 2009. Since that time, more
than 3,000 taxpayers have come forward to the IRS with
bank accounts from around the world. These taxpayers
will also be eligible to take advantage of the special
provisions of the new initiative.
“As I’ve said all along, the goal is to get people
back into the U.S. tax system,” Shulman said.
“Combating international tax evasion is a top priority
for the IRS. We have additional cases and banks under
review. The situation will just get worse in the
months ahead for those hiding assets and income
offshore. This new disclosure initiative is the last,
best chance for people to get back into the system.”
The new initiative announced today – called the 2011
Offshore Voluntary Disclosure Initiative (OVDI) --
includes several changes from the 2009 Offshore
Voluntary Disclosure Program (OVDP). The overall
penalty structure for 2011 is higher, meaning that
people who did not come in through the 2009 voluntary
disclosure program will not be rewarded for waiting.
However, the 2011 initiative does add new features.
For the 2011 initiative, there is a new penalty
framework that requires individuals to pay a penalty
of 25 percent of the amount in the foreign bank
accounts in the year with the highest aggregate
account balance covering the 2003 to 2010 time period.
Some taxpayers will be eligible for 5 or 12.5 percent
penalties. Participants also must pay back-taxes and
interest for up to eight years as well as paying
accuracy-related and/or delinquency penalties.
Taxpayers participating in the new initiative must
file all original and amended tax returns and include
payment for taxes, interest and accuracy-related
penalties by the Aug. 31 deadline.
The IRS is also making other modifications to the 2011
disclosure initiative.
Participants face a 25 percent penalty, but taxpayers
in limited situations can qualify for a 5 percent
penalty.
The IRS also created a new penalty category of 12.5
percent for treating smaller offshore accounts. People
whose offshore accounts or assets did not surpass
$75,000 in any calendar year covered by the 2011
initiative will qualify for this lower rate.
The 2011 initiative offers clear benefits to encourage
taxpayers to come in now rather than risk IRS
detection. Taxpayers hiding assets offshore who do not
come forward will face far higher penalty scenarios as
well as the possibility of criminal prosecution.
“This is a fair offer for people with offshore
accounts who want to get right with the nation’s
taxpayers,” Shulman said. “This initiative offers them
the chance to get certainty about how their case will
be handled. Just as importantly, those who truly come
in voluntarily can avoid criminal prosecution as
well.”
The IRS is handling processing of the voluntary
disclosures in centralized units to more efficiently
process the applications.
The IRS will also launch a new section on www.IRS.gov
that includes the full terms and conditions on the
2011 Offshore Voluntary Disclosure Initiative,
including an extensive set of questions and answers to
help taxpayers and tax professionals. The web site
also includes details on how people can make a
voluntary disclosure.
In the first voluntary disclosure program in 2009,
taxpayers faced up to a 20 percent penalty covering up
to a six-year period. Taxpayers came forward with
about 15,000 voluntary disclosures in that effort
covering banks in more than 60 countries.
Shulman said IRS efforts in the international arena
will only increase as time goes on.
“Tax secrecy continues to erode,” Shulman said. “We
are not letting up on international tax issues, and
more is in the works. For those hiding cash or assets
offshore, the time to come in is now. The risk of
being caught will only increase.”
The Social Security benefits you received in 2010 may be
taxable. You should receive a Form SSA1099 which will show
the total amount of your benefits. The information
provided on this statement along with the following seven
facts from the IRS will help you determine whether or not
your benefits are taxable.
1.
How much – if any – of your Social Security benefits are
taxable depends on your total income and marital status.
2.
Generally, if Social Security benefits were your only
income for 2010, your benefits are not taxable and you
probably do not need to file a federal income tax return.
3.
If you received income from other sources, your benefits
will not be taxed unless your modified adjusted gross
income is more than the base amount for your filing
status.
4.
Your taxable benefits and modified adjusted gross income
are figured on a worksheet in the Form 1040A or Form 1040
Instruction booklet.
5.
You can do the following quick computation to determine
whether some of your benefits may be taxable:
·
First, add one-half of the total Social Security benefits
you received to all your other income, including any tax
exempt interest and other exclusions from income.
·
Then, compare this total to the base amount for your
filing status. If the total is more than your base amount,
some of your benefits may be taxable.
6.
The 2010 base amounts are:
·
$32,000 for married couples filing jointly.
·
$25,000 for single, head of household, qualifying
widow/widower with a dependent child, or married
individuals filing separately who did not live with their
spouses at any time during the year.
·
$0 for married persons filing separately who lived
together during the year.
For additional information
on the taxability of Social Security benefits, see IRS
Publication 915, Social Security and Equivalent Railroad
Retirement Benefits.
I just received a blog post from ING Direct and it was so
good, I thought I should share it with you. http://wethesavers.ingdirect.com/
Once upon a time, way back in 2009, it was easy for big
banks to make big money off of their checking account
Customers—in the form of overdraft fees and other
so-called “service charges.” For many of the nation’s
biggest banks, these service charges accounted for
anywhere from 11 percent to 28 percent of overall core
revenue, according to the Wall Street Journal. But last
year the Federal Deposit Insurance Corporation began
flagging some of the industry’s more abusive practices,
such as the huge overdraft penalties—as much as $35 a
pop—that banks charged customers who dipped into debt for
incidental purchases as minute as a cup of coffee.
That means banks are scrambling for new sources of
revenue.
Tag, free checking: You’re it.
Before, because of the money they made on overdraft fees
and other charges, banks were able to offer the basic
service of a checking account for free. Now, many are
sticking a price tag on that basic service.
However, consider this: According to a recent study, more
than half of checking account customers are highly likely
to switch banks if their institution begins charging fees
for what were previously free services for their checking
accounts. What does that signal? Any bank with a brain in
its branch is going to offer a workaround, a way to keep
the basic service “free”—in exchange for certain
behavioral requirements.
Thus, “free” checking becomes an if/then scenario.
If you keep a minimum balance of $2,000…then we won’t
charge you for your checking account.
-and/or-
If you have a monthly direct deposit of $500…then we won’t
charge you for your checking account.
-and/or-
If you agree to never step foot in our branch or demand
anything of our customer service… then we won’t charge you
for your checking account.
The array of choices and combinations by which one can be
assured of “free” checking is dizzying and potentially
misleading. After all, maintaining a daily balance of
$2,000 in a checking account means you’re forgoing
interest you’d earn in a high-yield savings account—at
current rates, that annual opportunity cost is roughly
equivalent to a $20 fee.
The New York Times recently published an enlightening
piece titled “As Banks Raise Fees, You Have Options.”
Indeed, you do have options—and some are far better than
others. So if your bank is cramping the “free” in your
free checking, we’ll offer you a free piece of advice: Do
your homework.
Medical & Dental Expenses
After spending the weekend playing in the dirt at
Quartsite Arizona, along with thousands of other
motorhomers, I am back at my desk today, and loe and
behold a tax tip from the IRS just came to my computer. I
always wonder if the IRS highlights certain areas that
they know they will be looking at closely on these tax
tips or ???? Anyway I thought I would list their six
points aboue medical and dental and you can make up your
own mind.
1. In 2010 you can only deduct the amount by which your
total medical expenses for the year exceed 7.5% of your
adjusted gross income. This calculation is on Schedule A
of Form 1040.
2. The medical expenses you can include are the qualified
medical expenses you pay for yourself, your spouse and
your dependents. If you share custody of a child you can
deduct only the amount that you pay out of pocket for the
childs medical expenses.
3. To deduct a medical expense for the tax year 2010, it
needed to be paid in that year. If you have an expense and
are reimbursed for some of it you cannot include the
reimbursed part of the expense.
4. Medical expenses include payments for the diagnosis,
cure, mitigation, treatment or prevention of disease, or
treatment affecting any structure or function of the body.
If you have prescription drugs the cost of them can be
deducted, plus any insulin paid for which does not require
a prescription.
5. You can deduct mileage or other transportation costs
which are primarily for and essential to medical care that
qualify as medical expenses The actual fare for a taxi,
bus, train, or ambulance may be deducted. If you use your
car you can deduct the actual out of pocket expense or you
can deduct the standard medical rate for medical expenses.
6. Distributions from Health Savings Accounts, and
withdrawals from Flexible Spending Arrangements may be tax
free if you pay qualified medical expenses.
If you are in business for yourself, or carry on a trade
or business as a sole proprietor or an independent
contractor, you generally would consider yourself
self-employed and you would file IRS Schedule C, Profit
or Loss From Business or Schedule C-EZ, Net Profit From
Business with your Form 1040.
Here are six things the IRS wants you to know about
self-employment:
1.Self-employment can include work in addition to
your regular full-time business activities, such as
part-time work you do at home or in addition to your
regular job.
2.If you are self-employed you generally have to
pay Self-employment Tax. Self-employment tax is a
social security and Medicare tax primarily for
individuals who work for themselves. It is similar to
the social security and Medicare taxes withheld from
the pay of most wage earners. You figure SE tax
yourself using a Form 1040 Schedule SE. Also, you can
deduct half of your self-employment tax in figuring
your adjusted gross income. However, if your business
is trading and you qualify for
Traders Status you do not have to pay any
Self-employment tax.
3.If you are self-employed you generally have to
make estimated tax payments. This applies even if you
also have a full-time or part-time job and your
employer withholds taxes from your wages. Estimated
tax is the method used to pay tax on income that is
not subject to withholding. If you don’t make
quarterly payments you may be penalized for
underpayment at the end of the tax year.
4.You can deduct the costs of running your
business. These costs are known as business expenses.
These are costs you do not have to capitalize or
include in the cost of goods sold but can deduct in
the current year.
5.To be deductible, a business expense must be
both ordinary and necessary. An ordinary expense is
one that is common and accepted in your field of
business. A necessary expense is one that is helpful
and appropriate for your business. An expense does not
have to be indispensable to be considered necessary.
6.For more information see IRS Publication 334,
Tax Guide for Small Business, IRS Publication 535,
Business Expenses and Publication 505, Tax Withholding
and Estimated Tax, available at 829-
Who do you trust?, or can you trust anyone anymore?
I know that those of you who follow my blogs and attend my
webinars hear me state that I follow the SEC litigation
website. Here is one that I thought some of you might be
interested in. I am truly amazed in the number of scams that
I see the SEC going after. Tons and Tons of money that has
been invested by trusting people. I guess the name of this
blog sez it all.
Litigation Release No. 21817 / January 14, 2011
SEC v. Christopher Wheeler, et al., Civil Action No.
11-CV-0289 (GBD) (S.D.N.Y. January 14, 2011)
On January 14, 2011, The Securities and Exchange Commission
charged an upstate New York-based penny stock promoter and
his affiliated website with fraud for failing to disclose
that he was paid by certain issuers to promote their stock
while simultaneously liquidating millions of his own shares
for profits of at least $2.95 million.
The SEC alleges that Christopher Wheeler of Victor, N.Y.,
received compensation at various times in 2007 and 2008 to
promote several thinly-traded penny stocks on his website,
OTCStockExchange.com. Wheeler’s website claimed to “have
compiled a long list of successful stock picks” and to
afford investors the opportunity to “make a fortune.”
The SEC alleges that after receiving millions of shares in
undisclosed compensation from the issuers, Wheeler featured
the issuers’ stock on OTCStockExchange.com, recommended that
investors purchase the securities, and posted lofty price
predictions for the stock without any reasonable basis for
those projections. Wheeler’s and OTCStockExchange.com’s
promotional efforts often resulted in dramatic, but
temporary, increases in the volume of shares traded and the
price of the issuers’ securities. Once the prices were
pumped in this manner, Wheeler simultaneously dumped shares
from his personal brokerage account onto the market.
IRS ALARM - The National Taxpayer Advocate at the
IRS has issued her annual report to Congress, saying that
"The most serious problem facing taxpayers - and the IRS -
is the complexity of the Internal Revenue Code." More
information is available from
Forbes.com, but get
this..."The total cost of compliance in 2008 was $163
billion, or more than 11% of total income tax
collections." That's crazy!
Sitting here on my patio today, temperature suppose to
get up to 72 degrees, after the cold snap we have
experienced for the past 10 days this is heaven.
We left off yesterday talking about the new tax changes
for tax year 2011, so lets continue.
Electronic Funds Transfer Rules
As of the first of this year all employers must use EFT
to make all federal tax deposits. This will include
employment tax, excise tax and your corporate income
tax. This is screwing over the banks where you used to
have to make a manual deposit, and then the bank got the
float on your money until the IRS took the money from
the bank. I know we all feel sorry about the banks
loosing this perk, especially after earnings reports
today.
Mileage Rates Are Up
The mileage allowance for owned or leased autos is up
one penny to 51cents per mile. If you are using your
personal car for medical care, the rate is 19 cents per
mile. Remember though that you must have proper
documentation in case you are audited. The IRS can
accuse you of fraud if you do not have this
documentation. It is not hard to keep a log, but you
have to learn apply. There is a set of 8 CD's and a big
workbook, called Tax Secrets for Business Professionals,
that shows you how to maintain a proper log. if you
would like to know more about this neat set call Raven
Johnson at 800.938.9513 and she can tell you all about
it.
Basis Overstatement can Trigger 6-year Limitation
Period
Ok so we save the biggest one for last! The IRS has
indicated that an understated amount of gross income
reported on a return which results from an overstatement
of unrecoverable cost or other basis is an omission of
gross income which triggers a 6-year period for the IRS
to assess tax, rather than the more normal 3-year
period. This limitation period applies when you omit an
amount from your gross income that is greater than 25%
of the amount you have entered in your return.
Extended Due Date for Your Return This Year
Because of the Emancipation Day Holiday in the District
of Columbia, the due date for Form 1040 is April 18th
instead of April 15th for all taxpayers.
Have a great weekend, we'll talk next week.
2011 Tax
Changes
Well it seems that we might know of all of the tax changes
that will affect you for 2010 & 2011 now so let's start
discussing them. It will probably take a couple of days so
that you are not bored out of your gourd, but here goes.
Final Regulations on Stock Reporting Rules
The good old IRS has issued the final regulations
explaining the reporting requirements that will be put
into effect for most securities you acquire after 2010,
for mutual funds ar for a drip plan. Brokers will have to
report to the IRS your adjusted basis in the security and
if it has been sold whether the gain is long-term or
short-term capital gain. For those of you who are
wondering what the difference is it is ST Capital Gain if
you hold a position for less than 365 days before selling
it, and long term if you hold it for more than 365 days.
As you can see this is going to tighten up the IRS
position on whether you are properly reporting your
gains/losses and also will probably work into a look at
wash sales.
More Guidance on the Small Business Health Care Credit:
Now if you are trading as a business this could have a
large impact on you. For tax years beginning after Dec.
31st 3009, an eligible small employer (ESE) can claim a
tax credit for non-elective contributions to purchase
health insurance for its employees. An ESE is an employer
with no more than 25 full time employees employed during
the tax year and where the employees have wages that
average under $50K per year. The full credit is available
to you if you have 10 or fewer FTEs with an average wage
of less than $25K.
These two will directly affect you if you are an active
trader, especially if you have taken my advise to trade as
a business. Hope all is well...regards Jim
Top 8
Misconceptions About Taxes
The task of filing one's taxes seems to be flooded with
rumors and misconceptions. Here are the Top 8
Misconceptions About Taxes:
1) Students are Exempt - While there are tax credits for
students, no student is truly exempt unless they did not
make enough money to file.
2) Married Tax Payers Must File Jointly - Married couples
do need to indicate that they are married on their tax
return but they are free to decide whether or not to file
jointly. Married couples should weigh their options and
may find one filing status more beneficial than another.
3) Early Filers Have a Higher Chance of Audit - This is
simply not true. The IRS does have red flags for auditing
someone, but filing early is not one of them.
4) There is No Need to File if Taxes are Withheld from
Your Paycheck - Although taxes have been withheld from
your paycheck each month, you still need to file your
taxes. Plus, you may be missing out on a return of funds
withheld!
5) You Only Need to Reduce Your Tax Liability if You're
Rich - This is one of the oldest and most untrue myths
about taxes in the book! People of all income levels
should take advantage of any tax deductions and credits
they qualify for.
6) You Can Not Claim a Working Adult as a Dependent - Even
if your child is over 18 years of age and is working full
time, you can still claim them as a dependent if you
provide more than 50% of their financial support.
7) Only Parents Living With You Can be Claimed as
Dependents - Just as with children, if you provide more
than 50% of your parents' financial support, you may claim
them as a dependent.
8) You Should Not File Your Return Until You Can Afford to
Pay - Deciding to not file on time and not file for an
extension are the worst decisions you can make if you are
low on funds. The IRS may be able to work out a payment
plan with you and you will avoid failure-to-file
penalties.
Think You
Don't Have to File Your Taxes On Time? Think Again!
It is a common misconception that you do not have to file
your taxes on time, or even at all. However, neither of
these are the case. Taxes must be filed each year by April
15th or you must file for an extension before that date.
If you do not file your taxes on time you may be subject
to penalties by the IRS including:
* A failure-to-file penalty of 5-25% of your unpaid taxes
* A failure-to-file penalty of 100% of your unpaid taxes
or $135, whichever is smaller, if you are more than 60
days late filing
SEC LAUNCHES
INVESTOR.GOV
Agency's First-Ever Web Site Devoted Exclusively to
Investor Education
Washington, D.C., Oct. 22, 2009 – The Securities and
Exchange Commission today launched its first-ever Web site
devoted exclusively to investor education, providing
investors with in-depth information and “top tips” on how
to invest wisely, plan for the future, and avoid being
scammed.
By visiting www.investor.gov < http://www.investor.gov/ >
, investors can access information in a user-friendly
format that is specifically tailored to their needs. The
site includes sections specifically for those just getting
started investing, for those saving for a child's
education, and for those planning for retirement. It also
has a detailed “Seniors Care Package” section for senior
citizens and caretakers.
In a welcome video on the new site, SEC Chairman Mary
Schapiro says, “Investing information is available from
thousands of online resources – some good, some not so
good. Through Investor.gov, we are adding our own online
voice to provide investors with unbiased and factual
investing information.”
Although the income cap on converting an IRA to a Roth
ends after 2009
High incomes still can't Roth IRA payins. Contributions
are barred for couples with AGI of $176,000 or more and
singles with AGI of $120,000 and up.
But there's a loophole: See the story at Traders
Accounting Tax Loopholes for IRA to Roth
Random Audits
of S corporations have borne fruit
Uncovering several areas of broad noncompliance that are
targeted for future scrutiny: travel costs, meals, and
entertainment car and truck expenses, expensing of tools
and supplies and taking profits as dividends instead of as
salary to avoid paying payroll taxes.
See more tax tips and wealth strategies at Traders
Accounting
Posted by Mark Bertrand at 6:28 PM 0 comments
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Wednesday, October 7, 2009
Meet Traders Accounting in St. Louis
Traders Accounting will be presenting a seminar on October
23 and 24, 2009 in St Louis at the Options Monster Expo.
The live seminar presented by Traders Accounting will
cover the topic:
Five Reasons 94% of Traders Fail, A Guide to Managing Your
Cash Flow.
Traders of all skill levels will benefit from this
informative event. Validate your trading approach and
learn new techniques as top market pros teach you to
become a more successful trader.
Are you up this year? What is your plan for 2010?
Choose workshops that narrow in on key trends, strategies,
and asset classes
What are renowned market pros doing to beat the market?
Ask them yourself
Click here for more information on Options Trader.
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Friday, October 2, 2009
IRS Features Recovery Tax Credits on YouTube, iTunes
The Internal Revenue Service today announced the
availability of video and audio products to help taxpayers
take full advantage of the 2009 tax provisions in the
American Recovery and Reinvestment Act.
The IRS has launched a YouTube video site and an iTunes
podcast site to better serve taxpayers.
People can visit the video site at www.youtube.com/irsvideos
to view information about the Recovery, tax tips and
how-to videos. These videos will be in English, Spanish,
American Sign Language and other languages.
The YouTube focus will be on the provisions of the
American Recovery and Reinvestment Act. Videos will
highlight the $8,000 first-time homebuyer’s credit for
those who purchase a house this year, the sales or excise
tax deduction on new car purchases and the expanded
credits for education and energy conservation.
The IRS YouTube channel will debut with seven Recovery
videos in English and ASL and eight in Spanish. Also,
included will be a video on using the IRS Withholding
Calculator. Many workers received the Making Work Pay tax
credit in April through their tax withholding at work.
However, people who have more than one job or working
spouses should especially check their withholding to
ensure neither too much nor too little is being withheld.
People can use the calculator to help determine if they
should make adjustments.
People can visit the audio site at iTunes to listen to IRS
podcasts about ARRA tax credits. People without an iTunes
account can hear those same podcasts, in English and
Spanish, on IRS.gov’s Multimedia Center.
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Thursday, October 1, 2009
Six Facts About the American Opportunity Tax Credit
Many parents and college students will be able to offset
the cost of college over the next two years under the new
American Opportunity Tax Credit. This tax credit is part
of the American Recovery and Reinvestment Act of 2009.
Here are six important facts the IRS wants you to know
about the new American Opportunity Tax Credit:
1. This credit, which expands and renames the existing
Hope Credit, can be claimed for qualified tuition and
related expenses that you pay for higher education in 2009
and 2010. Qualified tuition and related expenses include
tuition, related fees, books and other required course
Materials.
2. The credit is equal to 100 percent of the first $2,000
spent and 25 percent of the next $2,000 per student each
year. Therefore, the full $2,500 credit may be available
to a taxpayer who pays $4,000 or more in qualifying
expenses for an eligible student.
3. The full credit is generally available to eligible
taxpayers who make less than $80,000 or $160,000 for
married couples filing a joint return. The credit is
gradually reduced, however, for taxpayers with incomes
above these levels.
4. Forty percent of the credit is refundable, so even
those who owe no tax can get up to $1,000 of the credit
for each eligible student as cash back.
5. The credit can be claimed for qualified expenses paid
for any of the first four years of post-secondary
education.
6. You cannot claim the tuition and fees tax deduction in
the same year that you claim the American Opportunity Tax
Credit or the Lifetime Learning Credit. You must choose to
either take the credit or the deduction, which ever is
more beneficial for you.
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Tuesday, September 29, 2009
IRS is doing fewer no-change exams on filers
Now that IRS audit formulas have been updated to
incorporate data from a recent set of random audits they
will be doing fewer no-change exams on filers. For tax
year 2006 returns, the no change rate is 13% down from 18%
five years ago. And the average additional tax recommended
per examination also went up 16%.
See rest of the story here
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Friday, September 18, 2009
Ten Facts about the First-Time Homebuyer Credit
Many taxpayers who purchase a home this year will qualify
for an $8,000 federal tax credit. The refundable
first-time homebuyer credit is a major tax provision in
the American Recovery and Reinvestment Act of 2009. But
time is running out to qualify for this credit.
Here are ten things the IRS wants you to know about the
first-time homebuyer credit:
• To be considered a first-time homebuyer, you – and your
spouse if you are married – must not have jointly or
separately owned another principal residence during the
three years prior to the date of purchase.
• You cannot claim the credit before there is a completed
sale and purchase of the residence. The sale and purchase
are generally completed at the time of closing on the
purchase.
• To qualify for the credit, the completed purchase must
occur before December 1, 2009.
• The home must be located in the United States.
Click here to get the rest of the Homebuyer Tax Credit
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Thursday, September 17, 2009
The odds of tax rate hikes are likely. What should you do?
You may want to reconsider the form of your business. The
top rate on both individuals and corporations is 35%,
smoothing the income tax differences among
proprietorships, partnerships, regular corporations, S
companies and LLCs.
The top rate on individuals will likely top 40%. Congress
is almost certain to let the Bush tax rate cuts lapse
after 2010, which would make the top rate 39.6%. It could
climb to 45% if a surtax being talked about by House
Democrats is approved.
Higher rates provide a big a big tax incentive to operate
as a regular corporation, despite the two layers of tax.
With such a big spread between the maximum tax rate on
corporations and individuals, many people would avoid
operating businesses as S firms, partnerships or sole
proprietorships. The reverse happened in 1986, when the
top rate on individuals was lower than the maximum
corporate tax rate.
Learn more about business formation and the many tax
advantages.
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Monday, September 14, 2009
IRS to send millions of tax payers letters and notices.
Every year, the IRS sends millions of letters and notices
to taxpayers. Many taxpayers will receive this
correspondence during the late summer and fall. Here are
eight things every taxpayer should know about IRS notices
– just in case one shows up in your mailbox.
Eight Things to Know If You Receive an IRS Notice
• Don't panic. Many of these letters can be dealt with
simply and painlessly.
See the rest of the IRS Notices to Taxpayers
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Wednesday, September 9, 2009
Hanky panky with your IRA will cost you the bankruptcy
exemption.
Although creditors typically cannot grab IRA funds, that
rule does not apply when the debtor engages in prohibited
transactions with the account. In this case, the owner of
a self-directed IRA borrowed money from it and used the
account to pay off a mortgage on property he wanted to
acquire. His self-dealing with the IRA allowed his
creditors to tap it (Willis, D.C., Fla.). Oddly enough,
although his IRA lost its tax exemption due to his
shenanigans, making the entire account taxable to him, IRS
never came after him for back taxes.
A New Tax Savings Begins January 1, 2010
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Thursday, September 3, 2009
Claiming new add-ons to the standard deductions? IRS wants
details.
Starting with returns for 2009, filers who add real estate
taxes, sales tax on vehicles or disaster losses to their
standard deduction must file new Schedule L and list the
extra amounts. For 2009, married nonitemizers can add up
to $1,000 of property taxes paid to their standard
deduction. The cap for single filers is $500. Those who
purchasing a vehicle after February 16th, 2009 and before
2010 can add sales tax paid on the first $49,500 of cost
to their standard deductions. And nonitemizers who live in
federal disaster areas can boost their standard deductions
by any casualty loses.
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Monday, August 31, 2009
Tips For Reducing Stress Ahead of Tax Time
Although most people won't be filing their tax returns for
several months, the dog days of summer are actually a
great time to start planning for the tax filing season by
ensuring your records are organized. Whether you are an
individual taxpayer or a business owner, you can avoid
headaches at tax time with good records because they will
help you remember transactions you made during the year.
Here are a few things the IRS wants you to know about
recordkeeping.
Keeping well-organized records also ensures you can answer
questions if your return is selected for examination or
prepare a response if you are billed for additional tax.
In most cases, the IRS does not require you to keep
records in any special manner. Generally speaking, you
should keep any and all documents that may have an impact
on your federal tax return.
More Information Available: Call Sara at
1-800-938-9513 ask for ext. 108.
Or see the rest of the story; Tips for reducing tax time
stress.
What software should Traders use for recordkeeping?
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Wednesday, August 26, 2009
Wealth Building Strategy
Double your cash for trading or investing.
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Ten Tips for Taxpayers Making Charitable Donations
Every year, millions of taxpayers itemize their deductions
on their federal tax return. One of the most common
itemized deductions is a donation made to a charitable
organization.
Here are the top ten things the IRS wants every taxpayer
to know before deducting charitable donations.
• Charitable contributions must be made to qualified
organizations to be deductible. You can ask any
organization whether it is a qualified organization and
most will be able to tell you. You can also check IRS
Publication 78, which lists most qualified organizations.
IRS Publication 78 is available at IRS.gov.
• Charitable contributions are deductible only if you
itemize deductions using Form 1040, Schedule A.
• You generally can deduct your cash contributions and the
fair market value of most property you donate to a
qualified organization. Special rules apply to several
types of donated property, including clothing or household
items, cars and boats.
• If your contribution entitles you to receive
merchandise, goods, or services in return – such as
admission to a charity banquet or sporting event – you can
deduct only the amount that exceeds the fair market value
of the benefit received.
See the rest: Ten Tips For Making Charitable Donation
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Tuesday, August 18, 2009
Eight Tips For Taxpayers Who Owe The IRS Money
The vast majority of Americans get a tax refund from the
IRS each spring, but what do you do if you are one of
those who received a tax bill? Here are eight tips for
taxpayers who owe money to the IRS.
1. If you get a bill this summer for late taxes, you are
expected to promptly pay the tax owed including any
additional penalties and interest. If you are unable to
pay the amount due, it is often in your best interest to
get a loan to pay the bill in full rather than to make
installment payments to the IRS.
2. You can also pay the bill with your credit card. To pay
by credit card contact either Official Payments
Corporation at 800-2PAYTAX (also www.officialpayments.com
) or Link2Gov at 888-PAY-1040 (also www.pay1040.com ).
3. The interest rate on a credit card or bank loan may be
lower than the combination of interest and penalties
imposed by the Internal Revenue Code.
4. You can also pay the balance owed by electronic funds
transfer, check, money order, cashier's check or cash. To
pay using electronic funds transfer you can take advantage
of the Electronic Federal Tax Payment System by calling
800-555-4477 or 800-945-8400 or online at www.eftps.gov .
See the rest of the Eight Tips for Taxpayers Who Owe Money
to the IRS.
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Thursday, August 13, 2009
Five Facts about the Home Office Deduction
With technology making it easier than ever for people to
operate a business out of their house, many taxpayers may
be able to take a home office deduction when filing their
2009 federal tax return next year.
Here are five important things the IRS wants you to know
about claiming the home office deduction.
1. Generally, in order to claim a business deduction for
your home, you must use part of your home exclusively and
regularly:
* As your principal place of business, or
* As a place to meet or deal with patients, clients or
customers in the normal course of your business, or
* In the case of a separate structure which is not
attached to your home, it must be used in connection with
your trade or business
Get the rest of the article here
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Tuesday, August 11, 2009
The IRS Service can seize funds in a health savings
account for unpaid taxes.
In a private ruling, the agency says that even though HAS
funds are held in a trust, the broad powers granted IRS to
grab assets for tax debts allow it to tap the account.
Worse, there is a double whammy if IRS taps the account:
Payouts are taxed as income to the owner of the HAS. And
there’s a 10% penalty on the distribution unless the HAS
owner is age 65 or older or is disabled when the Service
takes the money.
The rule is different for seizures from IRAs and 402(k)s.
There, no penalty is owed, even if the employee is under
the age of 591/2. Congress specifically barred any penalty
in those cases, figuring that punishing an involuntary
payout adds insult to injury. Unfortunately, there’s no
such expectation for involuntary withdrawals from HSAs.
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Thursday, August 6, 2009
IRS will put more suspected under-reporters on the honor
system next year.
It will send notices to another 30,000 filers to tell them
about discrepancies between 1099 forms and what was shown
on their 2009 returns. IRS will suggest that these
taxpayers either amend their returns or have 1099 issuers
fix any errors. It will check the 2010 tax returns of
these filers to see if the underreporting stopped. If they
report the money on their 2010 returns, IRS will give them
a pass for 2009. It's already monitoring 30,000 taxpayers
who got notices about their 2008 returns.
Free traders Webinars
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Wednesday, August 5, 2009
Gifts made via powers of attorney continue to create tax
woes.
The problem arises when the document is silent about
making gifts, as this case shows. An elderly father in
poor health gave his son power of attorney over his
assets. Just before the father died, the son wrote checks
for $11,000 (the maximum amount of the annual gift tax
exclusion then) to 17 family members. The gifts must be
added back to the estate for federal estate tax purposes,
as a district court says, rejecting the son's deathbed
estate planning. The gifts he made weren't specifically
authorized by the power of attorney are unauthorized
(Barnett, D>C>, Pa.) The problem could have been avoided
had the document said gifts were OK.
TAX SECRETS FOR TRADERS – STOCK AND OPTIONS SERIES (NEW)
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Tuesday, August 4, 2009
If your firm sponsors a simple plan and is short on cash,
take note:
Your cost saving options are limited by IRS rules. Plans
can't be shut down until the end of the year. Plus,
employers that promised a nonelective contribution or a
matching pay-in for 2009 can't reneg on that commitment.
But a delay is OK: Deposits can be deferred till the
extended due date of the firm's business tax return.
The rules are less strict for 401(k) plan sponsors. Those
that contribute 3% or more of pay to participant accounts
to avoid nondiscrimination testing are allowed to reduce
or suspend pay-ins. They must give employees prior notice
of the change and permit them to modify their own plan
contributions to make up for the loss.
Start earning $0.30 on every $1.00 you trade!
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Friday, July 31, 2009
Real estate agents can claim a special tax break on their
rental loses.
Their losses are exempt from the passive loss rules, the
Tax Court says. The exemption applies only to agents who
spend more than half of their time and at least 750 hours
per year materially involved in real estate…the same rule
that applies to landlords, developers and brokers. The IRS
said that agents were not covered, but the Tax Court
disagreed (Agarwal, TC Summ. Op. 2009-29). In this case,
the agent who was audited was not licensed as a real
estate broker.
Find all the tax breaks to save you money at Traders
Accounting.
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Thursday, July 30, 2009
Regulation of unlicensed tax return preparers is moving
closer to reality.
The IRS is establishing a task force to review problems
with preparers and offer options by year-end. Among the
likely recommendations: Registration of any preparers who
aren’t CPAs, Lawyers, or enrolled agents. Minimum
education and training requirements. Tougher IRS
punishment of misconduct by preparers. If IRS needs
authority to implement its plans, the commissioner will
push Congress to give it to her so the agency can get
going. IRS officials won’t need much time. They’ve studied
Oregon’s program, which is seen as a model for preparer
regulation.
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Tuesday, July 28, 2009
IRS takes a pro-taxpayer view on the sales tax deduction
on new vehicles.
Buyers can deduct the sales tax paid on more than one
vehicle this year, according to IRS officials. Although
this break applies only to the tax on the first $49,500 of
the cost for the vehicle purchased after February 16, 2009
and before January 1, 2010, IRS will apply the cap to each
individual car purchased. So if you buy two cars for
$30,000 apiece, total sales tax paid on the vehicles
qualify for the break.
Buyers living in states with no sales tax can claim this
break, says IRS. They can deduct other related fees
imposed by states and municipalities if the levies are
assessed on purchasing a vehicle and are based upon the
vehicle’s sales price.
Posted by Mark Bertrand at 11:43 AM 0 comments
Labels: tax deduction for auto purchase, vehicle sales tax
deduction
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Monday, July 27, 2009
The 2010 Mediacre Part B premium is projected to rise to
$104.20 a month.
This will mainly affect upper incomes ( married with AGI's
above $170,000 and singles over $85,000) who pay a stiff
surtax on top of the basic Part B premium. Lower income
folk who are already on the rolls will continue to pay
$96.40 a month. They avoid the price hike, thanks to a
rule that bars a cut in Social Security benefits solely on
account of a PArt B premium increase. the rule comes into
play in 2010 because the Social Security tustees project
that benefits will not go up next year.
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Thursday, July 23, 2009
Court of Federal Claims Finds LLC and LLP Interests Are
Not Limited Partnership
Court of Federal Claims Finds LLC and LLP Interests Are
Not Limited Partnership Interests Under Passive Loss Rules
(Thompson, FedCl)
A limited liability company (LLC) member's interest in his
LLC was not a limited partnership interest for purposes of
applying the more stringent test for material
participation under the passive activity rules because the
IRS lacks the authority to apply that rule to anyone who
is not, strictly speaking, a limited partner. Accordingly,
material participation of an LLC member is evaluated using
the more generous criteria that normally applies to anyone
who is not a limited partner. This decision by the Court
of Federal Claims follows within days the Tax Court's
similar decision against the IRS in P.D. Garnett, 132 TC
No. 19, Dec. 57,875 (TAXDAY, 2009/07/01, J.1).
More Information from the Traders Tax Experts
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Wednesday, July 22, 2009
Forex Transformer - Forex Transformer Honest Review
Are you like me looking for a way out the vicious cycle of
paying back credit card bills while simultaneously trying
to pay off mortgages? It seems no matter how hard you work
to pay off these mounting bills it is never enough. At
times like these it seems all of us need a little help. I,
like you, was stuck in such a vicious cycle out of
desperation I eagerly searched the internet for some
solution when I came across Forex Transformer.
What immediately attracted me to Forex Transformer was its
futuristic design and layout. The color combination of
black and silver makes for an attractive yet modern color
combination. Yet to make the text stand out clearly from
the black background, it is placed in a white box.
Important points in the text are bolded and larger in size
then the rest of the text present on this page, in
addition main points are written in a red font. The
website provides colored photos of the graphs and bank
statements one should expect once they endorse this
product. In addition Forex Transformer is extremely easy
to browse even for people who have little experience using
the internet as all the information that one requires is
all present on the homepage alone. Thus there is no need
to click on several links to direct one to separate
sections as all the information is on the site. Forex
Transformer uses intelligent methods to attract the
customer to its product by writing words such as rich,
wealthy in a large font in addition to being written in
capital letters. To emphasize their appeal these words are
repeated several times all over the homepage.
One of the most amazing features of Forex Transformer is
its utmost attention to detail. Important details about
the product are presented in a separate box at the end of
it hence essentially giving a short summary of all the
details present. This allows the customer to recall
important points written as reminder that one might be
prone to forget. The Forex Transformer over entrusting
ones money to greedy stock brokers. This is because the
Forex Transformer is free of making all the mistakes a
human may make. The robot functions with pinpoint accuracy
and it has the capability to predict trends with in the
market. As a result of buying this software an individual
will not have to take part in the tedious activity of
daily observing market trends as the robot makes the
important decisions for the customer. Best of all are the
customer reviews provided by satisfied customers which are
present on the report. What one should take note of is the
fact that these customers are not from one specific
country but they are from several different countries.
This shows that Forex Transformer is accessible to people
of all nationalities and does not serve to satisfy the
needs of people of a specific country only and truly
establishes the forex transformer as a global phenomenon.
With today’s financial climate one should be very
overprotective about their finances, and should only trust
very few people with it. The product advertised on Forex
Transformer is one of the few products that can be trusted
with ones assets and finances. If you want a future with
ample amount of money in it to support or perhaps even
uplift your lifestyle then I would recommend that you
entrust your money to the Forex Transformer, the robot
that promises sky high profits
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Tuesday, July 14, 2009
Free Trading Webinar
Today starting at 10:30 CT:
LIVE TRADING with Professional Trader Tom Busby Traders
tend to put themselves in one of three categories: day
trader, swing trader, or long-term investor. The truth is,
almost all trades start as day trades and develop into
swing or long-term positions depending on the market and
the returns. In this educational session, 25-year veteran
trader Tom Busby will share his method for using specific
times of day to trade stocks, futures and options. Bring
your pen and paper - this one is a MUST attend for the
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the Emini,
the Mini Dow and the German DAX-STOCK SELECTION, EXECUTION
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to the
Next-Psychology and Risk Management Techniques Used by the
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Click here to reserve your seat.
Posted by Mark Bertrand at 11:32 AM 0 comments
Labels: day trades, live trading, swing trades, tom busby,
trade setups, trading webinar
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Thursday, June 25, 2009
President Signs "Cash for Clunkers" Bill
President Obama on June 24 signed legislation aimed at
boosting the sale of vehicles at financially struggling
U.S. automobile dealerships. The so-called "cash for
clunkers" program provides $1 billion in tax-free vouchers
to automobile dealers who participate in the new program.
The program vouchers, worth $3,500 or $4,500, will be
given to dealers when consumers trade in old vehicles for
ones with higher fuel efficiency. The vouchers will not be
considered taxable income for the car buyer.
The new law limits the number of vouchers to one per
customer, including joint registered owners of a single
eligible trade-in vehicle. The car voucher measure is
included in the 2009 Supplemental Appropriations Bill for
Iraq, Afghanistan, Pakistan and Pandemic Flu (HR 2346).
Posted by Mark Bertrand at 6:05 PM 0 comments
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Tuesday, June 16, 2009
06-19-2009 - Lawmakers Ask IRS to Temporarily Halt Small
Business Penalties
Lawmakers from the Senate Finance Committee and House
Committee on Ways and Means have asked IRS Commissioner
Douglas H. Shulman to suspend certain penalties assessed
on small businesses while Congress works on legislation to
address what they term an inequitable and unintended
consequence in the tax code. The lawmakers argue that
small businesses with investments in listed tax shelter
transactions that are generating modest tax benefits have
received tax penalties significantly larger than the tax
benefits received.
In a letter dated June 12, the lawmakers requested that
Shulman "use the discretion provided to the IRS with its
effective tax administration authority to suspend efforts
to collect IRC [Internal Revenue Code] section 6707A
liabilities ... while Congress acts to remedy this
situation." Code Sec. 6707A was enacted in the American
Jobs Creation Act of 2004 (P.L. 108-357) as part of a
package of provisions intended to help the IRS detect,
deter and shut down tax shelters.
"When I advanced the legislation to shut down tax
shelters, I did not intend to bankrupt small businesses
that had no ill intent. I was focused on the big
corporations that were actively seeking to hide their
participation in tax shelters," said Senate Finance
Committee ranking member Charles E. Grassley, R-Iowa.
Treasury regulations require taxpayers to tell the IRS if
they invest in "listed" tax shelter transactions, and Code
Sec. 6707A imposes large, strict liability penalties on
taxpayers who fail to disclose this information to the
IRS. For listed transactions, the penalties are $100,000
for natural persons and $200,000 for others, including
Subchapter C and Subchapter S corporations. The impacted
companies have reported that they were never informed that
their transactions were considered abusive tax shelters by
the IRS
Grassley, along with Senate Finance Committee Chairman Max
Baucus, D-Mont., Ways and Means Oversight Subcommittee
Chairman John Lewis, D-Ga., and ranking member Charles
Boustany, R-La., pointed out that the inequitable
consequences were unexpected at the time the penalty was
enacted, and they plan to introduce legislation that would
result in penalty amounts in more reasonable proportion to
the tax benefits. They further claimed that while the
penalty has helped the IRS end many abusive deals, many of
the shelters being examined by the Service involve
significantly smaller dollar amounts, and current penalty
levels may be excessive in some circumstances.
"I don't condone investments in tax shelters, but I also
want to make sure our small businesses survive and
thrive," said Baucus. "It's important we get this done as
soon as possible and I urge and expect the IRS to comply
with our request." Grassley was even more succinct. "The
penalty should be commensurate with the transgression," he
said. None of the lawmakers offered a timetable as to when
they might advance legislation to change tax code.
Posted by Ryan Gibson at 1:25 PM 0 comments
Labels: Temporarily Halt Small Business Penalties
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Friday, May 29, 2009
05-29-2009 - IRS Announces No Interest Rate Change for 3rd
Quarter
The Internal Revenue Service today announced that interest
rates for the calendar quarter beginning July 1, 2009,
will remain the same. The rates will be:
* four (4) percent for overpayments [three (3) percent in
the case of a corporation];
* four (4) percent for underpayments;
* six (6) percent for large corporate underpayments; and
* one and one-half (1.5) percent for the portion of a
corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is
determined on a quarterly basis. For taxpayers other than
corporations, the overpayment and underpayment rate is the
federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment
rate is the federal short-term rate plus 3 percentage
points and the overpayment rate is the federal short-term
rate plus 2 percentage points. The rate for large
corporate underpayments is the federal short-term rate
plus 5 percentage points. The rate on the portion of a
corporate overpayment of tax exceeding $10,000 for a
taxable period is the federal short-term rate plus
one-half (0.5) of a percentage point.
The interest rates announced today are computed from the
federal short-term rate during April 2009 to take effect
May 1, 2009, based on daily compounding.
Revenue Ruling 2009-17, announcing the rates of interest,
is attached and will appear in Internal Revenue Bulletin
No. 2009-26, dated June 29, 2009.
Posted by Ryan Gibson at 2:50 PM 0 comments
Labels: IRS Interest Rates
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05-28-2009 - Law Offers Special Tax Breaks for Small
Business; Act Now and Save, IRS Says
Small Business Week is May 17 to 23, and the Internal
Revenue Service urges small businesses to act now and take
advantage of tax-saving opportunities included in the
recovery law.
The American Recovery and Reinvestment Act (ARRA), enacted
in February, created, extended or expanded a variety of
business tax deductions and credits. Because some of these
changes—the bonus depreciation and increased section 179
deduction, for example—are only available this year,
eligible businesses only have a few months to take action
and save on their taxes. Here is a quick rundown of some
of the key provisions.
Faster Write-Offs for Certain Capital Expenditures
Many small businesses that invest in new property and
equipment will be able to write off most or all of these
purchases on their 2009 returns. The new law extends
through 2009 the special 50 percent depreciation
allowance, also known as bonus depreciation, and increased
limits on the section 179 deduction, named for the
relevant section of the Internal Revenue Code. Normally,
businesses recover these capital investments through
annual depreciation deductions spread over several years.
Both of these provisions encourage these investments by
enabling businesses to write them off more quickly.
The bonus depreciation provision generally enables
businesses to deduct half the cost of qualifying property
in the year it is placed in service.
The section 179 deduction enables small businesses to
deduct up to $250,000 of the cost of machinery, equipment,
vehicles, furniture and other qualifying property placed
in service during 2009. Without the new law, the limit
would have dropped to $133,000. The existing $25,000 limit
still applies to sport utility vehicles. A special
phase-out provision effectively targets the section 179
deduction to small businesses and generally eliminates it
for most larger businesses.
Bonus depreciation and the section 179 deduction are
claimed on Form 4562. Further details are in the
instructions for this form.
Expanded Net Operating Loss Carryback
Many small businesses that had expenses exceeding their
incomes for 2008 can choose to carry those losses back for
up to five years, instead of the usual two. For small
businesses that were profitable in the past but lost money
in 2008, this could mean a special tax refund. The option
is available for a small business that has no more than an
average of $15 million in gross receipts over a three-year
period.
This option is still available for most eligible
taxpayers, but only for a limited time. A corporation that
operates on a calendar-year basis, for example, must file
a claim by Sept. 15, 2009. For eligible individuals, the
deadline is Oct. 15, 2009.
Eligible individuals should file a claim using Form 1045,
and corporations should use Form 1139. Details can be
found in the instructions for each of these forms, and
answers to frequently-asked questions are posted on
IRS.gov.
Exclusion of Gain on the Sale of Certain Small Business
Stock
The new law provides an extra incentive for individuals
who invest in small businesses. Investors in qualified
small business stock can exclude 75 percent of the gain
upon sale of the stock. This increased exclusion applies
only if the qualified small business stock is acquired
after Feb. 17, 2009 and before Jan. 1, 2011, and held for
more than five years. For previously-acquired stock, the
exclusion rate remains at 50 percent in most cases.
Estimated Tax Requirement Modified
Many individual small business taxpayers may be able to
defer, until the end of the year, paying a larger part of
their 2009 tax obligations. For 2009, eligible individuals
can make quarterly estimated tax payments equal to 90
percent of their 2009 tax or 90 percent of their 2008 tax,
whichever is less. Individuals qualify if they received
more than half of their gross income from their small
businesses in 2008 and meet other requirements. For
details, see Publication 505.
COBRA Credit
Employers that provide the 65 percent COBRA premium
subsidy under ARRA to eligible former employees claim
credit for this subsidy on their quarterly or annual
employment tax returns. To help avoid imposing an
unnecessary cash-flow burden, affected employers can
reduce their employment tax deposits by the amount of the
credit. For details, see Form 941. Answers to
frequently-asked questions are posted on IRS.gov.
Other ARRA business provisions relate to discharges of
certain business indebtedness, the holding period for S
corporation built-in gains and acceleration of certain
business credits for corporations. Also see Fact Sheet
FS-2009-11.
Posted by Ryan Gibson at 2:27 PM 0 comments
Labels: Small Business, Special Tax Breaks, tax deductions
