If you plan to set up a retirement plan other than an IRA--including a SEP-IRA--you must establish the plan by December 31, 2010. Funding is not required until the due date of your income tax return, or, if extended, September 15, 2011.
This pertains to defined benefit pension plans, profit-sharing plans, money purchase pension plans, etc.
Do yourself a favor, set it up now. The amount of funding can be determined later.
Monday, October 18, 2010
Wednesday, October 13, 2010
Apathy
I haven't stopped following our Congress, but I feel great lethargy whenever I think of what they are not doing. My apathy is extreme.
Perhaps the crisp days of autumn will finally clear my mind, if only we can have more than one consecutive day of crispness in the Mid-Atlantic region.
Perhaps the crisp days of autumn will finally clear my mind, if only we can have more than one consecutive day of crispness in the Mid-Atlantic region.
Saturday, August 28, 2010
Federal tax reform report
The President's Economic Recovery Advisory Board (also know as PERAB) yesterday released its report on tax reform options for simplifying the federal tax system, improving taxpayer compliance, and reworking the corporate tax rules.
The Board did have a directive to not consider tax options that would raise taxes for families with incomes less than $250,000 a year. They took this to mean that options “taken together should be revenue neutral for each income class with annual incomes less than $250,000", while considered separately may increase or decrease the tax burden for each group.
For the most part, the Board reviewed options that have been bruited about for the past 20 years.There are good options for tax simplification for individuals and tax compliance.
The report discusses a number of options to streamline the tax code for family credits and incentives, savings and retirement accounts, capital gains, tax filing, small businesses, and the individual alternative minimum tax (AMT).It also looks at simplifying the tax return preparation process by increasing the standard deduction and reducing the benefit of itemized deductions.{Was I not right on in my screed in the spring?—see my April 25th blog post.)
The report reflects the common belief that that largest area of non-compliance is in underreporting income by small businesses and individuals. But the options discussed on small-business bank reporting, withholding for independent contractors, and multiple year audits of small businesses and individuals are new.
In the discussion on corporate and international tax reform, the main theme was that there needed to be comprehensive reform because any one option would be too expensive—mainly for the Treasury.
The question now is what is going to be done with this report? Will the President change his proposals? What effect will it have on his overall tax policy? Will Congress act in accordance with some of the simplifications and tax compliance options? Or, will it be placed on the tall pile of unused reports that recommend reform of the Federal tax code? to be continued...
The Board did have a directive to not consider tax options that would raise taxes for families with incomes less than $250,000 a year. They took this to mean that options “taken together should be revenue neutral for each income class with annual incomes less than $250,000", while considered separately may increase or decrease the tax burden for each group.
For the most part, the Board reviewed options that have been bruited about for the past 20 years.There are good options for tax simplification for individuals and tax compliance.
The report discusses a number of options to streamline the tax code for family credits and incentives, savings and retirement accounts, capital gains, tax filing, small businesses, and the individual alternative minimum tax (AMT).It also looks at simplifying the tax return preparation process by increasing the standard deduction and reducing the benefit of itemized deductions.{Was I not right on in my screed in the spring?—see my April 25th blog post.)
The report reflects the common belief that that largest area of non-compliance is in underreporting income by small businesses and individuals. But the options discussed on small-business bank reporting, withholding for independent contractors, and multiple year audits of small businesses and individuals are new.
In the discussion on corporate and international tax reform, the main theme was that there needed to be comprehensive reform because any one option would be too expensive—mainly for the Treasury.
The question now is what is going to be done with this report? Will the President change his proposals? What effect will it have on his overall tax policy? Will Congress act in accordance with some of the simplifications and tax compliance options? Or, will it be placed on the tall pile of unused reports that recommend reform of the Federal tax code? to be continued...
Wednesday, August 25, 2010
DC Amnesty Update
See DCTAXAMNESTY for the details and forms necessary for the DC amnesty program ongoing now through September 30.
Tuesday, August 24, 2010
Tax Tip--Check your estimated payments and withholdings
I'm back from vacation. Congress is in its 6-week recess and any happenings are sub rosa.
You can be working on your 3rd quarter estimated tax payment due on September 15th--does it need to be revised up or down? What income do you have that needs to be covered by these estimated payments?
Do you only have withholding from your salary? Then do a projection of your tax liability and determine whether you have the right amount being paid in through withholding. Too little and you can be hit with a penalty. Too much and you are giving the government an interest free loan.
The year is two-thirds over and now is a good time to do some tax planning. As I wrote in an earlier post in June, Take your money in 2010, you may wish to accelerate income into 2010. Or plan for it if Congress doesn't extend the Bush tax cuts or pass some version of President Obama's proposed tax cuts.
If you determine this isn't the time to accelerate income, you may want to consider all the normal tax planning items:
You can be working on your 3rd quarter estimated tax payment due on September 15th--does it need to be revised up or down? What income do you have that needs to be covered by these estimated payments?
Do you only have withholding from your salary? Then do a projection of your tax liability and determine whether you have the right amount being paid in through withholding. Too little and you can be hit with a penalty. Too much and you are giving the government an interest free loan.
The year is two-thirds over and now is a good time to do some tax planning. As I wrote in an earlier post in June, Take your money in 2010, you may wish to accelerate income into 2010. Or plan for it if Congress doesn't extend the Bush tax cuts or pass some version of President Obama's proposed tax cuts.
If you determine this isn't the time to accelerate income, you may want to consider all the normal tax planning items:
- If you have capital loss carryovers from the past couple of years and some unrealized gains in your portfolio, it may be worth cleaning up your portfolio to bring it where you want it to be as an investor. If the loss carryovers offset any potential gains you can rebalance your portfolio without any negative tax consequences.
- Determine your charitable giving strategy for the year and plan on giving before December 31
- For those with businesses, take advantage of the increased expensing limit for acquisition of furniture, machinery and equipment under Section 179 of the Internal Revenue Code. Again for 2010, the limit is $250,000 with limitations for those who purchase qualifying fixed assets over $800,000 and for those who do not show a profit in that business.
- Consider deferring income and accelerating deductions where possible.
- Energy credits are still around for 2010, so consider installing qualifying windows or HVAC systems.
Friday, July 30, 2010
Nothing
That's what the House of Representative did with any tax bill before it . Then, today, they recessed for the month of August. Well, until after Labor Day--September 14th. Election day is early this year, November 2nd, so little will be done once they come back from "August" recess until the beginning of November. One hopes the lames ducks will do something before the end of the year.
There are too many important tax bills sitting around to be lackadaisical about all this: the estate tax that is to come roaring back next January 1; all of Bush's tax cuts that are to expire; foreign tax credit reform; and on and on. I won't go into why each one of these are so important, that has been rehashed in blogs throughout the web and newspapers around the country.
I began following these bills last February, now I'm frustrated with the slowness of Congress. Political posturing doesn't make good laws.
There are too many important tax bills sitting around to be lackadaisical about all this: the estate tax that is to come roaring back next January 1; all of Bush's tax cuts that are to expire; foreign tax credit reform; and on and on. I won't go into why each one of these are so important, that has been rehashed in blogs throughout the web and newspapers around the country.
I began following these bills last February, now I'm frustrated with the slowness of Congress. Political posturing doesn't make good laws.
Wednesday, July 28, 2010
Getting the money in
The tax amnesty programs I referred to in my previous post are all geared to getting cash in the door at the various states. Then, for some states, depending upon the amnesty program, to create future tax revenues by having previous nonfilers on the the tax rolls.
All states are dealing with tight budgets, if not budget reductions or potential bankruptcy, and any way to get the money in is being looked at. The DC amnesty program which is geared toward current tax bills, not nonfilers, is expected to bring in $120 million of receipts for the 2010 budget and $170 million overall.
These are all viable solutions for taxpayers who want to/will be paying the tax anyway--they can at least avoid penalties on the late payments and in some cases part of the interest due. There is no program that reduces the actual amount of tax due. But be care with the dates, any late filing for these programs and you're out of luck.
All states are dealing with tight budgets, if not budget reductions or potential bankruptcy, and any way to get the money in is being looked at. The DC amnesty program which is geared toward current tax bills, not nonfilers, is expected to bring in $120 million of receipts for the 2010 budget and $170 million overall.
These are all viable solutions for taxpayers who want to/will be paying the tax anyway--they can at least avoid penalties on the late payments and in some cases part of the interest due. There is no program that reduces the actual amount of tax due. But be care with the dates, any late filing for these programs and you're out of luck.
Tax Amnesty--KY, FL, NV, NM, MN and now DC
You have until this Friday, July 30th, under the Kentucky amnesty program to pay tax to avoid penalty and interest charges. For eligibility and details, see
Kentucky Expedited Protest Resolution Program
Remember that Florida, Nevada and New Mexico have ongoing amnesty programs until September 30, 2010. For eligibility and more information, see
Florida Dept. of Revenue-Amnesty
Nevada Dept. of Taxation-Amnesty
New Mexico Tax and Revenue Dept-TaxRelief
One last one--Minnesota has an amnesty from penalties for tax evasion from foreign financial accounts and foreign business entities. It runs until October 29, 2010. See
Minnesota Voluntary Disclosure Program
Now, DC has announced that it will have an amnesty for those who already have known tax liabilities. Details will be on the Office of Revenue and Taxation website beginning tomorrow. See,
DC Office of Tax and Revenue
Upcoming amnesty program: Maine begins September 1, 2010 and ends November 30, 2010 and pertains to outstanding tax bills. This is called the "2010 Tax Receivables Reduction Initiatives." See for further details, which are currently scant:
Maine Revenue Services
Kentucky Expedited Protest Resolution Program
Remember that Florida, Nevada and New Mexico have ongoing amnesty programs until September 30, 2010. For eligibility and more information, see
Florida Dept. of Revenue-Amnesty
Nevada Dept. of Taxation-Amnesty
New Mexico Tax and Revenue Dept-TaxRelief
One last one--Minnesota has an amnesty from penalties for tax evasion from foreign financial accounts and foreign business entities. It runs until October 29, 2010. See
Minnesota Voluntary Disclosure Program
Now, DC has announced that it will have an amnesty for those who already have known tax liabilities. Details will be on the Office of Revenue and Taxation website beginning tomorrow. See,
DC Office of Tax and Revenue
Upcoming amnesty program: Maine begins September 1, 2010 and ends November 30, 2010 and pertains to outstanding tax bills. This is called the "2010 Tax Receivables Reduction Initiatives." See for further details, which are currently scant:
Maine Revenue Services
Sunday, July 25, 2010
Decisions, decisions
Nothing is more difficult, and therefore more precious, than to be able to decide.__Napoleon Bonaparte
The lead article in today's "Washington Post" was Congress' forthcoming battle to extend the Bush-era tax cuts or not. This has been in the news for at least a year. A tax bill was introduced last December, 2009--H.R. 4213--with President Obama's proposal to extend some of the tax cuts, apply more credits and leave the built-in tax increases on high-income taxpayers. This bill has gone back and forth between the House of Representatives and the Senate ever since. It has been sitting in the Senate since before the July 4th recess with no action.
The article focused on the political battle of raising taxes just before an election (all Representatives are up for re-election this November and 1/3 of the Senate). Then again, keeping the tax cuts will add trillions of dollars over the next few years to the national debt. We have two wars going and have a slow recovery out of a major recession--can we afford to keep the tax cuts? But will raising taxes slow the economy further?
A year ago some optimists (myself among them) believed that the issue of the tax cuts, or a replacement, would be resolved, at the latest, by early 2010. Now we're coming down to the last six months before they are nixed and nothing has been decided.
It's not as though our lawmakers didn't know this was coming. The sunset for these tax cuts was built into the laws that created them back in 2001. Instead of continuing a screed about how lax Congress is in its duties, I'm going to write about why we need to have this settled, now.
In order for businesses and individuals to save and invest, they need to know what their disposable income will be. One significant factor in that income is what is the amount of tax that will be paid on it. If one doesn't know, one hoards all resources until one does know. This hoarding is not the best thing for a fragile economy, as we have now. All indications are that the economy is recovering from the recession and will continue to do so. But there is a segment of the population of both individuals and businesses that are playing the "wait and see" game. One doesn't know and can't estimate what taxes will be next year, so why do anything?
This "wait and see" and hoarding will only prolong the slow recovery because there is not the correct level of new investment into our economy. New investment will create jobs. Jobs will create purchasing power and more savings. More savings will create new investment. A continuous circle, or spiral. A spiral that we want to go up. Isn't this all basic economics?
So, because of a lack of decision in Congress, the whole economy is not deciding. And new investments are not being made. Make a decision, please.
The lead article in today's "Washington Post" was Congress' forthcoming battle to extend the Bush-era tax cuts or not. This has been in the news for at least a year. A tax bill was introduced last December, 2009--H.R. 4213--with President Obama's proposal to extend some of the tax cuts, apply more credits and leave the built-in tax increases on high-income taxpayers. This bill has gone back and forth between the House of Representatives and the Senate ever since. It has been sitting in the Senate since before the July 4th recess with no action.
The article focused on the political battle of raising taxes just before an election (all Representatives are up for re-election this November and 1/3 of the Senate). Then again, keeping the tax cuts will add trillions of dollars over the next few years to the national debt. We have two wars going and have a slow recovery out of a major recession--can we afford to keep the tax cuts? But will raising taxes slow the economy further?
A year ago some optimists (myself among them) believed that the issue of the tax cuts, or a replacement, would be resolved, at the latest, by early 2010. Now we're coming down to the last six months before they are nixed and nothing has been decided.
It's not as though our lawmakers didn't know this was coming. The sunset for these tax cuts was built into the laws that created them back in 2001. Instead of continuing a screed about how lax Congress is in its duties, I'm going to write about why we need to have this settled, now.
In order for businesses and individuals to save and invest, they need to know what their disposable income will be. One significant factor in that income is what is the amount of tax that will be paid on it. If one doesn't know, one hoards all resources until one does know. This hoarding is not the best thing for a fragile economy, as we have now. All indications are that the economy is recovering from the recession and will continue to do so. But there is a segment of the population of both individuals and businesses that are playing the "wait and see" game. One doesn't know and can't estimate what taxes will be next year, so why do anything?
This "wait and see" and hoarding will only prolong the slow recovery because there is not the correct level of new investment into our economy. New investment will create jobs. Jobs will create purchasing power and more savings. More savings will create new investment. A continuous circle, or spiral. A spiral that we want to go up. Isn't this all basic economics?
So, because of a lack of decision in Congress, the whole economy is not deciding. And new investments are not being made. Make a decision, please.
Saturday, July 24, 2010
What will 2011 taxes be?
I found a great website, just for fun, by way of Kay Bell at Don't Mess with Taxes. Brought to you by the Tax Foundation, MyTaxBurden.org lets you calculate your 2011 taxes under 3 "what-ifs":
My family is better off under Obama's proposal for 2011 based on my best guess, but who knows what the future will bring, both in the way of tax law and my family income? The first is up to Congress and the second up to me and my efforts.
Congress will need to act soon to get something passed. It will be in summer recess soon, then Representatives will be campaigning for re-election along with some Senators. It is possible to enact major tax legislation in an election year, but the likelihood goes down.
We won't talk about my efforts to raise my family's tax burden.
So plan for the Bush tax cuts to expire as originally enacted at the beginning of the decade and be glad if they don't.
- Bush tax cuts are all extended
- Bush tax cuts expire and we go back to old law
- Obama's budget proposal is passed (to include extending some of the Bush cuts but not all and adding new tax cuts, credits and tax increases)
My family is better off under Obama's proposal for 2011 based on my best guess, but who knows what the future will bring, both in the way of tax law and my family income? The first is up to Congress and the second up to me and my efforts.
Congress will need to act soon to get something passed. It will be in summer recess soon, then Representatives will be campaigning for re-election along with some Senators. It is possible to enact major tax legislation in an election year, but the likelihood goes down.
We won't talk about my efforts to raise my family's tax burden.
So plan for the Bush tax cuts to expire as originally enacted at the beginning of the decade and be glad if they don't.
Thursday, July 15, 2010
IRS special assistance Saturday July 17 for those affected by BP oil spill
The IRS website, www.irs.gov, has the specific addresses and times it will be open this Saturday, July 17 to aid those in areas affected by the BP oil spill. This from IRS News Release IR-2010-85:
IR-2010-85, July 14, 2010
WASHINGTON –– The Internal Revenue Service announced the locations of Taxpayer Assistance Centers in seven Gulf Coast cities that will be open this Saturday, July 17 to provide help to taxpayers impacted by the BP oil spill.
The following locations will be open from 9 a.m. to 2 p.m. Central Time:
Individuals who have questions about the tax treatment of BP claims payments or who are experiencing filing or payment hardships because of the oil spill will be able to work directly with IRS personnel at any of these locations on Saturday.
- 1110 Montlimar Drive, Mobile, Ala.
- 651-F West 14th St., Panama City, Fla.
- 7180 9th Ave. North, Pensacola, Fla.
- 2600 Citiplace Centre, Baton Rouge, La.
- 423 Lafayette St., Houma, La.
- 1555 Poydras Street, New Orleans, La.
- 11309 Old Highway 49, Gulfport, Miss.
Last week, the IRS announced the opening of a dedicated phone line for victims of the Gulf oil spill –– 866-562-5227. This special toll-free line is open weekdays from 7 a.m. to 10 p.m. and will also be open to callers on Saturday, July 17 from 9 a.m. to 2 p.m. Central Time.
In certain cases, IRS staff can assist oil spill victims by suspending collection and examination actions. Taxpayers who need this assistance must request it. Others may decide to continue making payments because interest will continue to accrue on outstanding balances, even if some penalties are abated.
In addition to postponing collection actions, the IRS continues to have a number of other ways to help taxpayers deal with oil spill issues or other economic hardships, including:
- Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals.
- Consideration of a taxpayer’s current income and potential for future income when negotiating an offer in compromise.
- Accelerated levy releases.
- Assistance of the Taxpayer Advocate Service for those experiencing economic harm and seeking help resolving tax problems that have not been resolved through normal channels.
Wednesday, July 14, 2010
Blogging existence
Blogging is a way for everyone in the world to read your opinion, thoughts, actions. But if no one reads you, do you exist?
Senators, do your job!
Typical politician posturing! I love it! A group of Democratic senators have asked the IRS to reduce the paperwork burden on prospective rules for 1099 reporting--rules they passed in Congress! I must defend the IRS here, they are charged with administering the Internal Revenue Code--which Congress legislates. The IRS doesn't make the laws, Congress (which includes the Senate and the House of Representatives) does. If you have a problem with the laws, call-email- write your congressman or Senator, or both.
The law in question was passed as part of the health care reform bill this spring. It requires all businesses, tax-exempt entities, and federal, state and local governments to issue Forms1099 to anyone from whom they purchase services, rents or goods of $600 or more during a year. The law in the past has pertained only to services and rents. The 'goods' requirement will include a small business that purchases office supplies and coffee-room supplies from, say, Costco during the year that equal or exceed $600. They will need to get Forms W-9--so they have the correct name, address and identification number--from all vendors, because who know in January who will exceed the $599 limit in December, and then issue Forms 1099 in the following January.
This is part of the plan to make sure that all income is reported by taxpayers.
The law in question was passed as part of the health care reform bill this spring. It requires all businesses, tax-exempt entities, and federal, state and local governments to issue Forms1099 to anyone from whom they purchase services, rents or goods of $600 or more during a year. The law in the past has pertained only to services and rents. The 'goods' requirement will include a small business that purchases office supplies and coffee-room supplies from, say, Costco during the year that equal or exceed $600. They will need to get Forms W-9--so they have the correct name, address and identification number--from all vendors, because who know in January who will exceed the $599 limit in December, and then issue Forms 1099 in the following January.
This is part of the plan to make sure that all income is reported by taxpayers.
Monday, July 12, 2010
IRS to help those in Gulf States
Starting today the IRS has a toll-free number for people affected by the oil spill in the Gulf of Mexico to call with tax questions. 1-866-562-5227. The phones will operate weekdays 7 a.m. to 10 p.m. local time.
Additionally, this Saturday, July 17, at select sites throughout the affected areas, IRS offices will be open to help taxpayers and tax professionals:
http://www.irs.gov/
Additionally, this Saturday, July 17, at select sites throughout the affected areas, IRS offices will be open to help taxpayers and tax professionals:
- Alabama: Mobile.
- Florida: Panama City and Pensacola.
- Louisiana: New Orleans, Houma and Baton Rouge.
- Mississippi: Gulfport.
http://www.irs.gov/
War and Peace
"When monarchs through their bloodthirsty commanders lay waste a country, they dignify their atrocity by calling it "making peace"--Tacitus
Sunday, July 11, 2010
www.regulationroom.org
As a traveler, I'm interested in how airlines are running their business and treating passengers. Not always as well as they should, we all know. Well, the Feds are writing some new regulations on travelers rights, filling in some gaps on what the rules currently are. Anyone can comment on these regulations, and a good place to start is at the website www.regulationroom.org where the proposed regulations are explained and then they tell you how to go about getting your comments to the right people. Go for it.
Tuesday, June 29, 2010
Currently reading
I'm currently reading:
Book Yourself Solid, by Michael Port
The Little BIG Things, 163 ways to pursue excellence, by Tom Peters
Frederica, by Georgette Heyer
Lulu Meets God and Doubts Him, by Danielle Ganek
An eclectic mix, as usual.
Book Yourself Solid, by Michael Port
The Little BIG Things, 163 ways to pursue excellence, by Tom Peters
Frederica, by Georgette Heyer
Lulu Meets God and Doubts Him, by Danielle Ganek
An eclectic mix, as usual.
Wednesday, June 23, 2010
Summer-time
I'm in summer mode. I just spent the weekend with a friend who does not use air conditioning and we live in the South! She is up in the mountains though and gets a good breeze most of the time, though it is hot mid-afternoon. Reminded me of my childhood when I would spend most days outside playing and then hitting the community pool in late afternoon. The heat made me slow down and laze around sipping iced tea. I could get used to that life.
Tax Tip--Take Your Money in 2010 (and pay tax on it!)
I know this is counter-intuitive: take your taxable income in 2010, as much as you can, because taxes are rising. With the Bush tax cuts expiring this year, taxes go up. By taking your money this year, you can pay tax at the lower rates.
Beginning in 2011 tax rates will go up and certain deductions and credits will go down for individuals. In 2013, married couples with income over $250,000 (singles, over $200,000) will pay an additional 0.9% on all income.
Then, if you are a "disqualified" professional with an S corporation( i.e., small business with three or fewer employees), under HR 4213 as currently written you will pay social security tax of 12.4% (up to the maximum) and Medicare tax of 2.9% on all income flowing from that corporation beginning in 2011 --you already pay income tax on that income.
What income can you accelerate to 2010? Consider:
1. exercising vested stock options with any gain in them,
2. not deferring any income to a future year whether through a formal plan with your employer or an informal arrangement by not billing until late in the year to put off collecting business income until early next year; collect everything you can this year,
3. cashing in on any gains sitting in your stock portfolio (that extra 0.9% tax discussed above? it applies to capital gains),
Also consider that certain tax deductions are expected to expire after 2010, and it's a good year to recognize income if you can also take those deductions. The deductions I'm talking about include:
1. Expensing capital acquisitions up to $250,000 (phase-out if acquisitions are above that)
2. Bonus depreciation of 50%
3. Itemized deductions limitations will go back to pre 2001 amounts
4. Child credit reverts to $500 from $1000 per child
This is definitely one area to go over carefully with your tax adviser and financial adviser, but it may benefit you to do the planning now.
Disclaimer: Tax Tips are informational only and are not meant as tax advice. Please consult with your personal tax adviser to see how these apply to your tax situation.
Beginning in 2011 tax rates will go up and certain deductions and credits will go down for individuals. In 2013, married couples with income over $250,000 (singles, over $200,000) will pay an additional 0.9% on all income.
Then, if you are a "disqualified" professional with an S corporation( i.e., small business with three or fewer employees), under HR 4213 as currently written you will pay social security tax of 12.4% (up to the maximum) and Medicare tax of 2.9% on all income flowing from that corporation beginning in 2011 --you already pay income tax on that income.
What income can you accelerate to 2010? Consider:
1. exercising vested stock options with any gain in them,
2. not deferring any income to a future year whether through a formal plan with your employer or an informal arrangement by not billing until late in the year to put off collecting business income until early next year; collect everything you can this year,
3. cashing in on any gains sitting in your stock portfolio (that extra 0.9% tax discussed above? it applies to capital gains),
Also consider that certain tax deductions are expected to expire after 2010, and it's a good year to recognize income if you can also take those deductions. The deductions I'm talking about include:
1. Expensing capital acquisitions up to $250,000 (phase-out if acquisitions are above that)
2. Bonus depreciation of 50%
3. Itemized deductions limitations will go back to pre 2001 amounts
4. Child credit reverts to $500 from $1000 per child
This is definitely one area to go over carefully with your tax adviser and financial adviser, but it may benefit you to do the planning now.
Disclaimer: Tax Tips are informational only and are not meant as tax advice. Please consult with your personal tax adviser to see how these apply to your tax situation.
Saturday, June 5, 2010
Tea as a ritual in my house
We have "tea" most afternoons or evenings in my house. We eat dinner late so the first thing upon everyone coming home is "Has someone put the kettle on?". Usually it is just a pot of tea, sometimes a snack--sweet or savory. It's a time of transition from the work and errands of the day to home-time and making dinner. As my daughter painted on her paint-your-own-pottery teacup "A cup of tea solves everything."
Tax Help Today Saturday June 5
IRS offices across the country are open today to help individual taxpayers dealing with "notices and payments, return preparation and a variety of other tax issues". Offices will be open from 9:00 a.m. until 2:00 p.m. local time. Click here for locations
Friday, June 4, 2010
Florida Tax Amnesty
Florida will have a tax amnesty program running from July 1 to September 30. It will cover corporate income tax, sales/use taxes, intangibles tax, and others. Waiver, as is common, of penalties and 50% of the interest due.
Tuesday, June 1, 2010
State tax amnesty programs
Keep up on whether your state or city (or even county) has a tax amnesty program. These usually waive all or part of the interest and all of the penalties on late filing and payment of taxes. With so many state and local jurisdictions scrambling for cash, this is one way to have it flow into the coffers.
If you decide to file under one of these programs, the tax itself isn't waived, but you won't pay penalties and interest is lowered or eliminated. You will now be a solid citizen and on the tax rolls, so be prepared to make filing taxes an annual habit. Some jurisdictions, such as Philadelphia, discussed below, apply these late payment waivers to such taxes as real estate tax.
Current and forthcoming programs:
Pennsylvania, through June 18, 2010
Philadelphia, through June 25, 2010
Nevada, starts July 1, 2010 and goes through September 30, 2010
If you decide to file under one of these programs, the tax itself isn't waived, but you won't pay penalties and interest is lowered or eliminated. You will now be a solid citizen and on the tax rolls, so be prepared to make filing taxes an annual habit. Some jurisdictions, such as Philadelphia, discussed below, apply these late payment waivers to such taxes as real estate tax.
Current and forthcoming programs:
Pennsylvania, through June 18, 2010
Philadelphia, through June 25, 2010
Nevada, starts July 1, 2010 and goes through September 30, 2010
Shareholders with S corporation income will pay social security and medicare tax
I don't like this. Not because it's a scheme that only a select few are using but because it will tax only certain S corporation shareholders.
The proposed law in the new tax bill passed by the House of Representatives and sent to the Senate to approve has S corporation income flowing through to shareholders, not as salary, to be subject to social security and Medicare tax. Aha! the catch is that it applies to only some S corporation shareholders: those whose business is personal services with 3 or fewer employees--including shareholders--and those personal service corporations with more than 3 employees--including shareholders-- whose principal asset is not the reputation of more than 3 employees. Whew! and the language in the law is even more convoluted.
Why the distinction? If they are to be taxed, tax all of them! How will "personal services" be defined? Only those professions like law, accounting (me!), engineering etc? Those where the individual's efforts form 50% or more of income from the business? Why discriminate against the person who works alone versus the one who happens to have 3 employees? What is the "principal asset"? Who picked the arbitrary number of 3? [Full disclosure, I am not organized as an S corporation].
Currently, S corporation shareholders are subject to social security and Medicare tax on any salary they take from the company, just like any wage earner. Any income over and above flows through to the individual shareholder and is taxed as ordinary income, but not subject to these "payroll" taxes. However, if the same business were organized and taxed as a sole proprietorship or a partnership, all of the income flowing from that business would be subject to the "payroll" taxes. The IRS can, and does, examine S shareholders to make sure they are taking a "reasonable" salary--subject to payroll taxes. Why enact a complicated law that will be litigated forever?
Putting personal service S corporations on parity with sole proprietorships and partnerships is not inherently bad, but this one is bad law.
The proposed law in the new tax bill passed by the House of Representatives and sent to the Senate to approve has S corporation income flowing through to shareholders, not as salary, to be subject to social security and Medicare tax. Aha! the catch is that it applies to only some S corporation shareholders: those whose business is personal services with 3 or fewer employees--including shareholders--and those personal service corporations with more than 3 employees--including shareholders-- whose principal asset is not the reputation of more than 3 employees. Whew! and the language in the law is even more convoluted.
Why the distinction? If they are to be taxed, tax all of them! How will "personal services" be defined? Only those professions like law, accounting (me!), engineering etc? Those where the individual's efforts form 50% or more of income from the business? Why discriminate against the person who works alone versus the one who happens to have 3 employees? What is the "principal asset"? Who picked the arbitrary number of 3? [Full disclosure, I am not organized as an S corporation].
Currently, S corporation shareholders are subject to social security and Medicare tax on any salary they take from the company, just like any wage earner. Any income over and above flows through to the individual shareholder and is taxed as ordinary income, but not subject to these "payroll" taxes. However, if the same business were organized and taxed as a sole proprietorship or a partnership, all of the income flowing from that business would be subject to the "payroll" taxes. The IRS can, and does, examine S shareholders to make sure they are taking a "reasonable" salary--subject to payroll taxes. Why enact a complicated law that will be litigated forever?
Putting personal service S corporations on parity with sole proprietorships and partnerships is not inherently bad, but this one is bad law.
Sunday, April 25, 2010
Tax Simplification
I propose a major change and simplification to our Federal tax code for individuals.
My proposal would be to include income, pretty much the same as it is today, and get rid of Schedule A-itemized deductions and get rid of the standard deduction. The personal exemption would go up to $20,000 per person, or whatever the budget can bear. Tax would be paid on any amount over that at three tax brackets: 15%, 25% and 35%. Simple. No alternative minimum tax, no differing between home owners and renters, and no differing between those who live in states with income taxes and those who don't. No more credits for children, though they would be one of the personal exemptions described above.
Businesses would still need to compute net income, but depreciation should be simplified to one way to depreciate per each class of property: cars 5 years straight-line (okay, if a deemed luxury vehicle with a cost over $XX, then 10 years straight-line), computers & similar equipment 5 years straight-line, furniture 7 years straight-line--I think you get the idea. No bonus depreciation. No section 179 (immediate expensing of asset purchases).
I'm sure I'll think of other ways to simplify for businesses, just give me time.
My proposal would be to include income, pretty much the same as it is today, and get rid of Schedule A-itemized deductions and get rid of the standard deduction. The personal exemption would go up to $20,000 per person, or whatever the budget can bear. Tax would be paid on any amount over that at three tax brackets: 15%, 25% and 35%. Simple. No alternative minimum tax, no differing between home owners and renters, and no differing between those who live in states with income taxes and those who don't. No more credits for children, though they would be one of the personal exemptions described above.
Businesses would still need to compute net income, but depreciation should be simplified to one way to depreciate per each class of property: cars 5 years straight-line (okay, if a deemed luxury vehicle with a cost over $XX, then 10 years straight-line), computers & similar equipment 5 years straight-line, furniture 7 years straight-line--I think you get the idea. No bonus depreciation. No section 179 (immediate expensing of asset purchases).
I'm sure I'll think of other ways to simplify for businesses, just give me time.
Monday, April 19, 2010
Subscribe to:
Posts (Atom)
