ABC Taxes, Tips & Tools

So we are halfway through the year; con­gress has done noth­ing except pass health care reform. There are rumors that incum­bents are so ter­ri­fied of los­ing their jobs, that they are afraid to act.  I don’t know about you, but congress’s inac­tiv­ity also speaks to me-it’s congress’s job to make these deci­sions so that Joe & Jill aver­age tax­payer can plan their taxes; right now its hard to say how much taxes they should be with­hold­ing.  At the rate con­gress is are going none of these issues will be addressed until after Novem­ber elec­tions.  At that point sev­eral issues may be resolved in the lame duck ses­sion, which is far too late for tax planning. 

Mil­lions on unem­ploy­ment need con­gress to act to receive extended ben­e­fits that were already in the works.  As an unem­ployed per­son reaches the end of their cur­rent tier of ben­e­fits, they will not be receiv­ing ben­e­fits under the next tier unless con­gress acts.  Even if con­gress acts there is no plan to extend ben­e­fits beyond 99 weeks. 

As for other expir­ing leg­is­la­tion the usual sus­pects are in the offing:

• Deduc­tions for col­lege tuition
• Deduc­tion teach­ers supplies
• R&D credit,
• Farm machin­ery write off over 5 years
• Lease­hold improve­ments over 15 years.

There is talk they will revive:

• Writ­ing of state sales taxes in lieu of state income tax,
• tax-free direct pay­outs to char­i­ties from IRAs,
• the extra stan­dard deduc­tion for per­sonal prop­erty taxes.

Some new tax breaks they are kick­ing around

• A break on cap­i­tal gains taxes on sales of stock for own­ers of a cer­tain small com­pa­nies, for stock held over 5 years,
• A larger deduc­tion for busi­ness start up costs,
• Pen­sion fund­ing relief,

The estate tax talks are also under­way, but are being addressed sep­a­rately, and law mak­ers plan to rein­state it retroac­tively, but may face a legal chal­lenge. Con­gress is decid­ing whether to exempt $5M and have a tax rate of 35% or or $3.5 M and have a 45% tax rate. Nobody wants it to drop back $1 M in 2011. Cur­rently there is no estate tax. 

 Alter­na­tive Min­i­mum Tax (AMT) is also not in the cur­rent bill either–if con­gress does not pass higher AMT exemp­tions then they will fall back to pre-2001 lev­els and AMT will affect mil­lions more taxpayers.. 

In other news the IRS is deny­ing pro­tec­tive claims of refund for FICA taxes on sev­er­ance pay for laid off work­ers.  Short of fil­ing a law­suit against the IRS, com­pa­nies can file an admin­is­tra­tive appeal with the IRS.  The appeals offi­cer can take into con­sid­er­a­ton the haz­ards of lit­i­ga­tion and offer a set­tle­ment, but if no agree­ment is reached the com­pany still has two more years to sue the IRS for the refund and by then the IRS appeal of the lower court rul­ing should be decided. 

In 2011 all paid tax pre­par­ers must be reg­is­tered.  Start­ing in Sep­tem­ber the IRS should have a sys­tem in place for unreg­is­tered pre­par­ers to get a pre­parer tax iden­ti­fi­ca­tion num­ber (PTIN).  Licensed pre­par­ers that already have a PTIN will have to re-register it too.  The fee for reg­is­tra­tion is slated to be between $100 and $200. Only unli­censed pre­par­ers will be sub­ject to IRS com­pe­tency test­ing; unli­censed pre­par­ers will have 3 years to pass the com­pe­tency exam.

UBS turned over the names of 4000 account hold­ers who may have stashed money over­seas to avoid taxes.  If you are among these 4000 you may want to con­sider turn­ing your­self in and throw­ing your­self on the IRS’s mercy in order to avoid crim­i­nal pros­e­cu­tion.  You may want to get a lawyer. 

A recent rul­ing (Shiekh, TC Memo, 2010-126) upholds pass­sive loss rule for real-estate pros with mul­ti­ple rental prop­er­ties–they must attach a state­ment to the tax return say­ing the prop­er­ties are being treated as one activ­ity in order to sat­ify mate­r­ial par­tic­i­pa­tion rules to be treated as a non­pas­sive activity.  Merely group­ing them all together on on sched­ule E does not qual­ify as a valid elec­tion to group the rentals into one activ­ity for mate­r­ial par­ti­pa­tion purposes.  

Busi­ness should be gear­ing up now to report health ben­e­fits received in 2010 on W-2s in 2011.  A health plan’s value is the same as would be used to com­pute the allow­able pre­mium for COBRA coverage. 

Stay tuned.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, finan­cial plan advi­sor or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

Tags: 2010 tax update, alternative minimum tax, congress, credits, deductions, election to group rentals together as one activity, estate tax, FICA tax on severance pay, indivual taxes, passive activity loss, Tax court ruling, unemployment

This entry was posted on Wednesday, June 30th, 2010 at 1:03 pm and is filed under Business Taxes, Individual Taxes, Other Information. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.