ABC Taxes, Tips & Tools

Con­gress con­tin­ues to do noth­ing.  There is a lot of spec­u­la­tion about what they might do and when, but basi­cally things are pretty much where they have been for months. Some think that con­gress will act on extend­ing the Bush tax cuts, extend­ing pro­vi­sions that lapsed at the begin­ning of this year and AMT before the Novem­ber elec­tions and some think they will do some­thing in the lame duck ses­sion after the Novem­ber elec­tions. The rea­son for inac­tion is pol­i­tics — the Democ­rats want to make an issue of tax cuts to high income indi­vid­u­als and Repub­li­can oppo­si­tion to other mea­sures that help low income folks, the Repub­li­cans say the Democ­rats’ tax hikes hurt small business. 

In a sim­i­lar vein there is some spec­u­la­tion that con­gress will act to repeal the expanded 1099-MISC infor­ma­tion report­ing it made law with the health care leg­is­la­tion.  Once again, until that actu­ally hap­pens tax­pay­ers must deal with mat­ters as they are now, not as they hope they will be. 

The  Estate tax: short advice is to talk to a pro­fes­sional that spe­cial­izes in Estate taxes.  GOT that? This is not a DYI activ­ity.  The vast major­ity of peo­ple do not wind up fil­ing the Estate Tax Return, Form 706.  But for those that do, proper advice is essen­tial.  What is dif­fer­ent in 2010? Given that in 2010, so far, there is no estate tax, heirs will start with the decedent’s basis for assets (rather than the step up in basis of the assets at the time of death or alter­nate val­u­a­tion date). The execu­tor can then increase the value of up to $1.3 Mil­lion in assets to the date of death val­u­a­tion. Up to $3 mil­lion extra can be allo­cated to the sur­viv­ing spouse.  The basis allo­ca­tion can­not increase the asset’s basis over its value.  That means for very large estates, heirs will have to pay up, but the cap­i­tal gains tax is far less than the estate tax would have been AND the heirs con­trol when they pay the tax because it is not due until the heir sell the asset.

Expanded 1099-MISC Report­ing: Busi­nesses need to have their account­ing sys­tems in place start­ing 2011-they need to have the abil­ity to track the dif­fer­ence between pay­ment via Debit or Credit Card, verses pay­ment Cash, Check or Barter (to cor­po­ra­tions) so they can take advan­tage of the IRS guid­ance.  They will need  Form w-9 or equiv­a­lent from all busi­nesses with whom they exchange more than $600 per year for goods and/or ser­vices in 2011. Real­ize busi­nesses are sup­posed to do 28 % backup with­hold­ing from busi­nesses that refuse to sup­ply their TIN — busi­nesses should col­lect the W-9 as soon as they pay a busi­ness money in 2011, espe­cially if they know it will add up to more than $600 by year’s end.   

With respect to other tax breaks…

State­ment No 1. If your favorite tax break has not been re-enacted, do not plan for it to be.  Set aside some funds to pay the extra tax. 

State­ment No.2. Whether before or after the Novem­ber elec­tions, right now many believe:

• the tax rate cuts for tax­pay­ers with incomes below $200,000 will be extended,
• the 15% cap­i­tal gains rate will be extended,
• there will be an exten­sion of Sec­tion 179,
• exten­sion of Bonus Depreciation,
•  exten­sion of busi­ness and indi­vid­ual energy tax credits,
• exten­sion of the state and local prop­erty tax stan­dard deduction,
• exten­sion of state and local sales tax in lieu of the state and local income tax deduction,
• exten­sion of tax free dis­tri­b­u­tion from an IRA,
• exten­sion of the research credit for businesses,
• exten­sion of enhanced char­i­ta­ble con­tri­bu­tions for food inven­tory and cor­po­rate com­puter dona­tions for education.

All of these tax cuts are expected to be revived, but see State­ment No. 1.  The best advice is for tax­pay­ers must plan around things as they stand now, after­all no one pre­dicted that con­gress would actu­ally let the Estate Tax expire and yet… it did.

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.  Please note: Our offices will be closed until Octo­ber 1, 2010.  We may respond to emails and calls in the inter­rim, but no staff will be avail­able to meet with you in per­son until Octo­ber 1, 2010. 

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, cer­ti­fied finan­cial plan­ner 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.