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.