Posts Tagged ‘congress’

September 2010 Tax Update

Saturday, September 4th, 2010

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.

Midyear Tax Update 2010.

Wednesday, June 30th, 2010

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.