Updates

Resource for Home Mortgage Loan Modification and Refinance

www.makinghomeaffordable.gov

 

New laws...More to come

2009 brings many new Federal and State tax laws that have resulted from the current economic situation. Visit our newsletter for a brief summary of the key provisions that have been enacted. California (and other states) as well as Federal legislators are are still coming up with tax ideas to "kick start" the economy. Stay tuned.

 

California cracking down on non-resident witholding

Desperate for revenue, California is stepping up enforcement of the non-resident witholding requirements.  For more information regarding these requirements that impact all business entities, estates and trusts, click here.

 

Annual Gift and Estate Tax exclusions increased

Effective January 1, 2009

 - Annual gift tax exclusion - $13,000 (up from $12,000)

 - Estate tax exclusion - $3,500,000 (up from $2,000,000)

 - Lifelime gift tax exclusion remains at $1,000,000

 

Tax Gap Audits

 

IRS has gathered extensive data and is restructuring their audit focus on the areas most likely to generate large tax adjustments.  The primary components of the so-called Tax Gap are unreported business income, non filers and overstated deductions.  Approximately 1% of all individual tax returns are audited – by correspondence, IRS office, or field audit.  However, they have determined that the misreporting of Schedule C (sole proprietor) returns is 57% and 72% for Schedule F (farm) returns.  They have zeroed in on the Schedule C returns with $100,000 - $200,000 of gross receipts because these audits result in an average additional tax of $25,000 - $30,000.  About 6% of returns in this range are audited compared to about 2% for all other ranges of gross receipts.

 

Partnership and S Corporations are also drawing increased attention from IRS.  The audits are revealing that business income on these returns is understated.  S Corporation owners not taking sufficient salary, and, thereby, avoiding payroll taxes, continues to be a hot issue and productive source of additional tax.

 

Consumer Alert

The IRS warns taxpayers to be on the alert for e-mails and phone calls they may receive which claim to come from the IRS or other federal agency and which mention their tax refund or economic stimulus payment. These are almost certainly a scam whose purpose is to obtain personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — from taxpayers which can be used by the scammers to commit identity theft. The e-mails and calls usually state that the IRS needs the information to process a refund or stimulus payment or deposit it into the taxpayer's bank account. The e-mails often contain links or attachments to what appears to be the IRS Web site or an IRS "refund application form." However genuine in appearance, these phonies are designed to elicit the information the scammers are looking for.

The IRS does not send taxpayers e-mails about their tax accounts. Additionally, the way to get a tax refund or stimulus payment, or to arrange for a direct deposit, is to file a tax return.  

For more information on consumer scams, see Suspicious e-Mails and Identity Theft. 

 

 

Why Pay Taxes? — The Truth about Frivolous Tax Arguments

The Truth About Frivolous Tax Arguments (PDF 405K) addresses some of the more common false "legal" arguments made by individuals and groups who oppose compliance with the federal tax laws. These arguments are grouped under six general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention. The second section deals with frivolous arguments encountered in collection due process cases. The final section illustrates penalties imposed on those pursuing frivolous cases.

 

 
 
 
 

Reminders For Tax Season

 

As you begin to gather and prepare year-end tax information please keep the below points in mind:

  • In order for us to efficiently prepare your tax returns please make sure to submit all of your tax documents together (e.g. W-2s, 1099s of all types, 1098s for mortgage interest, and 1098-T for college tuition paid.
  • Online financial services companies such as Ameritrade and E*trade do not issue paper 1099s. When gathering your year-end tax documents make sure to print out your 1099s from your online account. Also, print your statement of gains and losses when you access your account. both of these documents are necessary for us to prepare your tax returns.
  • If you sold any securities (e.g. stocks, mutual funds, etc.) during 2009 and the year-end statement or tax documents provided by your broker do not include the cost basis of the securities please provide the cost of the securities when purchased when you submit your tax materials to us. If you are unable to obtain that information please contact us for guidance.
  • For those operating a business or real estate activity be sure to let us know early in January if you would like us to assist you in the issuance of Forms 1099. These forms are required to be prepared for all service contractors paid in excess of $600 for the 2009 calendar year.
  • Registered Domestic Partners (RDPs) are now required to file their California tax returns as a married couple (married filing jointly or married filing separately).  IRS will not conform to this, so RDPs will have a different filing status for IRS and California.  RDPs are same sex couples over age 18 or opposite sex couples where one of the partners is over age 62.  The repercussions and questions arising from this new requirement will impact all RDPs.  We strongly recommend that all RDPs contact us to determine the consequences for you and your partner.
  • Charitable contributions must have a receipt or cancelled check to be deductible.  Contributions over $250 must also have a letter of acknowledgement from the charity, and additional documentation is required when your total non-cash contributions exceed $500 for the year.  We require our clients to attest to understanding these documentation rules and to having the associated records.  For your convenience, we have included a worksheet to track charitable contributions and a valuation guide for donated property under "Useful Forms & Tools".
  • Private mortgage insurance premiums will be deductible for the first time for contracts entered into beginning in 2007.  Proposed legislation would extend this deduction for contracts entered into through 2015.