Updates
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New laws...More to come2009 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 witholdingDesperate 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 increasedEffective 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 AlertThe 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.
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Why Pay Taxes? — The Truth about Frivolous Tax ArgumentsThe 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.
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Reminders For Tax Season
As you begin to gather and prepare year-end tax information please keep the below points in mind:
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