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TO OUR ARTICLES SECTION!
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DECISION MAKING MODELS - FLOWCHARTS
Pro Tips 2003 Tax
Year
by Cindy J Harris CPA
This article contains the following tips: $100,00 Write-Off, Sale
of Residence, Child Tax Credit, Clean Fuel Vehicle Deduction, and
the Military Family Tax Relief Act of 2003. Click
here to view the article.
CA Amnesty and More
If you missed filing a California income tax return, underreported
or did not pay timely, there is a new Amnesty Program for Individuals
and Business that may waive unpaid penalties and fees. Click
here to view the article.
Happy New Year!
By Cindy J Harris CPA
While the last of the
tax returns were being prepared in October of 2004, the Government
was busy passing yet another series of tax law changes – two
within weeks of each other. Click
here to view the article.
Health Savings Account NEW!!!
This is new and differs from the old Medical Savings Account
(MSA) and Flexible Spending Accounts (FSA). Click
here to view the article (This is a zip of several
files).
Tax Benefits for Armed Forces Members
The 2003 Military Family Tax Relief Act has various benefits
related to military service. Earlier tax law provisions gave breaks
to those serving in combat areas. Tax Information for Members of
the U.S. Armed Forces is available at our office.
CA: Remember Independent Contractor Reporting
Any business
or government entity that is required to file a federal Form 1099-MISC
for services received from an independent contractor is required
to report specific independent contractor information to EDD. Click
here to view the article.
Fringe Benefits
Any fringe benefit you provide is taxable and must be included
in the recipient's pay unless the law specifically excludes the
benefit from taxation. Click
here to view the article.
Involuntary Conversions - Real Estate Tax Tips
An involuntary conversion occurs when your property is destroyed,
stolen, condemned, or disposed of under the threat of condemnation
and you receive other property or money in payment, such as insurance
or a condemnation award. Involuntary conversions are also called
involuntary exchanges. Click
here to view the article.
To Itemize or
Not to Itemize – See the NEW Stuff…
You will generally use the higher of the Standard Deduction (see
amounts below) or add all of your Itemized Deductions from Schedule
A. Some married filing separate returns and other special circumstances
may produce a different result. Click
here to view the article.
Law Changes May Affect
Your 2004 Taxes
Some recent tax law changes are effective for the 2004 Tax Year.
If these items affect you, be sure to get the details when you prepare
your tax return early next year. Click
here to view the article.
Medical Expenses
– Surgery, Nonprescription items, FSA reimbursements and more
The IRS in 2003 issued guidance on several issues related to medical
care. Some related to the deductibility of certain expenses, others
related to Flexible Spending Arrangements (FSAs) and similar employer
plans. Click
here to view the article.
Recordkeeping
Documentation
is key!
Records help you document
the deductions you’ve claimed on your return. You’ll
need this documentation should your return for examination. Normally,
federal tax records should be kept for three years, but some documents
— records relating to a home purchase or sale, stock transactions,
IRA and business or rental property — should be kept longer.
See our Website for a grid of these rules. Click
here to view the article.
Taxpayer Rights
a Priority for IRS
You have Rights –
access them!
The law requires a protection of taxpayer rights with the IRS. This
includes explaining rights to taxpayers, keeping taxpayer information
private and confidential and being professional and courteous.
Click
here to view the article.
TSUNAMI RELIEF
DEDUCTIONS
January 2005 Contributions Deductible on 2004 Tax Returns! (States
may vary)
Generally, contributions
are deductible for the year in which they are made.
A new federal law will
allow taxpayers to elect to deduct on their 2004 tax returns certain
contributions to qualified U.S. charities for Tsunami Relief made
in 2005!
Contributions to domestic,
tax-exempt, charitable organizations that provide assistance to
individuals in foreign lands qualify as tax-deductible contributions
for federal income tax purposes provided the U.S. organization has
full control and discretion over the uses of such funds.
Remember to tell
the person preparing your return that you want to consider this
choice and ask assistance for what may be better for your tax situation.
Must You File
a Tax Return – Don’t Overlook a Possible Refund
Consider the Earned Income Credit, any withholding or refundable
tax credits
There are some instances when you may not be required to file a
federal or state income tax return.
The federal government
reports that more than 70 percent of those who file (even though
they are not required to file) are due a refund, so it may be to
your advantage to file!
Don’t forget to
look at the federal Earned Income Credit issue that may provide
you a refund even if you did not have any withholding throughout
the year.
Each year new amounts
are released showing who must file and return.
Who Should Itemize?
Tax Tip 2005-6, Jan. 10, 2005
Whether to itemize deductions on your tax return depends
on how much you spent on certain expenses last year. According to
the IRS, money paid for medical care, mortgage interest, taxes,
contributions, casualty losses, and miscellaneous deductions can
reduce your taxes. If the total amount spent on those categories
is more than the standard deduction, you can usually benefit by
itemizing. Click
here to view the article.
Firms with Inventory
Allowed Cash Method
Small firms with inventory allowed cash basis. The IRS is letting
firms with average annual gross receipts of $1 million or less per
year over 3 years use cash-basis accounting and not maintain inventories.
Qualifying businesses can treat inventories as materials and supplies
that are not incidental. The goal: to simplify small company bookkeeping.
Social Security Earnings
– Limit on Earnings Repealed
Social Security
earnings limits for workers aged 65-69 are repealed retroactive
to Jan. 1, 2000, by The Senior Citizens Freedom to Work Act. These
workers no longer lose benefits for earnings over $17,000 in 2000.
Disabled employees and early retirees (62-64) are not affected.
Yes, wages are subject
to FICA regardless of retirees' age or whether they receive retirement
benefits.
Income Reporting -
Installment Method Change
A 1999 tax
law change limited the use of the installment method (a method under
which at least one payment is received after the close of the taxable
year) for certain sales by accrual basis corporations, partnerships
and certain proprietorships. Some business owners have complained
that the law will make it harder to sell part, some or all of their
assets on the installment method because the tax must be paid all
at once. New rulings have been issued to clarify the reporting issues
for the company versus the owner/shareholder/partner.
Checkbox Power of
Attorney New for Year 2000 Returns
For next year's
tax filing season, taxpayers can name a paid Preparer as their designee
to resolve certain return issues. The Preparer will be able to speak
directly to the IRS in response to notices of math errors, refunds
or payments. Previously, a power of attorney was needed to discuss
these matters. A formal power of attorney is required for examinations,
underreported income, appeals, and collection notices.
State-Sponsored College
Savings Plans
Parents are
constantly looking at ways to pay for college education costs. The
Plans were originally introduced to help families pay college tuition.
However, the Plans now help families save for room, board and other
expenses. With the limit on the allowable expenses you can use for
the college tuition credit (the Hope and Lifetime Learning Credit),
these Plans allow more flexibility in paying for college expenses.
The assets in the Plan
have the opportunity to grow tax-deferred until withdrawn. The earnings
are taxed at the child’s rate (often lower than the parent’s
rate) and more. Some states exempt earnings from taxation. Discuss
this issue with your tax Preparer.
New Independent Contractor
Reporting Requirement for 01/2001 - DE 542 (10/2000)
New EDD reporting requirements
for independent contractors. Any business or government reporting
entity that is required to file a Form 1099-Misc for independent
contractor services may be required to report within 20 days of
making payments totally $600 or more or entering into a contract
for $600 or more. This can include someone inside or outside of
the Company State.
For example, a California-based
company with a small office in Florida that hires a gardener may
need to file a report regarding payments to the gardener. These
new reports are designed to help collect child support. See EDD
Web site at http://www.edd.ca.gov or call 916-657-0529 or go to
our "Links" page and click on the EDD site.
Standard Mileage Rate
for Tax Return Year 2000 Released
IRS Standard
Mileage rates are updated as follows for year 2000 returns:
Business mileage = 34.5
cents a mile
Medical mileage = 12.0 cents a mile
Moving mileage = 12.0 cents a mile
Charity mileage = 14.0 cents a mile
Does a Divorce Decree stating who can claim the child as a dependent
hold up in court?
A March 2000
court case says "no". The person who has custody of the
child will prevail unless the proper IRS Form is attached to the
return waiving the dependent. This could affect past and current
filed returns.
Napa Valley Quake
Victims Qualify for Special Tax Breaks
The September
3, 2000 Napa Valley taxpayers may be granted special tax breaks.
The variety of breaks and the requirements for the breaks are too
involved to list her - consult your professional. But, they include
the ability to file for a refund this year (2000) instead of waiting
until next year.
Transportation Fringe
Benefit Rules Have New Proposed Regulations
Employee may receive
payments up to $175 a month for parking and $65 a month for public
transit passes/van pools. These plans can be offered under salary
reduction plans.
Teachers Retention Credit
approved for year 2000 Tax Returns
Credit ranges from $250
- $1,500. Certain criteria must be met to take the credit. California
Form 3505 used to claim the credit. See our "Links" section
to find the Form on the FTB Website. |
