California Taxes – Tax Accountants – Tax Service in Los Angeles, California

Newsletter 2011


published on 11.01.2012 in Newsletter
Benjamin Franklin once said that two things are inevitable in life: death and taxes.
And the nice thing about death is there’s no super committee leaving us all in
purgatory.
2011.     It started with the aptly named Anthony Weiner proving to be just that.
Proving the adage, men will be men and boys will be congressmen.  The year ended
with Ashton Kutcher trying to emulate Charlie Sheen, both on the tube and off.
It was a year of no jobs, no Steve Jobs and needing the patience of Job.
The aptly named Amy Winehouse proved that sometimes drinking and not driving
can be dangerous, too.
Herman Cain receives Secret Service protection, hopefully from himself.
Looking at the 2012 presidential candidates:   Obama, Gingrich, Perry, Bachman,
Romney and comparing them to our founding fathers:  Washington, Jefferson, John
Adams, and Hamilton.   If this doesn’t disprove evolution, I don’t know what does.
(Special thanks to Mort Saul around 50 years ago.)
Congress seems to think that pizza is a vegetable.   At least children now will love
their vegetables.
Texas eliminates choosing the last meal for inmates who are about to be executed.
Nothing worse than dying on an empty stomach.
Herman Cain was accused of sexual harassment by three different women.   He
responded “Liar, Liar, Pants on Fire.”    The woman said that he said the same thing
about his pants when he was with them.
The IRS is hiring more agents.   The Service claims that it brings in $6 for each extra
dollar spent on enforcement.    A new budget plan is circulating through
Washington.   If they hire 15 million more IRS agents, not only would we balance the
budget but we can end unemployment at the same time.
Kim Kardashian and Kris Humphries redefine the word “forever.”    Rumor has it
that Kris will qualify for three minutes of alimony.
Newt Gringrich’s candidacy seems to be sponsored by Tiffanys.
It’s become transparent that there’s no transparency in the Obama administration.
There’s now an app for people who don’t want apps on the their phone.
Is it an anti-children’s statement that in Genesis there are no children in the Garden of
Eden?
Rick Perry did his own version of “Don’t ask.   Don’t tell.”   He did “Don’t ask.
Don’t remember.”
With global weather change, the Iranian nuclear situation and various contagions,   a
fundamentalist religion just started an Occupy Heaven movement.
TAX HIGHLIGHTS AND LOWLIGHTS:
There have been very few tax law changes for 2012 even though there has been a lot
of talk about tax law changes.    Washington has redefined gridlock.    Normal
gridlock slows down traffic but eventually one gets to their destination.
0% AND 15% RATES FOR CAPITAL GAINS AND DIVIDENDS CONTINUE.   If
you are in a 10 or 15% tax bracket, you pay $0 on dividends and capital gains.   An
interesting statistic just came out that the .1% highest tax bracket constitutes 50% of
the capital gains.
Tax planning note, if you have adult children that are in a low tax bracket and you
have appreciated stock, you can give it to your children and they may have no tax on
the gain.   They have to report the gain.    It’s better for them to learn about life from
an early age.
MEDICARE D SURCHARGE IN 2011.     Since 2007, there has been means testing
for Medicare B, now there is means testing for Medicare D drug plan.     Which
means your golden age may be less golden.
IT’S OKAY TO HAVE A FOREIGN BANK ACCOUNT, BUT YOU HAVE TO
REPORT IT.   Under the Bank Secrecy Act, United States citizens, residents and
domestic entities must file form TDF 90.22.1, Report of Foreign Bank and Financial
Accounts (FBAR), by June 30 if you have a financial interest or signature authority
over one or more accounts in a foreign country and the aggregate value exceeds
$10,000.    The penalties are severe even if you receive little or no interest.
AND IF YOU HAVE $50,000 IN A FOREIGN INSTITUTION, there’s yet another
form starting in 2011.   Form 8938.   It’s due with your tax return.   So far, there are
no forms required if you hide your money under a foreign mattress.
OFFICERS, DIRECTORS OR 10% SHAREHOLDERS OF CERTAIN FOREIGN
CORPORATIONS MUST FILE A FORM 5471.   There are substantial penalties if
you don’t.   The government estimates that it will take 38 hours to complete this
form.    Don’t worry.   To cover this, there is a bill circulating through the Congress
for us to move from a 52 week per year calendar to a 56 week per year calendar.
STANDARD DEDUCTION GOES UP.     The standard deduction for a single
person is $5800.   For head of household, $8500 and married is $11,600.
IT PAYS TO DRIVE.    The standard mileage rate has changed mid-year or as they
say in tax parlance mid-intersection.    Business driving was deductible at 51 cents a
mile for the first six months of 2011.    By the end on the year, it is $55.5 cents.
Charitable driving is only 14 cents a mile.
MEDICAL MARIJUANA HAS BEEN REDEFINED.   IT’S NOW CALLED
MEDICAL BUT NOT TAX DEDUCTIBLE MARIJUANA.    I guess that tax
loophole has gone up in smoke.
ADOPTING A CHILD HAS BECOME MORE BENEFICIAL.    The adoption credit
is now $13,360 and the income phase out starts at $185,710.    There is no limit to the
number of children you can adopt.
ENERGY CREDIT GOES DOWN AS YOUR ENERGY BILL GOES UP.   There is
now only a maximum $500 energy credit.    No one has gotten any credit for
changing the expression “Global Warming” to Weather Change.
QAULIFIED COSTS FOR TUITION CREDIT INCLUDES BOOKS.   No word if
Kindles are now tax deductible.
SOME WEALTHIER AMERICANS ARE HOPING THE MAYAN CALENDAR IS
RIGHT AND THAT THERE WILL BE NO YEAR 2013.   THERE IS A NEW
MEDICARE TAX ON WAGES, SELF-EMPLOYMENT INCOME AND
UNEARNED INCOME.    This will effect clients having an adjusted gross income of
$200,000 single and $250,000 who are married filing jointly starting January 1,
2013.    The tax will be an additional .9% on wages and self-employment income.
For these same taxpayers there is a “Medicare Tax” also starting in 2013 of 3.8% on
investment income.   Investment income is interest, dividends, royalties, annuities
and most rental income after expenses.   In Mayan lore, this tax was called
Kukulcan’s revenge.
MAXIMUM IRA CONTIRUBTIONS ARE STILL $5,000.   If you are 50 years old
or older, you can contribute $6,000.     From a retirement standpoint, it does not help
to grow older than 50.
YOU CAN STILL CONVERT YOUR IRA INTO A ROTH WITHOUT ANY
PENALTY.   You will be taxed on the amount.   There are many Roth conversion
calculators on the internet.
MAKE SURE THAT YOUR BENEFICIARY IS SOMEONE YOU WANT TO
BENEFIT FROM YOUR DEATH.     38% of all life insurance policy proceeds go to
ex-spouses.
ELECTRIFYIING CAR CREDITS.   The minimum amount of the credit for
qualified plug-in electric drive vehicles is $2500 and the credit tops out at $7500,
depending on battery capacity.    Makes sense environmentally until you find about
the next deduction.
THE HUMONGEOUS SUV DEDUCTION.   If your business vehicle is 6,000
pounds or more curb weight, you can deduct the entire cost of the business
percentage of the vehicle.  This can be a $500,000 deduction if you buy a gold-plated
Hummer.
IT’S BETTER TO BUY BUSINESS EQUIPMENT.    You can buy up to $500,000
in business equipment and deduct all of it.     The trick is that most business don’t
need 166 computers.
SOME 1099S DON’T NEED TO BE FILED.   The Comprehensive  1099 Taxpayer
Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repeals
the reporting provisions requiring landlords to issue 1099 to services providers paid
$600 or more in a year and all business that paid $600 or more to a corporation for
goods and services provided.   Too bad that they don’t require tax laws to have better
names.
IS IT BETTER TO GIVE OR TO RECEIVE?   The annual gift exclusion is
$13,000.     If you receive a gift this size it is not taxable to you and not a deduction
to the giver.   Any gift larger than this requires a gift tax return.   Those of you who
have a lot of money to give to family members, friends or you accountant the next
two years would be a good time to start.   The 2011-12 gift tax exemption is
$5,000,000 ($10,000,000 for married couples.)   The exemption is due to drop to $1
million in 2013.   So it may be better to give or pass away before 2013.
IS IT BETTER TO LEASE OR TO BUY?    Because of bonus depreciation, you can
now deduct up to $11,060 times the percentage of business use for the first year of
purchase.    The taxable portion of leasing a luxury car has been reduced by 50%.
So once again there is no easy answer.
DESPITE THE GARDEN OF EDEN REFERENCE, IT IS BETTER TO HAVE
CHILDREN IN CALIFORNIA IN 2011.   The credit has changed from $99 to
$213.
SOCIAL SECURITY TAXES HAVE BEEN REDUCED FOR THE EMPLOYEE
FROM 6.2% TO 4.2% IN 2011.   What happens in 2012 is anyone’s guess.
EVEN THOUGH 200 PEOPLE OF OCCUPY L.A. HAVE BEEN ARRESTED,
THERE IS AMNESTY IN THE CITY OF LOS ANGELES.   For those of you who
have a business or even receive a 1099, while living in the city of Los Angeles, you
must have a city business license.   If you don’t have a business license than you can
contact Los Angeles and start one.   They have eliminated the penalties for being
late.   There is still interest that is charged.    Call the City of Los Angeles at 213-473-
5901.
OCCUPY L.A. TAX SERVICE.    No, you don’t have to be part of a protest.   You
can be to the left or to the right.    Or even right in the center.    You won’t find any
tents or pepper spray here.    You will find…
Dom Gelband.    She has been occupying  L.A. Tax Service since almost the
beginning.    Originally, she was going to name her daughter L.A.T.S.  until she
discovered she couldn’t deduct her daughter’s expenses as advertising for the
business.
Patty Alvarez has been occupying L.A. Tax Service for the past fifteen years.    She’s
actually two people: her real self and her electronic self.  Her electronic self is faster
but her real self has a better smile.
Nataliya Shur.    She comes from the Ukraine.   She knows what happens when you
protest there.    You won’t find her in a tent but you will find her handling payroll, all
our technical needs and any questions we have concerning American history.
Viki Zelaya has been occupying her station at L.A. Tax Service for the shortest
period of time.   She is willing to give into your demands to make your experience
here a great one.    And she can do it in three languages.
So we move into our 30th tax season.   People used to say that you can’t trust anyone
over 30.    Don’t worry.   Tax businesses age slower.
PERSONAL NOTE:
2011 was a fruitful year for me I now have 3 grandchildren and am the proud winner
of the grandma sweepstakes at L.A. Tax Service.
Some people use meditation some use mood enhancing drugs, I have found my 3
grandchildren, Johnathan, Camille and Henry like a chant.
Michael and Christina moved to Los Angeles 5 minutes from my house so I can get
my daily dose of Henry (newly minted on 10/4/2011). They are adjusting to
parenthood and seem to appreciate me more than ever.
Louie who isn’t married yet and hasn’t given me any grandchildren but he did the
next best thing for people in LA, he totally remodeled a shack into a palace.
Beth in the midst of raising two children passed her CPA exam and would be
following in her mommy’s footsteps except she won’t dye her hair red and she loves
her additions (Johnathan and Camille) more than the additions at L.A. Tax.
Robert is retired and has turned into a Bridge Hustler and you can currently find him
teaching Henry so he has a permanent partner.
In some way L.A. Tax has been like one of my children needing all of my time and
keeping me up at night but still always giving me a lot of joy.
Maybe we can all learn from the country of Bhutan where instead of measuring
success by GNP they measure their success by GNH –Gross National Happiness.
So have a great Holiday and enjoy!
Esther

Benjamin Franklin once said that two things are inevitable in life: death and taxes.   And the nice thing about death is there’s no super committee leaving us all in purgatory.

2011.     It started with the aptly named Anthony Weiner proving to be just that.   Proving the adage, men will be men and boys will be congressmen.  The year ended with Ashton Kutcher trying to emulate Charlie Sheen, both on the tube and off.

It was a year of no jobs, no Steve Jobs and needing the patience of Job.

The aptly named Amy Winehouse proved that sometimes drinking and not driving can be dangerous, too.

Herman Cain receives Secret Service protection, hopefully from himself.

Looking at the 2012 presidential candidates:   Obama, Gingrich, Perry, Bachman, Romney and comparing them to our founding fathers:  Washington, Jefferson, John Adams, and Hamilton.   If this doesn’t disprove evolution, I don’t know what does.   (Special thanks to Mort Saul around 50 years ago.)

Congress seems to think that pizza is a vegetable.   At least children now will love their vegetables.

Texas eliminates choosing the last meal for inmates who are about to be executed.   Nothing worse than dying on an empty stomach.

Herman Cain was accused of sexual harassment by three different women.   He responded “Liar, Liar, Pants on Fire.”    The woman said that he said the same thing about his pants when he was with them.

The IRS is hiring more agents.   The Service claims that it brings in $6 for each extra dollar spent on enforcement.    A new budget plan is circulating through Washington.   If they hire 15 million more IRS agents, not only would we balance the budget but we can end unemployment at the same time.

Kim Kardashian and Kris Humphries redefine the word “forever.”    Rumor has it that Kris will qualify for three minutes of alimony.

Newt Gringrich’s candidacy seems to be sponsored by Tiffanys.

It’s become transparent that there’s no transparency in the Obama administration.

There’s now an app for people who don’t want apps on the their phone.

Is it an anti-children’s statement that in Genesis there are no children in the Garden of Eden?

Rick Perry did his own version of “Don’t ask.   Don’t tell.”   He did “Don’t ask.  Don’t remember.”

With global weather change, the Iranian nuclear situation and various contagions,   a fundamentalist religion just started an Occupy Heaven movement.

TAX HIGHLIGHTS AND LOWLIGHTS:

There have been very few tax law changes for 2012 even though there has been a lot of talk about tax law changes.    Washington has redefined gridlock.    Normal gridlock slows down traffic but eventually one gets to their destination.

0% AND 15% RATES FOR CAPITAL GAINS AND DIVIDENDS CONTINUE.   If you are in a 10 or 15% tax bracket, you pay $0 on dividends and capital gains.   An interesting statistic just came out that the .1% highest tax bracket constitutes 50% of the capital gains.

Tax planning note, if you have adult children that are in a low tax bracket and you have appreciated stock, you can give it to your children and they may have no tax on the gain.   They have to report the gain.    It’s better for them to learn about life from an early age.

MEDICARE D SURCHARGE IN 2011.     Since 2007, there has been means testing for Medicare B, now there is means testing for Medicare D drug plan.     Which means your golden age may be less golden.

IT’S OKAY TO HAVE A FOREIGN BANK ACCOUNT, BUT YOU HAVE TO REPORT IT.   Under the Bank Secrecy Act, United States citizens, residents and domestic entities must file form TDF 90.22.1, Report of Foreign Bank and Financial Accounts (FBAR), by June 30 if you have a financial interest or signature authority over one or more accounts in a foreign country and the aggregate value exceeds $10,000.    The penalties are severe even if you receive little or no interest.

AND IF YOU HAVE $50,000 IN A FOREIGN INSTITUTION, there’s yet another form starting in 2011.   Form 8938.   It’s due with your tax return.   So far, there are no forms required if you hide your money under a foreign mattress.

OFFICERS, DIRECTORS OR 10% SHAREHOLDERS OF CERTAIN FOREIGN CORPORATIONS MUST FILE A FORM 5471.   There are substantial penalties if you don’t.  The government estimates that it will take 38 hours to complete this form.    Don’t worry.   To cover this, there is a bill circulating through the Congress for us to move from a 52 week per year calendar to a 56 week per year calendar.

STANDARD DEDUCTION GOES UP.     The standard deduction for a single person is $5800.   For head of household, $8500 and married is $11,600.

IT PAYS TO DRIVE.    The standard mileage rate has changed mid-year or as they say in tax parlance mid-intersection.    Business driving was deductible at 51 cents a mile for the first six months of 2011.    By the end on the year, it is $55.5 cents.   Charitable driving is only 14 cents a mile.

MEDICAL MARIJUANA HAS BEEN REDEFINED.   IT’S NOW CALLED MEDICAL BUT NOT TAX DEDUCTIBLE MARIJUANA.    I guess that tax loophole has gone up in smoke.

ADOPTING A CHILD HAS BECOME MORE BENEFICIAL.    The adoption credit is now $13,360 and the income phase out starts at $185,710.    There is no limit to the

number of children you can adopt.

ENERGY CREDIT GOES DOWN AS YOUR ENERGY BILL GOES UP.   There is now only a maximum $500 energy credit.    No one has gotten any credit for changing the expression “Global Warming” to Weather Change.

QUALIFIED COSTS FOR TUITION CREDIT INCLUDES BOOKS.   No word if Kindles are now tax deductible.

SOME WEALTHIER AMERICANS ARE HOPING THE MAYAN CALENDAR IS RIGHT AND THAT THERE WILL BE NO YEAR 2013.   THERE IS A NEW MEDICARE TAX ON WAGES, SELF-EMPLOYMENT INCOME AND UNEARNED INCOME.    This will effect clients having an adjusted gross income of $200,000 single and $250,000 who are married filing jointly starting January 1, 2013.    The tax will be an additional .9% on wages and self-employment income.

For these same taxpayers there is a “Medicare Tax” also starting in 2013 of 3.8% on investment income.   Investment income is interest, dividends, royalties, annuities and most rental income after expenses.   In Mayan lore, this tax was called Kukulcan’s revenge.

MAXIMUM IRA CONTIRUBTIONS ARE STILL $5,000.   If you are 50 years old or older, you can contribute $6,000.     From a retirement standpoint, it does not hel to grow older than 50.

YOU CAN STILL CONVERT YOUR IRA INTO A ROTH WITHOUT ANY PENALTY.   You will be taxed on the amount.   There are many Roth conversion calculators on the internet.

MAKE SURE THAT YOUR BENEFICIARY IS SOMEONE YOU WANT TO BENEFIT FROM YOUR DEATH.     38% of all life insurance policy proceeds go to ex-spouses.

ELECTRIFYIING CAR CREDITS.   The minimum amount of the credit for qualified plug-in electric drive vehicles is $2500 and the credit tops out at $7500, depending on battery capacity.    Makes sense environmentally until you find about the next deduction.

THE HUMONGEOUS SUV DEDUCTION.   If your business vehicle is 6,000 pounds or more curb weight, you can deduct the entire cost of the business percentage of the vehicle.  This can be a $500,000 deduction if you buy a gold-plated Hummer.

IT’S BETTER TO BUY BUSINESS EQUIPMENT.    You can buy up to $500,000 in business equipment and deduct all of it.     The trick is that most business don’t need 166 computers.

SOME 1099S DON’T NEED TO BE FILED.   The Comprehensive  1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 repeals the reporting provisions requiring landlords to issue 1099 to services providers paid $600 or more in a year and all business that paid $600 or more to a corporation for goods and services provided.   Too bad that they don’t require tax laws to have better names.

IS IT BETTER TO GIVE OR TO RECEIVE?   The annual gift exclusion is $13,000.     If you receive a gift this size it is not taxable to you and not a deduction to the giver.   Any gift larger than this requires a gift tax return.   Those of you who have a lot of money to give to family members, friends or you accountant the next two years would be a good time to start.   The 2011-12 gift tax exemption is $5,000,000 ($10,000,000 for married couples.)   The exemption is due to drop to $1 million in 2013.   So it may be better to give or pass away before 2013.

IS IT BETTER TO LEASE OR TO BUY?    Because of bonus depreciation, you can now deduct up to $11,060 times the percentage of business use for the first year of purchase. The taxable portion of leasing a luxury car has been reduced by 50%.    So once again there is no easy answer.

DESPITE THE GARDEN OF EDEN REFERENCE, IT IS BETTER TO HAVE CHILDREN IN CALIFORNIA IN 2011.   The credit has changed from $99 to $213.

SOCIAL SECURITY TAXES HAVE BEEN REDUCED FOR THE EMPLOYEE FROM 6.2% TO 4.2% IN 2011.   What happens in 2012 is anyone’s guess.

EVEN THOUGH 200 PEOPLE OF OCCUPY L.A. HAVE BEEN ARRESTED, THERE IS AMNESTY IN THE CITY OF LOS ANGELES.   For those of you who have a business or even receive a 1099, while living in the city of Los Angeles, you must have a city business license.   If you don’t have a business license than you can contact Los Angeles and start one.   They have eliminated the penalties for being late.   There is still interest that is charged.    Call the City of Los Angeles at 213-473-5901.

OCCUPY L.A. TAX SERVICE.    No, you don’t have to be part of a protest.   You can be to the left or to the right.    Or even right in the center.    You won’t find any tents or pepper spray here.    You will find…

Dom Gelband.    She has been occupying  L.A. Tax Service since almost the beginning.    Originally, she was going to name her daughter L.A.T.S.  until she discovered she couldn’t deduct her daughter’s expenses as advertising for the business.

Patty Alvarez has been occupying L.A. Tax Service for the past fifteen years.    She’s actually two people: her real self and her electronic self.  Her electronic self is faster but her real self has a better smile.

Nataliya Shur.    She comes from the Ukraine.   She knows what happens when you protest there.    You won’t find her in a tent but you will find her handling payroll, all our technical needs and any questions we have concerning American history.

Viki Zelaya has been occupying her station at L.A. Tax Service for the shortest period of time.   She is willing to give into your demands to make your experience here a great one.    And she can do it in three languages.

So we move into our 30th tax season.   People used to say that you can’t trust anyone over 30.    Don’t worry.   Tax businesses age slower.

Scott & Esther

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