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.

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

2010. The year began with people singing the old depression hit “Brother Can You Spare a Dime?” and it ended with the country still out of tune.

The year started out with Sarah Palin abandoning her Alaska governorship. She thought lame duck were two four letter words. It ended with her living the American Dream… having her own reality show.

Liberals started their own Green Tea Party.

Mark Twain just had his autobiography published. One hundred years after his death. Jon Stewart has been compared to Twain. Of course, Mark Twain didn’t have a stable of comedy writers. Unless you want to count Samuel Clemens.

Once leader of the committee that writes tax law, Representative Charlie Rangel, learned how long it takes to fully depreciate a political career.

Bristol Palin proved the old political adage. Republicans can’t dance but they can sure vote. As a counter political move, Michelle Obama tried out for American Idol.

Scream 5 came out before Scream 4. Scream 4 actors David Arquette and Courtney Cox are separating.

The Transportation Security Administration justified their pat downs and imaging devises by stating that “Now we can pick out the terrorists. They’re the ones not annoyed by our procedures.”

WikiLeaks actually leaked this tax newsletter.

It seems like the North and South Koreans have nicer things to say to each other than Democrats and Republicans.

Many thanks to Charlie Sheen for establishing the base price for taking an escort out to dinner, $3500. Though most of us can not afford to tip a Patek Philippe watch. Valued at $165,000. Fortunately for the taxpayers, none of this was tax deductible. A deduction needs to be “ordinary and necessary” expense to promote one’s career. Though for Charlie Sheen it might be.

2010 was a perfect year to die if you’re wealthy. There were no estate taxes. This saved the Estate of George Steinbrenner $50,000,000. No wonder they can afford Derek Jeter.

Good news for taxpayers. In String theory, there are eleven dimensions. It’s been discovered that in one of the dimensions, everything is tax deductible. Wesley Snipes lives in that dimension.

HIGHLIGHTS AND LOWLIGHTS:
This is the spot usually preserved for the end of the year tax bill. As of this printing, there is no end of the year tax bill. The Republicans want to extend the Bush tax cuts to all taxpayers. The Democrats want to extend it to only those who are single and make less than $200,000 and to married people who make less than $250,000. Hundreds of billions are at stake. Both sides are willing to blink but as the old adage says: “if you blink too long. it’s the same as closing your eyes.

There was The Patient Protection and Affordable Care Act. This requires most of the 32 million uninsured to be insured. The bill contains over $400 billion in revenue raisers. So far it helped cost Democrats 67 congressional seats. Most of tax provisions take place in future years after the next presidential election. Before that happens, this is what you get in 2010.

2010
IT PAYS TO ADOPT. The adoption credit is increased by $1,000 to $13,170. It’s now refundable. Some people have been adopting the medically uninsured for maximum benefit.

ENERGIZE YOUR HOUSE AND THEN ENERGIZE YOUR WALLET. There is a maximum 35% credit for small business employers paying at least 50% of employees single-person health care coverage. Credit phases out when average annual employee wages increases from $25,000 to $50,000 or average number of employees increases from 10-25. Owner employee wages are excluded from the computation. So if you want to help your employer you can ask for a pay cut.

This is a really worthwhile credit. So if you have a business that pays at least half of the employees wages, please call us.

FOR THE SELF-EMPLOYED, KEEP YOUR CHILDREN HEALTHY. The tax bill recognizes that kids are growing up later these days. Income exclusion for employer health plans and for the self-employed is extended to children under 27. December is usually open enrollment month. This should be a priority.

THE TAX LAW THAT MAKES US PALE IN COMPARISON. There is a 10% excise tax on indoor tanning services. This should be called the anti-John Boehner Tax Bill. He’s the new Speaker of the House and has a tan that never fades.

THE RICH DON’T HAVE PARTIAL CHILDREN ANY MORE. There is no phase out of the exemption credit. No matter what your income is. Everyone will get $3650 for each exemption claimed. In the past, higher income people would not get all of their exemption credit. This was the major cause for rich people giving their children to the poor.

NO EXCLUSION FOR UNEMPLOYMENT BENEFITS IN 2010. In 2009, the unemployed could exclude up to $2400 of their benefits. But don’t despair…

YOU CAN ALWAYS SELL YOUR STOCKS FOR ZERO PER CENT CAPITAL GAINS TAXES. If you are in the 10 and 15% tax brackets. If you’re single and have a taxable income of under $34,000 or married filing jointly and earn less than $68,000, you can sell your stocks and not pay any capital gains. Income above these thresholds and you pay at a 15% capital gains rate. If the Bush tax cuts are not restored, the bracket will go up to 20% for higher earning taxpayers.

CHARITY BEGINS AT HOME BUT IT’S BETTER TO DRIVE FOR IT. Charitable driving is 14 cents a mile. Business driving is 50 cents a mile.

IMPROVE YOUR ENERGY CONSUMPTION, IMPROVE YOUR POCKET BOOK. Actually this sounds better in Latin. There is a nonbusiness energy property credit. There is now a 30% credit for all qualifying improvements with a maximum of $1500 for 2009 and 2010 combined. You need to get some energy to get this deduction before it expires by New Year’s Eve 2010.

2011
FSAs and HSAs will not include over-the-counter drugs. Drugs bought on street corners are never deductible. See note on Charlie Sheen.

2013
MEDICARE TAX ON THE WEALTHY. There will be a 3.8% tax on all capital gains and investment income for people in the Obama wealthy tax bracket. $200,000 single, $250,000 married filing jointly. This starts in 2013 and could possibly change. There’s another election between now and then. We’ll keep you apprised of this situation.

OTHER CHANGES:
ROTH IRA? THE ONLY IRA THAT IF YOU SWITCH THE WORDS YOU HAVE A PERSON’S NAME. This works like a regular IRA except that you pay the taxes upfront and when you take it out after you’re 59 ½, it’s all tax-free. There are, however, income limitations. In 2010, if you are single and you earn under $105,000, you can set up a Roth. If you earn up to $120,000 then you can have a partial Roth. The top limitation for a married couple is $177,000. For the maximum Roth, it is $167,000.

IMPORTANT NEW ROLLOVER RULES FROM TRADITIONAL IRA’S TO ROTH’S. If you like the idea of a Roth but have been unable to roll your IRA into one because you make over $100,000, you are in luck. Regardless of what you earn, you can roll over your IRA into a Roth. Of course, you have to pay taxes on the distribution but there’s no penalty. You can either pay the taxes on your 2010 return or you can split the income over 2011 and 2012. Confused at what you should do. There are more web-sites on this than there are opinions. Also you can check with us.

OWN A RENTAL PROPERTY. OWN SOME 1099 FORMS. Starting in 2011, you need to send out 1099’s to anyone who earns over $600 in a year doing your painting, plumbing, managing or gardening. You need to get a real name, address and Social Security number. Download a W-9 form.

2010 WAS A GOOD YEAR TO DIE IN BUT WHAT HAPPENS IF WAIT TILL 2011. As many of you know, 2010 had no estate taxes. Those of you who subscribe to Extreme Tax Planning, 2011 is a mess when it comes to passing away. If no bill is passed then in 2011, there will be only a $1,000,000 exclusion. The tax rate for everything above this is 55%. It may pay to hold on till 2013. Stay tuned.

TAX PLANNING? If you have a business, you can prepay up to all of your 2011 business deductions in 2010. Your April 2011 property taxes can be paid in December. This helps if you are not subject to alternative minimum tax. If a new tax bill doesn’t pass, virtually everyone will be subject to it.

Your charitable deductions can be made by check or charge to get a deduction. If you want to set up a solo 401K retirement plan, it must be opened by December 31st. A very good organization to give used clothing and furniture to is the National Council of Jewish Women. They actually itemize all of your gifts and attach a value to them. This is much more helpful than those organizations that give you a blank receipt. Remember, you can not deduct clothing that is in bad shape. It’s okay for you to be in bad shape but not your clothing.

CITY BUSINESS LICENSE. THERE’S NO ESCAPE. Even in the movie Inception, each of the levels of reality there were notices from the city asking for money. If you are self-employed, a corporation or a partnership and live or work in Los Angeles, you must have a city license. Other cities have similar requirements. Check with your city office.

LA TAX SERVICE ADMITS THAT WE ARE NOT WITCHES. In the spirit of Delaware Senatorial candidate Christine O’Donnell, we admit that we are not a coven. But sometimes we create magic.

Dom Gelband, our office manager admits that she’s dabbled in magic. She’s made mistakes disappear and has once turned an annoying client into a frog. You can still hear the REDEEP sound when you visit our kitchen.

Patty Alvarez admits to being able to e-file a tax return to both Fresno and Sacramento simultaneously without using her computer. Borrowing from Macbeth, you can hear her chant. “1040, 1040, toil and trouble. Fires burn and tax returns e-file.” Don’t try this at home.

Nataliya Shur, our payroll mystic, conjured up a tax decrease on Social Security Taxes for 2011. She admits that before she came to the United States she had the nickname “the Ukrainian Harry Potter.”

Marcy Krich, our receptionist and QuickBooks mystic, can fix a brew with the best of them. When you come in for your appointment, don’t be surprised if she asks you, coffee, tea or the eye of an IRS agent’s brew?” The brew will help you remember a $10,000 tax deduction that you had previously forgotten.

2009.A year so tough that many people wish that the Mayan calendar ended three years earlier.

Those of you using the Mayan calendar as an appointment book be sure to ask for a discount on your 2012 one. It only lasts until December 21st. Do your Christmas shopping early.

2009 started out with the promise of change. It ended up with a promise of spare change.

South Carolina Governor Mark Sanford took a hike on the Appalachian Trail and ended up in Argentina. Finally a man gets a divorce for not asking for directions.

Men can’t win. To get closer to his feminine side, Dodger ballplayer Manny Ramirez took female fertility drugs and was banned for sixty days by Major League baseball. Now he may need directions to get to the Hall of Fame.

Cash for Clunkers? It ended early right before someone decided to turn in their member of Congress.

This recession seems to be like the old neutron bomb. Kills only people and leaves the buildings intact.

“Unfriend” was the top new dictionary word for 2009. The top new song was “Unbuddy, can you spare a dime?”

America’s answer to Tostoy’s novel War and Peace was the 2074 page Senate health bill. It’s just as long and just as many people haven’t read it.

Actress Michelle Phillips’s tell-all autobiography gives new meaning to the “Mamas and the Pappas.”

In Afgraftifstan, Abdullah Abdullah ran as an independent candidate for president. He was in a run-off with President Karzai. Abdullah Abdullah made the mistake of referring to President Obama as President Obama Obama. Abdullah Abdullah was then pressured to pull out of the presidential race. He learned quickly that those in power have less of a sense of humor than those out of power.

Tiger Woods has now shown that he has a hook to his drive. Will he try to deduct the three iron used by his wife? Stitches are a medical deduction.

There has been a California tax lien put on Arnold Schwarzenegger. He owes $80,000 in back taxes. He said that it was mistake. He had already paid those taxes with an IOU.

Maybe the recession is worse than we thought. Dubai announced that they need a six month reprieve on their debts until at least May. Maybe they’re just waiting for their tax refund.

Rumor has it Dubai will be reading about all the new tax laws from this newsletter.

HIGHLIGHTS AND LOWLIGHTS

What the Federal government giveth, the state government taketh away.

IT’S BETTER TO BE UNEMPLOYED THIS YEAR. The first $2,400 of unemployment will not be taxed. There are no income limitations. So the rich can benefit from being unemployed as much as the poor. Unemployment is not taxable by the state. But don’t let Arnold know this.

IT’S TIME FOR PEOPLE WHO HAVE LOW INCOME TO INVEST IN THE STOCK MARKET. Capital gains can be tax-free if you’re in the 15% tax bracket or less. This will last through 2010. Unfortunately, most people had losses in 2009.

TIME TO BECOME AN EX-PATRIATE? The first $91,400 of your income is tax-free in America. But I wouldn’t suggest moving to Dubai.

BUY A NEW CAR AND GET A DEDUCTION. Sales tax on a new car will be now deducted off the top of your income. Car limit is $49,500. The deduction is phased out ratably between $125,000 and $135,000 ($250,000 and $260,000 on a joint return. But the good news is there’s no limit to how many cars you can buy.

TIME TO GET A DISASTER LOSS? The standard deduction is increased by net disaster loss from federally-declared disasters. Even if California is considered a disaster, living here isn’t tax deductible. There have been no federal declared disasters in California in 2009. It is raining today so we can always hope.

DECLUTTERING AS A TAX DEDUCTION. You can still give away clothes or furniture to a charitable institution and get a deduction. The clothing must be in good condition. Of course, if it was in good condition why would you give it away. For cash donations of less than $250, you will need a cancelled check and written communication from the charity. For contributions over $250, you will need written acknowledgement that no goods were provided to you. Any property donations greater than $5,000 will need an appraisal. After four years, you can declutter these acknowledgements and shred them along with most tax documents.

THE GOVERNMENT HAS NOT MADE IT EASIER TO BORROW MONEY TO PAY YOUR TAX BILL. Credit and debit cards fees are now tax deductible for paying your tax bill. It is 2 ½ to 2 ¾%. This will come in very handy in future years when taxes go up.

THE HOPE EDUCATION CREDIT NOW TURNS INTO THE AMERICAN OPPORTUNITY TAX CREDIT. You can now get a credit of up to $2500 for the first four years of college. This includes tuition, fees and materials. The AGI phase out is $80,000-$90,000 for Single/Head of Household and $160,000-$180,000 joint. Note. The University of California has just raised its tuition by 32%.

MORE NONBUSINESS ENERGY CREDITS. Also known as the Ben Franklin Energy credit. The credit rate is increased from 10% to 30%. You can get $50 for each advanced air circulating fan. $300 for each item of qualified energy efficient property and $200 for windows. You are limited to $1500 in the aggregate credit for $2009 and 2010. If you want to research your energy credit potential check:

www.energystar.gov/index.cfm?c=products.pr_tax_credits#s1.

Check out the 30% Solar energy credits. The solar energy works even in the rain.

MAKING WORK PAY CREDIT. There is a credit of up to $800 for a married couple who are both working outside the home. You can not be eligible to be claimed as a dependent in order to get the deduction. There is a phase out for single taxpayers with a modified AGI in excess of $75,000 and couples with a modified AGI of $190,000. This is instead of the rebate check in previous years. There is a problem with this. Most of you have been getting a little bit of the rebate every week because of an adjustment of withholding. $8 a week. Many of you have been spending this foolishly on yachts and limos. Couples may find themselves ineligible for this credit because of high income or two jobs. You already got your rebate. Maybe.

NANNY TAX THRESHOLD. For those of you planning on being nominated for the Supreme Court or interested in doing the right thing, the Nanny Tax threshold is $1700. If you pay a Nanny or housekeeper $1700 or more, you have to withhold.

IT’S BETTER TO GIVE THAN TO RECEIVE. ..unless money is involved. You can give $13,000 to any individual without having any gift tax ramifications. Remember when you receive a gift, you have no tax ramifications.

IRA AND ROTH IRA CONTRIBUTIONS ARE $5,000 IN 2009 AND 2010. If have reached 50 years old, there is a catch-up provision of $1,000 that can be added to your $5,000 contribution.

ROTH CONVERSION PARTY IN 2010. You can convert your IRA into a Roth in 2010 without any income limitations. As with all Roth conversions, the amount of the conversion (less basis) must be recognized as income. You can spread income over 2 years. Remember you would have to have the money to pay the taxes. The conversion includes all your IRA accounts. Let’s discuss when I meet with you for our tax appointment.

PEOPLE WITH THEIR OWN BUSINESSES CAN HAVE A SOLO 401K. You can have a SEP plan and a deferral of 100% of compensation up to $16,500 for 2009 and $5500 for taxpayers age 50 or older. The only problem is finding that much spare change. This needs to be open by December 31st.

PATRIOT TO BUY. Businesses can buy up to $250,000 in equipment and deduct it completely. Individuals can buy up to $250,000 in holiday presents but you can’t deduct it.

NOTHING LIKE A GOOD DRIVE. The standard mileage rate for business is 55 cents mile in 2009

A PERSON’S HOME IS THEIR CASTLE AND MAY BE A GREAT TAX DEDUCITON. If you bought a house between January 1, 2009 and December 1st 2009, there is one set of rules. You can get up to an $8,000 credit on your taxes. It would be a refundable credit. First time homebuyers would mean some one who had no present ownership in a principal residence during the three-year period ending on the date of the purchase. There would be a phase out starting at $75,000 for single people and $150,000 for married people. This would be good from January 1st 2009 through November 30th 2009.

It was so popular that a 4 year-old bought a house. Because of the popularity and the fraudulent 4 year-old, the government passed an enhanced credit. Starting November 6, 2009 and before May 1, 2010. There is a $6,500 credit for certain non-first-time homebuyers, an increase in the AGI limitations to $125,000-$145,000 (single) and $225,000-$245,000 (married filing jointly.) You can’t buy a house for more than $800,000 and you can’t be a dependent on someone’s tax return or qualify as a dependent. No four-year olds. Also you need a property settlement statement.

HOT OFF THE PRESSES. You can beat IRS in court, but you can’t get make them apologize to you. But if they win, they can’t make you apologize either.

LOAN MODIFICATIONS? The best way to find out about this is to check out the web-site www.Makinghomeaffordable.gov.

REVERSE THE IDEA OF REVERSE MORTGAGE OUT OF YOUR MENTAL GARAGE. They were set up for people who have little cash but who have equity in their homes. The loan offers tax-free proceeds. To qualify you have to be 62 years-old. The fees are very high ($12K to 20K) and it may make it difficult for the recipient to qualify for Medicare.

FOREIGN BANK ACCOUNT? Remember when having a Swiss bank account was a good thing. Every year you have to file a form showing that you have an interest in or signature authority over a financial account. If it’s worth less than $10,000 at any time, it’s not a problem. The penalties are enormous if you don’t report it. Buying Swiss chocolate is always fine.

CALIFORNIA’S IOU’S INTEREST IS TAX-FREE. They were paying 3.75% interest per year. Much better than a bank.

CALIFORNIA GETS REVENGE ON THE OCTUPLET MOM. To balance the budget, California reduced the dependency deduction from $301 to $98. So those of you who have children, you will be paying $203 per child in California taxes. The Governor announced that he can balance the budget if more Californians have 8 children at a time.

CALIFORNIA TAXES RAISED SOME MORE. Individual tax rates were increased across the board by .25%

FEELING USED? SO IS CALIFORNIA. They want their “Use Tax.” Those of you who buy products on the internet or in a place that doesn’t charge sales tax, the State wants their money! They want their money from everyone. But for businesses that have gross receipts of at least $100,000 and are not registered with the Board of Equalization, you must register with the BOE and report and pay, by April 15th, any use tax due. You must file even if you don’t have any non-tax purchases. Form BOE-401-EZ. This is also true for people who have rental property that has $100,000 in income.

EX CALIFORNIA GOVERNOR GRAY DAVIS MUST BE TURNING AROUND IN HIS POLITICAL GRAVE. The car tax on noncommercial vehicles increases from .65% to 1.15%.

Remember when you charge an expense is when you can deduct it.

WHAT RECORDS YOU SHOULD KEEP. I still have my old Leonard Cohen ones. You, however, need to keep tax returns, fax correspondence, audit reports and contracts forever. There is a new religion that promises you storage space in the after life. For the current life, you need to keep bank statements and sales records for six years. Tax records for four years, longer if it’s regarding property or equipment. Keep stock purchases three years after you sell the stock.

CITY BUSINESS TAX LICENSE. Self-employed people who live or work in the cities of Los Angeles, Santa Monica, Culver City, Burbank and San Diego must get a city license. They are very strict about this. They are talking about having their own helicopters to enforce it. Check with your city.

IN THE SPIRIT OF ABDULLAH ABDULLAH, WE HAVE CHANGED OUR NAME TO L.A. L.A. TAX SERVICE. But you can call us L.A. Tax Service for short. We are excited entering our 28th tax season. While there are a lot of changes in the tax code, there are not a lot of changes in our offices.

Dom Gelband is still our office manger. She is similar to the Mayan God Quetzalalcoatl. She is such importance and power that every aspect of L.A. Tax life is influenced by her. She is still known to want human sacrifices.

Patty Alvarez is our female god Tezcatlipoca. Tezcatkuoica used smoking mirrors to e-file the Mayans tax returns. Tezcatkuoica also provided the comic relief in the Mayan culture.

Nataliya Shur is like the Mayan god Chac. Chac wore so many hats that one would think that she is four gods. Rumor has it that Chac was also very proficient with the computer.

Hadas Stein is our god Ah Cancum. The God of hunting. Ah Cancum hunted answers to many tax questions. Ah Cancum was the first CPA. But no one knows exactly what the CPA stood for then.

If the world does end in 2012, you won’t have to worry about filing extensions.

2008. A leap year. The only leaping we seemed to be doing is back to 1929.Things are so tough that the old sixty is today’s sixty-five.

Madonna’s getting divorced.  Guy Ritchie found out that she was cheating on him.  Because in her new act, she started singing,’Like a Yankeee.  For the very first time.’  When Alex Rodriguez’ cap fell off in a game, he was wearing a yamakah.

The election lines were so long that some people swear by the time they got to vote, Sarah Palin was running for president.

Two new singers entered show business.  Joe the Plumber signed a recording contract.  So did Ashley Dupre.  She was the escort of former New York governor Eliot Spitzer.   So while politics make strange bedfellows, it also makes strange singers.

General Motors is now on the endangered species list.

Michelle Obama’s mother is moving into the White House.   This has ecological ramifications.  Now a thousand years of mother-in-law jokes can be recycled.

The Chinese seemed to have invented pre-natal gymnastics.

401 K’s have shrunk to just 1K’s.

Iceland melted in the recession.

Gas got so high that people had to sell their cars to afford the gas.  Now that prices have gone back down, everyone can afford to drive but no one can afford to park.  People in cars now cruise around the Beverly Center afraid to stop and shop.

The U.S. big 3 auto CEO’s flew to Washington in their private jets.  They drove to the airport in Japanese made cars.

Circuit City was unplugged.

I checked an old 1931 L.A. Tax Service Newsletter.   It read. ”We shouldn’t have voted for Herbert Hoover.   We should have voted for Hoover, the vacuum.  At least it would have done something.”

Why are lame duck presidents lame?

I don’t know about you but I’m worried that the government will want their stimulus check back.  It obviously didn’t work.

The Star asked the question that we all want to know.  Is Barak Obama anorexic?

For those of you who are addicted to presidential polls, the next presidential election is in 1415 days.  But there is a Sri Lanka election next week that we can all follow.

The expression ”you can bank on it” is no longer used.

Some Democrats want to give Alaska back to the Russians.

In probably the most interesting poll of 2008, British women prefer to date accountants over James Bond.  Their number one movie this week is ”Quantum of Tax Preparation.”

And now it’s time for TAX LAW CHANGES FOR 2008.  There are so many of them that a new song could be ”Brother Can You Spare Me a Deduction?”

THE HIGHLIGHTS AND LOWLIGHTS:

POSSIBLE ZERO CAPITAL GAINS RATES?  If you are in a 10 or 15% tax bracket ($32,500 for singles and $43,650 for married filing jointly), you will have no tax on capital gains.  Unfortunately, with the current economy capital gains is an endangered species.  Note: you are limited to a $3,000 a year loss.  Anything more than that carries forward into the following year.

LEAVING THE COUNTRY TO WORK?   The foreign-earned income exclusion is $87,600 in 2008 and $91,400 in 2009.  You have to stay out of the U.S. for 330 out of 365 days.   Those of you who want to escape global warming and work at the South Pole are out of luck.  It’s considered part of this country.

TEACHABLE MOMENT.  Educators can still take $250 of unreimbursed expenses as a deduction off the top of their income.   Now, no more teachers’ dirty looks.

STANDARD DEDUCTION FOR PROPERTY TAXES.  If you own property but don’t itemize, you can take $500 of your property taxes if you’re single and $1,000 if you married off the top of your income.  Perfect for older people and people who buy their home at the end of a tax year.

IT PAYS TO BE SICK.  Medical mileage rates are 19 cents a mile for the first six months of 2008 and 27 cents for the last six months.  It’s the same for moving.  You can not take a double deduction if you moved because you’re sick of L.A.

IT MAY BE BETTER TO GIVE THAN RECEIVE BUT IT’S ALSO MORE DIFFICULT.  All cash and check donations must be substantiated even if under $250.  You will also need a receipt from the charity for all non-cash contributions.  Your clothing contributions must be in good condition.

G.M. just cancelled the endorsement deal with Tiger Woods.   I guess he’ll have to stop driving his Buick.

IF YOU’RE GOING TO HAVE A CASULTY, HAVE ONE IN A FEDERALLY DECLARED DISASTER AREA.  If you do, the entire loss comes off the top of your income tax.  If not, then the only deduction that counts is your loss minus 10% of your adjusted gross income minus $100.  So having a casualty loss may take some planning.

YOUR KIDDIES GET OLDER.  The kiddie tax now pertains to students up to the age of 24.  So this gives you more reason to toss them out of the house.

YET IF THEY ARE UNDER 17, THEY MAY BE WORTH $1,000 EACH ON YOUR TAX RETURN.   This is known as the Old Mother Hubbard credit.  This works if your adjustable gross income is under $75,000 if you’re single and married filing jointly under $150,000.  Just as a note, it costs $600,000 to raise a child through college.

THE GOVERNMENT WANTS YOU TO BUY A HOUSE.  There is a new homebuyer credit where you can get back the lesser of 10% of the house and $7,500.   The only problem is that you can to give the money back ratably over a 15 year period interest free.  There are also income limitations.  If you buy a house up till July 1, 2009, you can amend your 2008 and take the credit.  The only problem is getting a bank to loan you the money to buy it.

NANNY TAX THRESHOLD FOR 2008 IS $1600.  If you pay your nanny more than that you must withhold social security taxes.  One way around this is to employ a revolving nanny service.  Your child needs to grow accustomed to change.

KEEP YOUR RICH AUNT ALIVE.  In 2010 the estate tax is scheduled to expire.   Though the rules will probably change by then.

JUST WHEN YOU THOUGHT WASHINGTON WASN’T DOING ANYTHING THERE WAS THE MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007.  If you owe more money on your house than it is worth and you walk away, there can be a cancellation of debt.  This is usually income to you.  This Act will forgive you of your forgiveness of debt.  This does not cover home equity debt or even credit card debt.  That will still be your responsibility.  The qualified principal indebtedness is limited to 2 million dollars.  If you have any questions regarding this, please let us know.

So it seems that the government wants you to buy a house on one hand and then wants you to be walk away from it on the other hand.

TO STIMULATE THE ECONOMY, THE GOVERNMENT GIVES BUSINESS A BONUS.  In depreciation.  Taxpayers are permitted to claim 50% first year bonus depreciation of qualifying equipment placed in service in 2008.

AND THERE’S EVEN BETTER NEWS.  The first $250,000 in equipment purchased can be expensed on your tax return.  Now all you have to do is come up with $250,000 for equipment.

DRIVE FOR BUSINESS AND MAKE A PROFIT.  The standard mileage rate is now 58 ½ cents a mile for the last six months of 2008.  It was 50.5 cents a mile.  The increase was due to the price of gas.  Now that the price is down, you can take advantage of it by driving more for business.  Some people have been getting lost going to business locations just to save money.  Remember commuting to work is not tax deductible.  Even if you get lost.

RETIREMENT IS GETTING EASY WITH IRA INCREASES.  In 2008 and 2009 IRA contributions have been increased to $5,000.  If you are over 50, you can contribute $6,000.  The extra $1,000 is called a catch-up contribution.  With today’s economy, we may need more than $1,000 to catch up on our retirement.

2009 SHOULD HAVE A LOT OF CHANGES.  But high-incomers should take a deep breath.  It looks like they will not have to pay more taxes in 2009.  2010 will probably be another story.

MIDDLE-INCOMERS SHOULD GET SOME TAX RELIEF.  There probably will be an expansion on the earned income credit, child and dependent care credits will be fully refundable and exempting seniors from income tax if they have income of less than $50,000.  And in lieu of a rebate, there may be a modest payroll tax credit that will be in one’s weekly payroll check.  But we will have to see.  Maybe we will have YES WE CAN BUT SOME OF YOU CAN’T TAX LEGISLATION.

WHAT RECORDS YOU SHOULD KEEP.  I still have my old Dylan ones.  You need to keep tax returns, fax correspondence, audit reports and contracts forever.  Keep bank statements and sales records for six years.  Tax receipts for four years, longer if it’s regarding property or equipment.  Keep stocks purchases three years after you sell the stocks.  In the recent discovery of a pyramid, tax receipts were found with the Pharaoh.

END OF THE YEAR PLANNING.  If you’re not subject to minimum tax, (line 45 on your 2007 tax return) , then it pays to pay your property taxes and your state estimated taxes by December 31^st.  You can still use your credit cards for charitable, medical and business deductions.  It’s the date of the charge that counts.  Make sure you keep the actual receipt for your purchase.  Having a credit card statement isn’t good enough proof for an audit.

L.A. CITY TAX ENFORCERS ARE NOW PART OF THE AXIS OF EVIL.  You need to file for a city business license if you have any business income that is not on a W-2.

Since we are now officially in a recession, you will be comforted to know that L.A. Tax Service is staffed with a group of super-heroes.   Dom is known as ”The Dominator”: Able to look at ten thousand random numbers and know which one is out of place.  Able to calm anyone with a single smile.   Then there’s Patty a.k.a  ”The Joker”:  Able to staple, talk on the phone and tell a joke to the client standing in front of her.  All in two languages.  In her case the smile is real.  Natalya a.k.a., ”The Master.”   With the speed of Karpov, she works our computer system with total mastery and tenacity.  She is constantly thinking five moves in advance.  When faced with opposition, she smiles and whispers ”checkmate.”  Olivia a.k.a. The ”Quickbooks Slayer”.   With the software called machete, she has hacked her way through Quickbooks.   It’s now called Slow Books.   That leaves us with Hadas a.k.a. ”The Fashion Assassin.”   With international expertise, she has been able to out trick agents and double agents of every government.  And she looks great in a trench coat.

Personal Note:

In the spirit of the 2008 election, I decided to have my family vetted.  And the results are not pretty.

My daughter, Sara, has been seen hanging around methamphetamine addicts in Sacramento.  She claims it’s her job as a therapist but I have my suspicions.

Sean, her husband, has spent a lot of time in front of judges.  He claims to be a lawyer but I have my suspicions.

Aaron, my son, spends late nights staring into a camera in his computer in Boston.   I think he’s working as a spy.  He claims he’s tutoring students in California for his fourth job that he does concurrently with the others.   The other jobs are teaching students with psychological problems, doing accounting for a tennis club where he also plays tennis with people without partners.  But I have my suspicions.

Devo, my wife, has been seen heard mumbling to friends about being involved with a Serial Killer.   She claims that she’s just working on directing a movie.  You can check her out at www.deveronpix.com.  But I have my suspicions.  I now sleep with my eyes open.

My dog Bo.  Short for Bo Diddley has been seen wandering through  Hollywood hanging around with suspicious people.  He claims that he was just doing a short called ”Strike Doody” about the Writer’s Strike.  He says you can check him out at www.strikedoody.com.  But I have my suspicions.

My mom, Shirley, was so involved in the recent election that she’s expecting an ambassadorship to France   She’s currently trying to add her vote to the Minnesota senatorial election.   I’m always telling her that I’m a good son.  But she has her suspicions.

It’s been a magical and very difficult year for the world.  But the stars still twinkle at night.  Pluto revolves around the sun.  Remembering the time it was a planet.

Looking forward to seeing you in 2009.  Thank you for helping me paint my universe.

2007 – The Iron Age was during the 12th century B.C.We seemed to be entering the Irony Age.

England has banned fat Santa Clauses.The government feels that fat Santa Clauses promote childhood obesity. California has gone a few steps further.They have stopped Santa Clauses from saying Ho. Ho.This, they say, has been promoting a childhood dessert.Those of you who don’t know what a HoHo is, it’s not the same as a Ho which is an adult dessert.But I digress.Santa Clauses can now say ‘Broccoli.Broccoli.’Next year they will probably be banning fake Santa fur.Stuffed animals have feelings, too.

007.This is definitely a year we could have used James Bond. Unfortunately, he too was outed by Scooter Libby.

The curse of the Red Sox appears to be back. The Redo Sox are expected to win every year. Maybe they can trade David Ortiz and reverse the curse.

Atlanta Quarterback Michael Vick had his endorsement contract with Hush Puppies cancelled.

Ironically, anti-war movies bombed.

The good news about global warming is that there is little chance for hell to freeze over.

The Bush Administration has moved away from ignoring Global Warming to ignoring the Global Cooling of the stock market.

The Republican Party has gone Hollywood . They are referring to the Democratic Congress as ‘Superbad.’ They don’t seem to realize that bad means good. Candidate Romney, showing that he’s cool, started referring to the Democrats as Supergood, meaning bad. No one got it, so he retracted it.

Hilary Clinton has changed her campaign slogan to be more Hollywood, too. No Country for Old Men.

It’s a bad sign that I know more names of Angelina Jolie’s children than I do Supreme Court Justices.

The Iraq-Afghanistan war(s) have cost us 1.7 trillion dollars. Because of the shrinking of the dollar it is really a lot less than this.

60 is now the old 40. O.J. Simpson proved to all AARP members that you’re never too old to commit armed robbery.

Very few Southern Californians went to see the Noah’s Ark film: Evan Almighty. Southern Californians didn’t know what rain was.

Speaking of water. When did water turn so bad?WATERgate, WhiteWATER, WATERboarding and now BlackWATER.

On a more hopeful front, there is now a fledgling religion that is offering the internet in the after-life.

The Middle Class has just entered the endangered species list.

Larry Craig taught all of us what to do or what not to do when in a men’s restroom.

Mike Tyson served a one day sentence for DUI.Nicole Richie served 82 minutes.Her four hour sentence was reducedfor good behavior.

2008 will be the year of the early primary. Each primary wants to be first and therefore most important. This has led to the ‘2012′ Rhode Island Primary to moved up to Jan 27th of 2008.Right now, the front runners are Jenna Bush and Chelsea Clinton.When asked why they moved the primary up so early, the Governor said’What’s the matter? Can’t the voters double task?’

Speaking of double-tasking. Men have once and for all proved that they can double task. In a recent experiment men showed that they can have sex with one person and still think of Pamela Anderson. Or George Clooney depending on what side of the men’s room, you are standing on.

TAX HIGHLIGHTS AND LOWLIGHTS: 2007 began with minimum tax problems and ended with even a greater one. Minimum tax is the black hole of tax law. It’s even worse than the killer in No Country for Old Men. First the name ‘alternative minimum tax’ is ironic. It’s not a minimum tax it’s a maximum tax.It’s so bad that a teacher in Tennessee was jailed for naming a teddy bear after it. It started out in 1969 to stop 155 wealthy people from not paying taxes. It now affects 23 million people. It spreads like the plague, except the rats are in Washington . In 2006, there was a temporary reduction in the minimum tax.Everyone wants to keep the temporary reduction. However, the Democrats want to keep it revenue neutral and they want to close some foreign corporate tax loopholes. The Republicans do not want to raise taxes. We are at an impasse. If there is no tax bill in the next two weeks, the tax season may be delayed into mid-February. Maybe longer. It takes seven weeks for the government to reprogram their computers. Stay tuned.

On the good news front, there will be a deduction for MORTGAGE INSURANCE PREMIUMS. Ironically, few people have mortgage insurance premiums any more. It is not a deduction for those making more than $110,000. It is only for mortgage contracts issued after December 31, 2006.

THE PERSONAL EXEMPTION PHASE OUT HAS BEEN PHASED OUT. This was the phase-out that caused the wealthy to give their children to the poor. For people who had lost their children and personal exemptions because their income was too high ($159,950 for single people and $282,450 for married filing jointly.) Now you can take 1/3 of your children as a deduction as well as your self. Next year 2/3. The following year, you will be whole.And that’s something to be thankful for.

MAXIMUM 15% CAPITAL GAIN TAX EXTENDED TO DIVIDENDS THROUGH 2010.This is the tax deduction that caused multi-billionaire Warren Buffet to call it voodoo economics. I guess he already has enough money to tip at Denny’s.

MEDICARE ‘B’ PREMIUM SURCHAGE STARTING IN 2007. If the Social Security recipient’s 2005 adjusted gross income is above $80,000 single and $160,000, there will be Medicare B surcharge. It starts at $93.50 a month and goes to $161.40. The law provides for re-determination based on a major life-changing event. Having a Medicare B premium surcharge is not considered a life-changing event.

YIKES. CANCELLATION OF DEBT CAN CREATE INCOME. And, therefore, more debt to the taxman. But if you”re lucky enough to: go bankrupt, have insolvent borrowing, but to the extent of insolvency, HAVE qualified real property business debt, seller financing, certain student loans, then it won’t be income. So the old song, ‘another day older and deeper in debt’ can be a good thing. When you buy a house, you get a non-recourse loan. The bank can’t come after you. Once you refinance, then it can.

TOO MUCH RETIREMENT FUNDS? You can transfer funds from your retirement accounts directly to Charity. You have to be 70 1/2. For those of you who contribute substantially to charity but can’t itemize, this would be make sense.

IT’S MORE DIFFICULT TO PRETEND TO GIVE TO CHARITY. Starting in 2007, you need a receipt or cancelled check for all cash contributions. So, when they pass the plate, make sure they also pass the credit-card machine. Also you will need a receipt from the charity if you donation is over $250.

BUT THOSE WERE DESIGNER JEANS CLOTHING DEDUCTION HAS BEEN TIGHTENED. To take a deduction of more than $500 for a non cash item(s), you must attach a receipt to your tax return. To claim a deduction of more than $5,000, you must have an appraisal. It seems to be easier to set up a foreign corporation for deductions than it is to give away your underwear and take a deduction.

ADULTS ARE NOW CONSIDERED KIDS WHEN IT COMES TO KIDDIE TAXES. Starting in 2008, children who are 19 years old or are full-time students over age 18 but under 24 will now be subject to the kiddie tax law. This means that they will be paying higher taxes than they would if were considered to be adults.

Now, there’s no reason to keep those 18 year-old kids in the house. Kiddies stop being kiddies in California when they are 14. California did not conform to the Federal rules.

NEW ENERGY-EFFICIENT IMPROVEMENT CREDITS. They include insulation systems that reduce heat loss/gain, exterior windows (including skylights), exterior doors, metal roofs. There are also credits for main air circulating fans, hot water heaters. Check with the manufacturer. There are also solar, photovoltaic or fuel cell equipment. There is no personal thank you note from Al Gore.

HYBRID CREDITS SWALLOWED BY THE BLACKHOLE OF MINIMUM TAX. There is still a credit for buying a hybrid vehicle except when you are subject to minimum tax. Also since Toyota has reached its sales limit, if you bought a Toyota hybrid after 10/1/07, you will not be eligible for the credit.

MAKE SURE YOU WILL BE ELIGIBLE TO BE A SUPREME COURT JUSTICE. If you pay any household employee $1500 or more, you must pay them on a W-2. In many cases it’s much better for the employees to be paid this way. If you need help, let us know.

IRA’S AND ROTH IRA’S ARE STILL $4,000. Next year it will go up to $5,000. There is a $1,000 additional catch up for those 50 and over in 2007. Unfortunately, I have no clients who admit to being 50.

MAXIMUM SEP PLAN IS $45,000 IN 2007 AND $46,000 IN 2008.

DRIVE YOUR WAY TO FINANCIAL SUCCESS. The Standard mileage rate is 48.5 cents a mile. Medical and moving standard mileage is 20 cents a mile. The trick is to keep good track. It will be 50 cents a mile in 2008. You can always take the actual cost of driving. In Los Angeles , it’s about 63 cents a mile. Remember to get an appointment book for 2008.

YOU CAN DEDUCT UP TO $125,000 IN EQUIPMENT IN 2007. For me that’s a lot of adding machines.

DON”T LET YOUR BROTHER SLEEP IN YOUR HOME OFFICE. A home office must be used exclusively as such. There shouldn’t even be a sofa there. Remember the IRS tests for DNA.

THE GRAY AREA HAS TURNED BLOOD RED. Preparer penalties have increased substantially. It used to be if the preparer thought there was at least a 1 in 3 level of confidence that the deduction was correct, there would be no penalty. That has been replaced by a greater than 50% level of confidence. If the preparer thinks the position is less than 50% likely to be accepted, then he or she must fill out a form stating such. We don’t take ridiculous deductions but the IRS is getting more serious now.

EVEN THOUGH ALL AUDITS ARE AUDITS FROM HELL, THERE IS A REAL AUDIT FROM HELL. The IRS started a new compliance study for individual taxpayers. There will be 13,000 random audits for each of three years. Each line on the tax return will have to be proved. And even if you leave the country they will find you. Rumor has it that is why Bin Laden can’t be found.

USE TAXES? If you buy something on the internet or in another state that doesn’t charge sales taxes, you are supposed to report it on your state return. If you buy something overseas, you don’t have to pay use tax if it costs under $800.

THE CALIFORNIA TEACHER’S RETENTION CREDIT IS DEAD. After suspending it for the past three years, it has been officially killed.

IF YOU’RE CURIOUS ABOUT THE MENTAL HEALTH TAX. There is a tax surcharge at the rate of 1% on taxable income in excess of $1,000,000. If you feel like you don’t have mental health, you can not collect any of this money.

REGISTERED DOMESTIC PARTNER?This is a California distinction and not a Federal one. If you are registered as a domestic partner (as of Sept 2007, there are 43,790), you must file married/ Registered Domestic Partner for California but not for the Federal Government. This will create a myriad of differences between the Federal Return and the State. If you are registered, you should check with us.

So between Alternative Minimum tax and Domestic Partnership, confusion reigns. Some people feel that Global Warming can take care of all this.

WHAT SHOULD YOU KEEP? You need to keep tax returns, fax correspondence, audit reports, and contracts forever.. Keep bank statements and sales records for six years. Tax receipts for four years. If you”re planning on an afterlife, be sure to find a religion that will allow you receipts in your postmortem.

END OF THE YEAR PLANNING. If you are not subject to minimum tax, then it pays to pay your property taxes and state estimated taxes by December 31st. You can still use your credit cards for charitable, medical and business deductions. It’’s the date of the charge that counts. Make sure you keep the actual receipt for your purchase.Having a credit card statement is usually not good enough proof for an audit.

Los Angeles Business Tax is still out there, waiting for you. If you work any job as an independent contractor, you must have a business license. If you get a ‘green’ envelope from the City in December, please fill it out by February 28th.

L.A. Tax Service is celebrating its 25th Anniversary. Just 25 short years ago, Esther and Scott decided to open a business together. We had about twenty clients between us. We rented the room that Scott is in, bought two used desks and didn”t have a computer. We put up a Chinese screen between us. We did have a lot of pencils.

We hired a 75 year-old woman named Millie Smilie who could only work on Mondays. We could only afford a woman who could only work on Mondays. And so we began. We ended up hiring Scott’s cousin Dom Gelband. She was probably only twelve at the time, but she looked older. Thirteen. Our first goal was to be busy enough to keep her busy. She did want to work five days a week. It took us a few years to make her a full time employee. She went from someone who didn”t know very much to someone who didn”t miss anything. Margo came here because she had the misfortune to share a hospital room with Esther. She became the employee and partner that literally never left. It seemed like she worked twenty-four hours a day. Then she had a friend named Hadas who was an accountant. She worked for us then left us to become a CPA and then magically returned two years later as a CPA. Her knowledge has been a great gift. Jim came to us after working at UCLA. I think we told him that we had our own Pac Ten basketball team. He’’s been the rock of our office ever since. Patty came next. We weren”t looking for someone with a great sense of humor but that’’s what we got. To run our payroll service, we had a world-wide search. We decided we needed someone who had military service in the Ukraine , knew everything about computers and could use a weapon in case of attack. We finally found it in Nataliya. To be the voice of L.A. Tax Service, we needed someone to answer our phones that was articulate, funny, compassionate and energetic. Becca more than fits the bill. Our most recent hire is Olivia. She is the one who sends those lovely e-mails to clients, where are your receipts. She is also Vice-President of deadlines for the accountants. Somehow we seem to have a deadline every week. So we keep her very busy.

There has been much sadness this year. Stan Levin passed away. He was a long-time client and friend. 25 years ago, he was moving his 8350 Melrose Ave offices downstairs . He thought that maybe his former office would make a good home for us. And it was. I always looked at him as the grandfather of our business.

Also Scott’s cousin Bill Gelband passed away.He was Dom’s father. 23 years ago, he thought that Dom would be a good employee for us. He was pretty smart about that. He had a great sense of humor and to Scott he was like Marco Polo. The adventurer, not the swimming pool game.

And Margo has passed on to the Valley. She moved her offices to smoggier pastures. She wanted to be closer to her family. She will be greatly missed.

The 25th anniversary is silver. With our clients and our employees, we feel like we struck gold. Thank you.

2006. -The year started out with a couple of Republicans outing CIA agent Valerie Plame. And the year ended with the Republicans outing themselves.

Scientists have decided that Pluto wasn’t a planet anymore. Too small. I wish they would have decided that thirty-five years ago when I answered on my test: eight planets in our solar system. I guess I was ahead of my time.

Richard Hatch will be using all of his survivor skills while serving time for tax evasion. Alleged tax evader, Wesley Snipes may be following with his own sequel. Blade: San Quentin.

Speaking of taxes. Hollywood started the year with the Da Vinci Code based on the original novel of the same name. What isn’t known is that the book was originally going to be called the Da Vinci Tax Code. And the secret to be revealed was Jesus? filing status: married filing jointly.

Speaking of filing status. Alleged bigamist leader Warren Jeffries found himself on trial when one of his arranged marriages was discovered. The much older man involved filed, married filing jointly, and claimed the child credit because his wife was also a child.

Another reason to have your taxes done in Los Angeles: Scientists now say that pollution may be beneficial to provide shade when we are about to succumb to global warming. As Raymond Chandler should have written: L.A., 95 in the shade and what looks like shade turns out to be smog.

>On a more literary front, Hollywood has discovered a William Faulkner vampire script called ‘Nosferatu’. Immediately three Faulkner novels have been optioned with potential vampire themes:Full Moonlight in August. The Unvanquished and As I Lay Dying I’m Craving for Blood.

The Democratic Party is no longer on the endangered species list.

Unfortunately, oceanic fish are. Scientists have predicted that in fifty years we may run out of fish. In response, California has banned the game. Go Fish.

In another fish story, Scripps Institute has announced that the ocean is ten times louder than usual. Maybe it’s just angry.

Arnold Schwarzenegger became a born-again Democrat.

Rush Limbaugh accused Michael J. Fox of faking his Parkinson’s symptoms so that voters in Missouri would feel sorry for him and vote for stem cell research. Rush turned a deaf ear to those who attacked him for this.?? Next year, Rush plans to expose Stephen Hawkins.

Borat has turned into a modern day DeTouqueville.

Thomas Wolfe wrote that in middle age you get the face that you deserve. I guess Evangelist Ted Haggard got the last name that he deserved.

On the bright side, dark chocolate was found to have great medical benefits for the heart. This year for Valentine?s Day, you can buy your parents chocolate covered baby aspirin.

Seen sitting together at the same comedy school were Mel Gibson and Michael Richards. On the blackboard was written: ‘Bigotry is easy. Comedy is hard.

The October surprise was that Karl Rove didn’t turn out to be a genius.

Vegas has the over/under on how many days before the Democrats implode in January. The guess is seven days.

A year without a Bush or an O.J. Simpson joke. There were just too many of them and I didn?t want anyone to think Jay Leno was stealing from me.

Oh never mind, at least the Democrats stopped George W. Bush from publishing his book:If I had written the constitution, this is what it would have said.

Since Saddam Hussein used to have a number of imposters that he used so that no one would know which one to assassinate, there is a new Iraqi peace plan that has come out in a memo.?? They would substitute an imposter for the Saddam who is currently on trial. They would execute the “imposter”.Then they would let the real Saddam rule again, since he was the only one who seems to know how to keep the peace. The only condition is that he has to claim to be the imposter.

If the Iraq war has ended between the writing of this newsletter and your receiving it, please disregard the previous jokes.

Confucius accountant once said that the perfect life is one that is 100% deductible.

So if I would have written the rest of this newsletter these would be the tax law changes.

It starts out with the Tax Increase Prevention and Reconciliation Act (TIPRA). It?s a tax increase prevention act that adds tax increases. But like most laws it has a cute name.

It eliminates the above the line deduction for school teacher expenses: (no child left behind, but teachers left behind are okay)

It eliminates sales tax in lieu of the state income tax deduction. Set up originally to get certain key states to vote Republican. Eliminating it was ahead of it’s time.

It eliminates The Archer MSA deduction. ?

It eliminates the above the line deduction for higher education tuition.

and then the Senate passed a bill, allowing all of the above.

It increases the age to which the kiddie tax provision applies from under 14 to under 18 years old. This may have been because of the 13 year-olds? lobby that doesn?t want to be referred to as kiddie. So now all teenagers are called kiddies. This is to prevent income being shifted to the family members with the lowest tax rates.? Any one stupid enough to give their teenagers extra money, deserves what he gets.

AND THEN THERE WAS THE PENSION PROTECTION ACT OF 2006. This was the first major reform of pension tax laws in thirty years. Of course, in the midst of protecting our pensions, the government has started to interfere with our charitable deductions.

For those people who like to give their shirts off their backs, it may no longer be taxed deductible. As of August 17, 2006, you will need increased substantiation for non-cash charitable contributions of household goods and clothing.?? In order to deduct these goods, they must be in ?good condition. They have not told us how to prove this. Also you can not deduct your socks and underwear. This is probably a reaction to 1993 when President Clinton tried to set a value of $40 for his underwear. It’s now worth $1500 on e-bay.

THE IRS HAS TAKEN THE JOY OUT OF GIVING AT CHRISTMAS. Starting January 1, 2007, you must be able to substantiate all cash charitable contributions.? It?s not enough to say that you put your money in the Salvation Army’s donation box. You need a receipt. Or write a check. So starting next year when you see a Santa Claus ringing a bell, remember to ask for a receipt. And put the Ho Ho Ho back in Christmas.

RING A DING DING. No more excise taxes on what you have been paying on certain services on your telephone bills. The IRS has given up the excise tax battle and will refund the tax on billings from March 1, 2003 through July 31, 2006. This refund may be in the form of a credit on your monthly phone bill or a credit claimed on your 2006 income tax return. The credit may be a standard amount of $30-$60 or the actual amount paid. If you happened to have saved your old bills, you might want to add up the excise tax. If you have a separate business line, you will have to add up all excise charges.

BUT YOU CAN GIVE TAX-FREE CONTRIBUTIONS FROM IRAS FOR CHARITABLE PURPOSES.? You must be over 70 and you are limited to $100,000 a year. It allows people who contribute to charity and have mandatory distributions to deduct their charitable deductions without itemizing. How this protects your pension, I have no idea.

IT DOESN?T PAY TO GROW OLD AND MAKE MONEY. Medicare B premium will have a premium surcharge starting in 2007.If you’re collecting social security and you’re married and have an adjusted modified gross income over $160,000, or you’re single and it is over $80,000, then you will have a surcharge.

WHY THE IRS DOESN’T TRUST AMERICANS CHARITABLE DEDUCTIONS. It all started with the vehicle donations. In 2000, taxpayers claimed $657 million in write-offs from car donations but the charities reported getting only $32.7 million in sales of those donated cars. Now it pays to sell your old car.

WE NOW HAVE A TAX ENERGY POLICY. Sort of. For the tax years 2006 and 2007, you will be able to make energy-conscious purchases that will have tax benefits when filling your tax returns. On your principal residence, you can purchase insulation systems, exterior windows, exterior doors and metal roofs that can give you a maximum credit for all taxable years of $500. Solar energy credits can add up to $2,000. The manufacturers will send you a certificate if you qualify.? The credits will not help you if you’re subject to minimum tax. This can blow the energy efficient roof off of this deduction.

AN INCOVENIENT TRUTH MAY HAVE AN INCONVENIENT DEDUCTION. There is now a credit for those of you who bought a new hybrid car in 2006. The deduction can be as much as $3,400.? The only problem is that it won?t help you if you?re subject to alternative minimum tax.

ALTERNATIVE MINIMUM TAX IS REALLY A MANDATORY TAX. The original idea of this tax was to stop people from taking advantage of tax shelters. It is a parallel income tax that disregards much of your itemized deductions: your medical, taxes paid and business deductions. It is the tax equivalent to string theory and the strings are not deductible. It brings in around a trillion dollars a year.

THE RICH GET RICHER AND THE POOR GET AUDITED. That’s the new refrain to an old song.? Because there is a tax credit for low income taxpayers, there has been much abuse. So the government has been investigating these claims. The government is wondering if people become poor for economic advantage. Some poor people have been known to eat cake with this credit.

IF YOU DON’t SEND 1099S YOU CAN LOSE YOUR TAX DEDUCTIONS. Those of you who are self-employed or own rental property and pay any one at least $600 total per year, then you must send out a 1099. If you are audited and you haven’t sent out a 1099 then you will lose the deduction.? No matter how legitimate the tax deduction is. Heed Al Capone?s words when he was being dragged off to prison.? ?If Frank Nitti would have sent me a 1099, I would have declared all my income. Maybe Wesley Snipes was auditioning for the Al Capone part.

YOU CAN NOW GIVE OR GET $12,000 WITHOUT ANY GIFT TAX CONSEQUENCES. Now all you have to do is come up with the money.

LOW CAPTIAL GAINS RATES EXTENDED TO 2010 OR TIL THE NEXT ELECTION. If you’re in a 10% or 15% tax bracket, your long term capital gains rate is 5%. If you’re in a higher rate, then it’s 15%.

KEEPING TRACK OF YOUR MORTGAGE INTEREST DEDUCTION, MAY TAKE A FORENSIC ACCOUNTANT. You must own the house to deduct the interest. Paying for someone else?s house is not deductible. Let them give you the house instead.

YOUR HOUSE MAY BE YOUR CASTLE BUT HOME EQUITY INDEBTEDNESS IS LIMITED TO INTEREST ON $100,000. Also the home equity interest will have minimum tax consequences if the money doesn’t go directly into repairs on your residence.

BURIAL PLOT CAN”T BE CALLED A HOME. Nothing more needs to be said.

KEEP RECEIPTS, NOT JUST CREDIT CARD BILLS. Remember that no one knows what you bought at Staples. Keep the receipt for tax purposes.

STANDARD MILEAGE RATE LOWERED TO 44.5 CENTS A MILE FOR 2006. And this was after gas prices went up. Now that gas prices have gone down, the deduction will rise to 48.5 cents a mile in 2007. Your best bet may be to figure out your actual deductions for business driving. The average car costs around 68 cents a mile.

GROWING OLDER HAS FURTHER BENEFITS WITH IRAS. Starting in 2006, there is an additional $1,000 that can be added to your IRA. All you have to do is be at least 50. And the only person you have to admit it to is your tax accountant.

ROTH 401(K)S ARE NOW POSSIBLE. Everyone loves Roth plans. You pay your taxes on your retirement contribution and then when you take it out, it’s tax free. Roths used to be limited to $4,000 a year. Now you can have a Roth with your entire 401K.

PURCHASE AN APPOINTMENT BOOK. It’s a legal document and you don’t even need a lawyer’s blessing. It will support your car mileage as well as any deduction under $75. And the purchase of the book is tax deductible. It’s a purchase that keeps on deducting.

SHRED THOSE RECEIPTS. Well not all of them. You need to keep tax returns forever, tax correspondence, audit reports, contracts and leases forever. If you’re planning on freezing your body at death, those receipts can be frozen with you in zip-lock bags. Keep bank statements and sales records for six years.? Also keep tax receipts for four years. There are now musical shredders that can play your favorite tunes. Rod Stewart’s song, first shred is the deepest.

END OF THE YEAR TAX PLANNING. If you are not subject to minimum tax, then it pays to pay your property taxes and state estimated taxes by December 31, 2006. If yes, wait till next year. You can still use your credit cards for charitable, medical and business deductions. It’s when you charge it, that counts, not when you pay the charge card bill. Check your stock portfolio. If you have some losers, it may be the time to sell them before next year. This year was a good one for the stock market. If your stock portfolio went down, you might want to talk to your stock analyst.

BILLING It’s due when you have your taxes done.We take credit cards, checks, post dated checks, cash, and we will take livestock.

CITY BUSINESS TAX. Los Angeles City seems to be effective in only one thing: finding people who are self-employed and who live in the city of Los Angeles. They want you to apply for your city business license. This can entail paying for up to three years back taxes plus interest. If you have been in business a few year, you can request a waiver of penalties. Call 213-473-5901. Also, when you get your 2007 tax bill, make sure you fill it out by February 28, 2007. If you made under $100,000, you will have no tax. If you are a creative professional, then you can earn up to $300,000 without any city tax. The trick is that you have to fill out the form by February 28^th. You can do this online at www.latcity.org/finance. Once you fill out your city business tax, you will have nothing to worry about on the streets of Los Angeles except for muggers and photo traffic enforced lights.

L.A. Tax Service has now reached its 24^th birthday.And much like the show ‘24′ we are dedicated to saving our clients from tax terrorists, unscrupulous accountants, humorless IRS agents and the underground of the minimum tax. Margo Katz ,CPA, keeps your identities protected by a Machiavellian knowledge of our computer system. Esther Eisenstein, CPA, is our Lady in Red Hair. But unlike the original lady in Red who double-crossed Dillinger and caused his death by the G men, Our Lady in Red Hair double crosses the G Men instead of you. Scott Rubenstein E.A. has switched sides and ended up on the Daily Show. Maybe his new knowledge of pimps will turn out to be useful. Hadas Stein, CPA, gives us much international intrigue. Besides she looks terrific in a trench coat. We even have our femme fatale, Dom Gelband. She has ways of making our enemies talk as well as our clients. And what they say, can not be published in a family newsletter. Jim Dias is the money man. He knows how to take care of business. In another time, he would have carried a gun and had a nickname like Gentleman Jim. Natalya Shur is our Russian connection. She is equally familiar with computers and AK47s. She got us to put our rare radioactive polonium 210 behind locked doors. Patty Alvarez seems to always be joking. But she seems to be the toughest of the lot of us. She has to be with a fifteen year old daughter. This was our first year with Nitza Freeman. She ’s our bag lady. She carries her computer bag filled with secrets to our clients homes. She ’s setting up our master plan which has the innocuous name: Quick Books. But it isn’t quick and it isn’t a book. Very suspicious. Becca Thomas is our new receptionist. She goes by many aliases, including Weekend Becky. She ’s always smiling. Maybe she knows something. Our war unfortunately has had a casualty. Mercy Go earned her last name and went retired. I will miss her as a play on words as well as being a wonderful person. So from now on we can’t show our enemies any Mercy.

Next year is our 25^th Anniversary and some of us are celebrating by having our hair turn silver.?

2005. It started with President Bush announcing that he had a pocketful of political currency and he pledged to spend it. Fortunately, he ended the year with a pocket full of lint.

This was the year of two Paris(es). Paris Hilton met Paris Latsis in Paris France and then they broke up in Paris, Texas. No wonder there was rioting in France.

It was a year full of earthquakes, tsunamis and hurricanes. It was like someone was standing on a roof looking heavenward and shouting, “bring it on.”

Dateline Hollywood; The Republicans started the year trying to “WALK THE LINE” and ended up like the movie “CRASH.”

The Democrats tried to be the “WEDDING CRASHERS” and ended up being “CHICKEN LITTLE.”

In New Orleans, Noah was seen weighing whether he should take two Democrats or two Republicans. He ended up kicking Ralph Nader overboard.

The “intelligent designers” have a point. Judging from our history, it’s hard to believe in evolution.

Because of the possible bird flu pandemic, famous sayings have been changed. “Birds of a feather, kill together.” “A bird in the hand is now much worse than two in the bush.” Though Democrats feel that anything in the Bush is worthless.

There was an actual sighting of a Democratic Party leader. Unfortunately it ended up being Howard Dean ranting.

There’s a new comedy routine, who’s onto Frist. Bill Frist, that is. Or for those tongue-twistonists, is there going to be another delay in the trial of Tom Delay?

Speaking of comedians, Mitch Hedberg died. He died from an overdose of heroin and Corona. His last words were “I wish I gave up the Coronas.” Speaking of post-humorous humor.

A burning question: was the “FORTY YEAR OLD VIRGIN” a remake of the “HUNCHBACK OF NOTRE DAME” or was it a sequel to the “PASSION OF CHRIST?”

There are special tax deductions for those who were victimized by Hurricane Katrina. There are no tax deductions however for lost work for those spending weeks at home watching the hurricane on CNN. Song lyrics have been changed. Now it’s “When the Saints Go Sloshing In.”.

Arnold Schwarzenegger was beaten up by a group of nurses.

Shades of No Republicans Left Behind. Ethic classes were held for administration officials. Unfortunately, there were no final tests.

The Chicago baseball team turned from the Black Sox into the White Sox.

The U.S. Army was accused of planting stories in the Iraqi newspapers and then paying for them. This is ridiculous. Even though L.A. Tax Service LLP is now the recognized tax service for the Armed Forces, we stand neutral as always in our editorial comments. We support our troops and our commander-in-chief.

Republicans tried to censor the word “Mutha”.

Shades of the apocalypse. There is a proposed reality series of Death Row Inmates playing Texas Hold’em.

Some people have mistaken George W. Bush for the Burning Bush.

What can you say about a year that has a comeback for Madonna and King Kong. Next year more jokes about Democrats.

AND NOW FOR DEDUCTIONS.

THE WINDS OF CHARITY INCREASE. If you used a vehicle to provide donated services solely for Hurricane Katrina relief then you can deduct between 30 and 36 cents a mile. There is no deduction for fleeing the devastation.

PERSONAL EXEMPTIONS MOVE UPWARD. Each person that you claim on your Federal Income Tax is now $3200. Last year it was $3100. The Standard deduction is now $5,000 for Singles and $10,000 for married couples. The maximum Social Security wage base is $94,200.

THERE’S STILL A KIDDIE CREDIT BUT NOT A KITTY CREDIT. For some income brackets there is a credit for children under the age of 17. At 17, you should throw them out. However, you can’t take a cat as a deduction. They usually take you off on their tax return. If we can only get strays to pay their taxes.

THE HYBRID CAR GETS BETTER MILEAGE ON YOUR TAX RETURN. In 2004 and 2005, there is a $2,000 deduction if you buy a new hybrid car. In 2006, there is a credit of up to $3500. There is no deduction if you are in a MINIMUM TAX SITUATION.

MINIMUM TAX IS THE DARTH VADER OF OUR TAX GALAXY. The alternative minimum tax was set up in the late 1960s to stop the rich from not paying taxes. As tax rates have gone down, more people have been affected. If you look at line 44 on your 2004 tax return, you will see if you are affected. The best way to avoid minimum tax is to make less than $50,000 a year or earn more than $500,000. May the farce be with you.

FLEXIBLE SPENDING ACCOUNT BECOMES MORE FLEXIBLE. If you have a flexible spending account at work for child care or medical, you have an additional 2 ½ months in the next tax year to use it.

PUT THAT CLUNKER CAR BACK IN THE GARAGE. It is no longer a great deduction to contribute your car to charity. It used to be that people would donate their cars and claim Blue Book value and end up with a great deduction. In the tax world, anything that is too good to be true, takes three years of congressional investigation before it becomes “not true.” Now when you donate a vehicle, your deduction is limited to the price that the charity receives when it sells your vehicle. You’re better off selling it yourself. Charities have reported a 40% decline in vehicle donations. This is a case where charities may be lying. If you can’t trust the Red Cross, who can you trust?

BETTER TO SPEND THE MONEY FROM THE SALE OF YOUR CLUNKER FOR LONG TERM CARE INSURANCE. It can be a deduction on your tax return. It’s limited to $270 when you’re under 40 but it goes to $2740 when you’re sixty-four. This was not mentioned in the Beatles song of the same name.

IRA RISING. If you qualify for a traditional IRA, you can deduct $4,000 in 2005. If you’re lucky enough to have reached the age of 50, you can deduct $4,500. Don’t let any one know that you’re that old if you live in the Los Angeles area. It’s considered a fatal disease.

IF YOU ARE SELF-EMPLOYED AND WANT TO PUT MORE MONEY INTO RETIREMENT, THE INDIVIDUAL 401 K MAY BE FOR YOU. This allows you to put $15,000 in addition to your SEP contribution. You can even put away more than you make from your self-employment. The 401 K must be opened, however, by December 31, 2005.

NEW PRODUCTION ACTIVITY DEDUCTION. This pertains to you if you are in manufacturing, produce tangible personal property, software development or sound recordings. There is a new 3% deduction for tax years 2005 and 2006. This was set up to stop people from going overseas to produce. It’s called the DEATH TO ALL SWEATSHOPS DEDUCTION. This includes people making films. The 3% relates to the film master and not the copies. You must have employees in order to qualify for the deduction.

THERE IS A NEW BANKRPUTCY ACT. Effective October 17, 2005, the only person who might qualify to go bankrupt is a congress person.

STARTING A NEW BUSINESS? Start-up expenditures and organizational expenditures are allowed to be expensed up to $5,000 for each of these. Anything above this must be amortized over a 15-year period.

BUY AN APPOINTMENT BOOK. It is a legal document. It substantiates your business mileage and other deductions under $75. And you can always claim that you’ve written a book. Make sure it’s non-fiction.

STANDARD MILEAGE GOES UP AND THEN DOWN WITH GAS PRICES. To show that the government is watching gas prices, the standard deduction is moving up and down like …the gas prices. The standard mileage is 40 ½ cents a mile for business between January 1 and August 31, 2005. After that it becomes 48 ½ cents a mile for the rest of the year. Starting next year it will go down to 45 ½ cents. There are people in the East coast who drive out West just for the tax deduction. Note: the average car costs 56 cents a mile.

A LUXURY CAR COSTS MORE THAN $14,700. No wonder the government thinks everyone is doing well. 91 per cent of the country owns a luxury car.

HEALTH SAVINGS ACCOUNTS CAN HELP. For those single people who have medical deductibles of between $1,700 and $2,600 (married couples and family are between $3,450 and $5150), there is an individual retirement account for medical expenses.

BEFORE YEAR’S END GO OUT AND BUY A $105,000 COMPUTER OR ANSWERING MACHINE. Actually you can now spend up to $105,000 in equipment in 2005.

THE FOUR MONTH EXTENSION HAS BEEN ELIMINATED. There is now only one extension. Starting this year when you file an extension April 17, 2006, it is good for six months. It’s automatic.

DEADBEAT CHILDREN NO LONGER HELP. It used to be if you were single and had a “deadbeat” child living with you, you could file as under the “head of household.” Now if the child earns more than $5,000 you can’t deduct them nor can you qualify as head of household. You only qualify as a single chump.

SELLING ON E-BAY? Sales of these items are taxable for income tax purposes but they are also subject to sales and use tax. There is a capital gains tax of the sale of a personal asset. This is taxable as long-term or short term depending on the holding period. The sale of a collectible is taxed at the capital gains tax of 28%. If the sale is part of a trade or business than it is subject to social security taxes, too.

CLEAR THE CLUTTER. You need to keep copies of tax returns, tax correspondence, audit reports, contracts and leases forever. There are certain religions that promise that there will be storage areas in the after-life. Keep Bank statements, sales records for six years. Keep personal investment records for 6 years after sales and keep IRA records 6 years after withdrawals. Also keep canceled checks for 3 years. Now people can contemplate the sound of one hand shredding.

SOCIAL SECURITY AND THE END OF RETIREMENT. As you probably know Social Security has survived another year. If you want to figure out your Social Security benefits go to http://www/ssa/gov/retire. Or do like my mother does, call me.

END OF THE YEAR TAX PLANNING. If you are not subject to minimum tax, see earlier minimum tax note, then it is good to pay your property taxes and state estimated taxes by December 31, 2005. If yes wait till next year. You can still use your credit cards for charitable, medical and business deductions. It’s when you charge it that counts; not when you pay the charge card bill. Check your stock portfolio. If you have some losers, it may be the time to sell them before the new year.

BILLING? Because of electronic filing, you don’t see us more than once. This has made billing more of a problem. At the end of the tax session, you should be prepared to either write us a check, charge the bill on your credit card, or pay the bill in cash. Remember our connection with the U.S. Army. Please see above mention.

L.A. TAX SERVICE IS NOW 23 YEARS OLD. So what can you say about a business that still brings us so much joy. Since a picture is worth a thousand words we decided to make: L.A. Tax Service, LLP, THE MOVIE. Right now we’re into casting. Esther Eisenstein CPA, one of the co-founders, is being played by Lucille Ball – some casting problems but very available, Margo Katz, an almost co-founder and 24 hour resident of the company, is played by the strong and comical Sigourney Weaver, Scott Rubenstein E.A. and co-founder is being played by Bill Murray and if he can’t make it Larry David. Hadas Stein, the CPA behind the scenes in played by Glen Close, Jim Dias, accountant extraordinaire played by the non-accountant like Billy Bob Thornton, in a bit of unusual casting; Mercy Go wants to be portrayed by George Bush. According to his agent he’s in for 2008. Nataliya Shur, the only member of our staff to train with an AK47 is being played by Linda Hamilton of Terminator fame; Beth Eisenstein, Esther’s daughter and new bookkeeper, thinks Sarah Jessica Parker would be perfect and Jane’e who answers the phone wants to be played by Angelina Jolie. I think it’s her way of trying to get closer to Brad Pitt. Patty Alvarez wants J-Lo to capture her effervescence. Dom Gelband who’s been running our offices for many years that it’s hard to remember that she’s only 26, will be played by Lucy Liu. Maybe we should call the movie L.A. TAX ANGELS. You can either have a cameo spot as yourself or cast someone else.

2004. The election campaign was the movie “The Never Ending Story” with no hope for a sequel.

It was the “Burning Bush” against the “Petrified Forrest.”

Lincoln and Douglas turned over in their respective graves during the debates.

At the end, the Republicans were playing “Dixie” while the Democrats were playing “Taps.”

Kerry was victorious. He goes home to a billionairess who can do “things” in 57 varieties. And they save millions of dollars because of Bush’s tax cuts with more to follow.

Bush has an interesting interpretation of the term “mandate.” He nominates Alberto Gonzales who believes in that a little bit of torture can be a good thing and that the Geneva Convention is like Santa Claus. It’s something for children and not to be taken seriously.

Merck and Company with Vioxx found a permanent cure for Arthritis. By the time the lawsuits are finished it will probably be called …And Company. They say John Edwards is available for litigation.

J. Lo broke up with Ben Affleck and married Marc Anthony. She is contemplating divorcing him and marrying herself. This could cause a constitutional crisis. From a tax standpoint, her status would be married filing double jointly.

The United States has rejected Ukraine’s poll results and Putkin turned around and rejected our 2000 election results. Their history books now have Gore as our president.

Many ABC affiliates refused to broadcast “Saving Private Ryan” because it was possibly obscene. It wasn’t the bullets riddling the soldiers landing on D day that were obscene. It’s the swear words used by the soldiers when the bullets were ripping through their bodies. The pen is more obscene than the sword.

BUT THE PEN IS MIGHTIER THAN THE CITY OF LOS ANGELES. Writers who earn less than $300,000 a year do not have to pay city tax starting July 1, 2005.

Bill O’Reilly learned that talk isn’t cheap.

There was the opening of the Clinton Library which some people say has a “Lady Chatterly’s Lover” wing. All the living past presidents and the current one attended. One might wonder what will happen when George W retires. It seems like the only book he’s ever admitted to reading is “My Pet Goat.” This is also the nickname that Kerry gave Edwards.

The average person spends 52 minutes a day looking for stuff they’ve misplaced. Ohio has spent 52 days looking for votes they’ve misplaced.

Martha Stewart will be hosting a TV show once she gets out of prison. A lot of actresses are firing their agents and getting a parole officer.

Republicans are laughing saying that it’s as easy for a Democrat to win a National election as it is for a rich man to get into heaven. Of course if Bush has his way in After-life reform, it will be much easier for the wealthy to enter there.

Because of the country being divided between Red states and Blue states, the Republicans refuse to sing the blues and the Democrats have refused to “see red.”

There is a new reality show about to be broadcast. It’s called “Accountants Gone Wild.”

And here’s to DEDUCTIONS GONE WILD.

There was THE WORKING FAMILIES TAX RELIEF ACT and the JUMPSTART OUR BUSINESS STRENGTH ACT in 2004. Though some people want to call it THE LET THEM EAT DEDUCTIONS ACT.

The ten per cent tax bracket has been extended through the year 2010.

The personal exemption is now $3,100. Children still cost more than this.

THERE IS A “HIE THEE TO A NUNNERY” TAX DEDUCTION: You may be able to use private school tuition as medical deduction. The school does not have to employ physicians but it must have a curriculum designed to provide medical care. Helping the student overcome physical or mental problems is the essence of special education.

MORE MEDICAL EXPENSE DEDUCTIONS. If a person needs help in performing two or more activities of daily living: eating, bathing, dressing, transferring, toileting, continence then all care giving services at home are medical deductions as long as there is a prescription from a licensed health care practitioner. Those of you who are just uncoordinated can not deduct this.

SALES TAX DEDUCTION IS BACK. This was basically set up for states that do not have state income tax. Taxpayers can either take the state tax deduction or look up in a sales tax chart what their sales tax would be plus sales tax on boats and cars etc. Most of you who live in states with a state tax will not benefit from this change. But those of you who have been reluctant to purchase an 80 foot yacht, this may now be the time to buy.

GIVE AWAY YOUR CAR TO CHARITY BY DECEMBER 31, 2004. Starting next year, you will be forced to go with the price that the charity will receive for selling your classic car that you have given away. This will curtail all charity car giving. Your family is never considered a charity.

SOCIAL SECURITY WAGE BASE RISES. The maximum FICA wage base will be $87,900. As a note, the world’s largest Ponzi scheme was not set up originally by Franklin Delano Roosevelt in the 30’s. It was Otto von Bismark of Prusso-German fame. He suggested that the retirement age should be 70 years old. Unfortunately, the average person only lived to 49. I guess the system would work better if we let people collect at 89 years old. Of course not raiding the social security coffers would have helped also.

YOU CAN NOW HAVE KIDS THROUGH 2010. There is a child tax credit of $1,000 for 2004 is allowed for each qualifying child under age of 17. There is a phase-out of the credit when married taxpayers make $110,000 and for single taxpayers who make $75,000.

MORE TEACHER’S DIRTY LOOKS…at least in California. The credit given to teachers for years of service has once again been taken away. I guess they should have supported Arnold Schwarzenegger. The $250 federal class material deductions has been extended.

HEALTH SAVINGS ACCOUNTS CAN HELP. For those single people who have medical deductibles of between $1,700 and $2,600 (married couples and family are between $3,450 and $5150), there is an individual retirement account for medical expenses.

GIFT TAX EXCLUSION is still $11,000. You can only give away $1,000,000 without any gift tax consequences. I’m sorry, Teresa Heinz.

There is an Indian employment tax credit that has been extended through 2005. Check your heritage.

THE $100,000 SUV deduction is gone. If you purchased an SUV after 10/22/04, you are limited to a $25,000 immediate write-off. There is still bonus depreciation. Ever since this was enacted gas prices have gone down.

STARTING A NEW BUSINESS? One can elect to take off the first $5,000 in start-up fees and up to $5,000 in organizational expenses.

STANDARD RATE FOR AUTOMOBILES SHIFTS INTO FOURTH. For 2004, it will be 37 ½ cents a mile. In 2005, it will be 40 ½ cents. So save your cross country research trip for 2005.

YOU MAY BE DRIVING A LUXURY CAR AND NOT KNOW IT. This year a luxury car is one that costs more than $14,800. So forget the Bentley and buy a Taurus.

A HUNDRED THOUSAND IN EQUIPMENT. For those of you holding out on Christmas business equipment, you can now deduct up to $100,000 in equipment. A business satellite is always a good idea.

BUY THE CAR BEFORE 12/31/04. Autos will have 50 per cent bonus depreciation until 12/31/04. Then it’s gone. So if you’re thinking of buying an auto that you use in business now may be the time. There is no bonus depreciation if you use it less than 50% for business or the vehicle is used.

The road to hell can now be depreciated with good intentions over 15 years. You can also deduct paving on a rental or commercial property over 15 years.

AMNESTY. And I don’t mean political amnesty in Canada. California wants everyone to come out of the closet. At least those people who have not filed tax returns. If you have balances due on an installment agreement, unpaid balance due without an agreement, are involved in a federal audit, have unreported income or questionable deductions, have unfilled tax returns or have appending state protest then you can apply for amnesty and they will waive the penalties. This is for all tax years prior to 2003. You have to apply for amnesty between February 1, 2005 and March 31, 2005. You also have to file the missing returns by May 31, 2005. If you don’t file for the amnesty, the penalties will increase. Businesses can apply for amnesty.

SOCIAL SECURITY AND SOCIAL INSECURITY. Everything will probably be changing soon. If you want to figure out whether to retire at 62 or 66 go to http://www/ssa/gov/retire. If you want to know whether it’s better to retire in Los Angeles or Costa Rica, we can probably help you there.

ELECTRONIC FILING. We do it. It’s a requirement by the state for all preparers with over 100 clients. It speeds up the refund and you only have to see us once. Those of you who want to see us more than once; there are signed photos available at the receptionist’s desk.

BILLING. Since you don’t have to see us more than once, billing has become more of a problem. If the check is really in the mail, then we may have the worst mail service in the world. We expect to receive at the end of our appointment either a check (can be postdated), a credit card charge or cash in any denomination. Your bill should also be current when we see you. It will help us keep our high level of service to you.

YEAR END PLANNING: It’s a different world. It may not be better to send your state estimated tax in December because of alternative minimum tax. You can still use your credit cards for charitable, medical and business deductions. You should also check your stock portfolio. If you have some losers, now might be the best time to sell. Incidentally, the minimum tax is when you want to pay your rightful tax and the government sneaks in their own form which is higher.

WITH THE ELECTION OVER, IT’S TIME FOR TAXES. L.A. Tax Service is now 22 years old. And just like a 22 year old, we are filled with knowledge, optimism and energy. Dom, our officer manager has been with us so long that when we hired her we must have violated child labor laws. She’s still a beautiful joy to behold. You can get into her good graces by asking about her child Alyssa’s report card. Patty still continues to crack jokes in both English and Spanish. At least we think she’s joking in Spanish. Her Jenny is beautiful and brilliant in both English and Spanish. Jim is our Rock of Gibraltar which is important for all 22 year-olds. Hadas with her fashion sense makes sure that we’re all trendy in case we get onto an episode of “Accountants Gone Wild.” Mercy is very important in both name and knowledge. 22 year-olds always need mercy. Nataliya holds all the secrets of our business. Her past experience with the Soviet Union will be very helpful. To balance everything out politically we hired a Keri who’s a Republican. David is our tech man, helping us go paperless. He scans then shreds everything we touch. Maybe that’s why our receptionist is missing. Don’t worry. She’ll be glued back together by tax season. Like most 22-years olds, L.A. Tax Service got a makeover. We painted the building. To be politically correct, by the end of your appointment, you will not be singing the BLUES or seeing RED.

BUSINESS MANAGEMENT. We have been offering this service for the past twelve years. We can pay your bills, invoice your clients and keep your books. We can handle both Quicken and QuickBooks on PC or Mac. We even do WINDOWS. For details of our services please see: Services.

The year started out with America going to war because of “weapons of mass destruction” only to discover that Sadaam Hussein was hiding them in North Korea.

California started out the year with a wishy-washy Governor Davis relieved to have won his election. Wishy-washy? Shouldn’t the people have realized this before? His name is “Gray” for God’s sake. And then ended up with a governor who when he speaks there are subtitles underneath. At least we can now say that our governor can beat up your governor.

Arnold Schwarzenegger has given new meaning to the political expression “hands on” executive.

Scientists have somehow calculated that the sound of a black hole in outer space is 25,000 octaves below that of a piano. I prefer to think that it’s just Johnny Cash singing in heaven.

Capital gains is no longer an endangered species.

Hollywood is choosing sides in the upcoming presidential election. Republicans flock to “Master and Commander:Far Side of the World” while Democrats refer to the president as “Looney Tunes:Back in Action.”

Kobe Bryant has given new meaning to the basketball expression, “backdoor pass.” To help out the economy Kobe added to the lexicon the term “adultery ring.” It should be 1/3 of your salary or four million dollars whichever is less. Don’t worry. He can afford it with his income tax cut.

Spike Lee sued Spike Television for use of his name. L.A. Tax Service is currently suing L.A. City for use of our name.

Rush Limbaugh. Turns out that his first name is too apropos. He found an interesting way to lower his taxes by taking an extra large deduction for prescription drugs. Non-prescription drugs are not deductible. Don’t worry he can afford it with his income tax cut.

Iraqis are now enrolled in Democracy 101. Certain fringe Iraqi students of democracy got very excited when they learned that America was started with a revolution when a small group of dissidents overthrew a despot named George.

William Bennett just completed his new book of virtues. “The Virtues of Video Poker.” Don’t worry with his tax cut he can afford his losses. Gambling losses are deductible only to the extent they offset gambling wins.

David Nelson is the most common name used by terrorists wanting to board airplanes. Ozzie, Harriett and Little Ricky are the next three most common.

Arnold Schwarzenegger turned down $200,000 in governor’s salary. Don’t worry. He saved more than that by repealing the car tax on his hummer.

Our relationship with the French is on the upswing. A lot of people have been trying to book themselves into Paris Hilton.

John Kerry has revitalized his campaign three times in the past six months. Bill Clinton advised John that he’s missing something for the voters to forgive. He’s married to the billionairess philanthropist Teresa Heinz. She said there’s 57 ways for John to be president. Don’t worry. He will save more money from the tax cut than he would receive as president.

On May 28, 2003, President Bush signed into law the Jobs and Growth Tax Act of 2003. This along with his 2002 tax legislation has given us the new “don’t worry, be happy” tax deductions. So welcome to the “WEAPONS OF MASS DEDUCTIONS.”

BACK TO THE FUTURE. Tax rate reductions have been accelerated into 2003. The ten per cent tax bracket has gone from the first $6,000 in income for a single person to the first $7,000. Double this for married people. A tax savings of up to $50 single ($100 married). People who were once in the 39.6 per cent bracket are now in the 35 per cent bracket. A savings from $5,000 to infinity. (See Warren Buffet’s tax return).

IT’S ALMOST BETTER TO BE MARRIED THAN REMAIN SINGLE. Unless you’ve married into the Heinz family. For married couples who do not itemize the 15% bracket has been expanded to now become twice the single filing bracket. There is no penalty relief for those in higher brackets. So it’s better to marry poor which is why J-Lo and Ben Affleck are postponing their marriage. Even they are waiting for a better tax break or for Ben’s career to continue downhill until he’s poor.

“LET THEM BUY STOCK”. There is great tax savings for both rich and poor alike for buying stocks with dividends. Most dividends will be taxed at either 5% or 15% depending on ones’ income. The five Wal Mart heirs will receive about $500,000,000 in dividend income. They will have $1,180,000 in tax savings. They will be able to hire more illegal aliens with this money.

CHEAPER BY THE DOZEN. It’s a remake of an old movie and another way to lower your taxes. Each exemption is now $3050.

SOCIAL SECURITY OR INSECURITY. If you want to figure out whether to retire at 62 or 66? You can check this on the new retirement benefit calculator at http://www/ssa/gov/retire.

COVERT GOVERNMENT ACTIVITY. Is it the CIA or Terrorists? Actually it’s the alternative minimum tax. This is the tax monster that lurks underneath every tax return waiting to come out. It started out innocent enough. Its purpose is to insure that taxpayers who take advantage of tax shelters still pay their “fair share.” However, it is now a tax that is calculated to make sure that you pay your “fair share”. If you have too much state tax withholding, property taxes, refinancing when you get extra money out, itemized business deductions, capital gains and other passive income, you may be subject to this added on tax. You may or may not need to prepay your state and property taxes. To pay or prepay that is the question. Child exemptions don’t help either. Those of you who want to give back your children this may be a good time.

OR IT MAY BE A BAD TIME. FINALLY THE DEPENDENT CARE CREDIT HAS GONE UP. It has been $2,400 since Rover had a litter of puppies. And she was mad that it only covered two puppies. The figure is now $3,000 a qualifying individual with a maximum of $6000. The credit is between 20 and 35 per cent of these amounts with a lot of phase outs attached to it. Too many credits can bring out the alternative minimum tax monster.

THE CZECH’S IN THE MAIL. If you’ve adopted a Czech child or have one or more of your own on your 2002 tax return and the child is born after 1987, you probably received an extra $400 for each of your qualifying children. If not, then you can claim the extra $400 credit on your 2003 return.

MEDICAL DEDUCTION WORTH WAITING FOR. The Tax Relief Act of 1997 gradually increased the 30% for self-employed to 100% in 2003. This is an above the line deduction. Of course, soon we will reach the point that no one will be able to afford health insurance. As an itemized deduction, medical doesn’t count until it reaches 7 ½ per cent of your adjusted gross income. Only six per cent of people are able to use it. In the beginning of life, egg donor costs are deductible. At the end, long term care is a medical deduction as long as it is not provided by a relative or spouse.

HE WHO IS NOT BUSY BEING BORN IS NOT BUSY DEDUCTING. Education qualifies for a credit that is 20% of up to $10,000 of expenses. Now if we can just figure out a way of having the schools stop raising the tuition.

IT’S BETTER TO GIVE THAN TO RECEIVE EXCEPT IN REAL LIFE. The IRS now allows people to give away $11,000 without any gift tax consequences. This is not a deduction for the person who gives and it is not income to the person receiving the gift. It helps in estate taxes. Kobe’s wife did not have to pay taxes on the gift.

IRA’S STILL HAVE A MAXIUMUM OF $3000 ($3500 FOR THOSE LUCKY ENOUGH TO BE OVER 50)

LOW INCOME WITH MONEY FOR RETIREMENT. Sounds like an oxymoron? Kind of like when Marie Antoinette was told that the poor didn’t have bread to eat, she replied, “Let them eat cake.” If she was alive and in power now, she would have said let them put money in retirement programs. And to help out she would have given them a credit for doing so. Of course if she were from California she would say forget bread, carbs aren’t good for anyone.

THERE’S NO BUSINESS LIKE BUSINESS. This is a good tax bill for businesses. There is a 50% first year bonus depreciation on all business equipment bought after 5/5/03. This has nothing to do with the Cinco de Mayo celebrations.

Equipment can be expensed up to $100,000 a year.

TIME TO BUY A NEW CAR FOR BUSINESS. No matter what those salesmen tell you it does not pay to lease. The first year luxury auto depreciation is increased from $4600 to $7650 multiplied by the percentage of business use. Incidentally, a “luxury” car is $15,300 and up. This increase in deductions is only for new cars.

ECOLOGICAL POLICY? Any car over 6,000 pounds curb weight qualifies to be expensed up to the first $100,000 multiplied by the percentage of business use. You can check if a car or truck qualifies by checking with http://www.intellichoice.com.

STANDARD MILEAGE FOR BUSINESS IS 36 CENTS A MILE. The average car cost with depreciation, gas, insurance, repairs, AAA and car washes is about 63 cents a mile.

CELL PHONES NEED A LOG KEPT. So while driving in one’s car talking on the cell phone, when the call is terminated, one should write down on a piece of paper the reason for the call. It would be nice if accidents while doing something related to business were tax deductible. At least keep the bills and mark why they were business related.

LONG TERM CAPITAL GAINS REDUCED TO 5% AND 15%. Now lower income people can buy stock, keep it for a year and then sell it at a profit and only pay 5% tax on the gain. Those in more than a fifteen per cent regular tax bracket will pay 15% capital gains. This is only for all sales after 5/5/03.

TEACHER RETENTION CREDIT IS BACK AFTER A TWO YEAR RECESS. The California credit for elementary and high school teachers is back again in full force. This is for teachers who have been teaching with a credential for the past four years. For those teachers with twenty years of service, the credit is $1500 on your state taxes. They will need this since they will have 95 students in their classes next year.

SELL A PIECE OF PROPERTY IN CALIFORNIA THAT’S NOT YOUR PRIMARY RESIDENCE? California has withheld 3.33 per cent of the gross proceeds. You will probably get most of it back come tax filing. Bring your escrow statements with you when you file.

HIRE A GROPE INVESTIGATOR. Many men following in Arnold Schwarzenegger’s footsteps have hired an investigator to see how many people they have groped in their lifetime. This is not a deduction. This is the real reason why the governor cancelled this investigation.

YEAR END PLANNING? A little different this year. It may not be better to send your state estimated tax in early because of alternative minimum tax. You can still use your credit cards for charitable, medical and business related deductions. Since tax rates are going down in 2004, your deductions will be worth more in 2003.

ELECTRONIC FILING? It’s now a requirement in the state of California. You will be getting your refunds in a shorter period of time. Of course, there’s no money in the state coffers. So you may end up with an I.O.U. But you’ll get it quicker. Note: that was just a joke you will get your refund of course it may be in discounts to state parks and universities.

DON’T HAVE TO COME BACK AND SIGN? That’s right. We will be sending virtually every virtual return by e-file and your refunds can be deposited directly. We will have you sign the e-file declaration when you finish your appointment. No return trip. Because of this and accounting factors, we are requesting that you pay your tax return preparation fee at the time of your appointment. We accept checks, credit cards, PayPal or you can have your refund checks sent here and we can exchange checks.

BUSINESS MANAGEMENT? We’ve been offering this service for the past eleven years. We can pay your bills, invoice your clients and keep your books. We can handle both Quicken and QuickBooks on PC or Mac. We even do Windows. 2000 that is.

L.A. Tax Service is finally becoming an adult at 21 years of age. To celebrate, we are moving entirely upstairs. We have kicked out the “parents” and will be taking over the apartment next door in addition to the other rooms upstairs that we have occupied for so many years. So our new slogan will be “Computerized accuracy with even more of a personal touch.” We’ll even have four bathrooms. Of course, remodeling isn’t cheap so we will be using tax returns instead of toilet paper. Dom, our office manager is making sure that our transition into adulthood runs smoothly. Patty says no matter how old we get, she will keep telling jokes until someone gets them. Actually she’s the funniest person here if you believe her. Jim manages our business management section so well that he should be running a Big 8 Accounting firm except there are none left. Hadas, who puts the chic in the letter C in CPA, says that it’s about time L.A. Tax Service became an adult. Mercy, payroll aficionado, is worried that she’s being kicked upstairs but we prefer to see it as moving up the corporate stairwell. And our new receptionist, Claudia a.k.a. Kihui is a Jill of all trades, thought she was hired by adults. She learned otherwise. But we’re all looking forward to the upcoming tax season, filled with laughter and deductions. Who could ask for anything more?

2002. A year filled with too much T&A: terrorists and accountants. Terrorists accounted for 3 billion dollars in damages and accountants helped account for 1.7 trillion. Whatever was left, Americans spent on gasoline.

Winona Ryder was finally convicted of shoplifting. She was sentenced to 480 hours of community service in working with children with Aids, the sick and the blind. When told that Mother Teresa spent her whole life with these people, Winona replied ‘what was she sentenced for?’

The Chinese choose a new Premier Zhu. This sparked a run of ‘Zhu’s on first?’ jokes. President Bush was annoyed because he wanted to be on first.

Since the Arab world loves our movies, our government wants to produce ‘Saddam Hussein and the Chamber of Secrets.’ Although Hussein prefers ‘To Die Another Day.’

Martha Stewart is designing a new clothes line. It’s called Prison Gray. Next year, San Quentin may be considered one of the best hidden resorts of Northern California.

The Louisiana Supreme Court declared that sodomy laws were constitutional. Therefore, what Louisiana politicians do to their constituents should be declared unconstitutional.

When Nicholas Cage and Lisa Marie Presley found out that married filing jointly was financially a bad way to go, they quickly divorced. They will both be filing single. Jennifer Lopez will filing married filing jointly and engaged to someone else.

The Democratic Party is looking to change from a non-profit organization to a charitable one.

To show that the party may be over, Zhu invited Chinese capitalists to join the communist party. They even adapted our tax system. They put in their own censorship deduction.

John Cage, the experimental composer, once wrote nine minutes of silence which he put on a record. A musician, as an homage to Cage, put a minute and a half of silence on his CD. He was sued by the Cage estate for plagiarism. The estate is now suing Paul Simon for Sounds of Silence. And Silent Night might be next.

The Chechen rebels had an odd way of showing that opera can be exciting.

The ten thousand page document handed over by the Iraqis turned out to be an Arabic translation of our tax code. Talk about a weapon of mass destruction.

The Iraqi war is supposed to cost $6,800 to every American citizen. That’s $27,200 for every family of four. And you were looking for a reason not to have septuplets.

After last year’s and this year’s stock massacre, Americans stopped worrying about retirement. They’ll get their rest in the afterlife. Though student loans will still be due.

The Internal Revenue Service joined the Axis of Evil.

TAX HIGHLIGHTS AND LOWLIGHTS:

THERE’S NOW A TEN PER CENT TAX BRACKET. The first six thousand of taxable income for single individuals, ten thousand for head of households, and twelve thousand dollars for the married couples is now taxed at 10% and not 15%. This translates to the $300, $500, $600 tax rebate we received a year and half ago that was supposed to stimulate the economy. Don’t expect a rebate, you’ve already received it from withholding.

THE PERSONAL EXEMPTION IS NOW $3,000. Now that’s a reason to have septuplets. And for the first time you can claim nieces and nephews. But not Uncle Sam. You can deduct your real uncle Sam if he lives with you.

IT PAYS TO GET OLDER EVEN IF NO ONE HAS ANY RETIREMENT. There is a medical deduction for long term care insurance. The best time to buy is between 55 and 60. The best time to need it is never.

FORTY POUNDS OF FLESH, FORTY POUNDS OF DEDUCTION. Losing weight may be deductible. If you are considered obese, in Los Angeles that’s five pounds underweight, then any weight loss treatment is deductible. This does not count the cost of purchasing diet food. There is no information on how much going to the spa will be deductible. And you don’t even have to lose weight.

THERE’S ELECTRICITY IN THE AIR AND EVEN HYBRIDITY. There is a deduction for any new hybrid car and a tax credit for any electric car. There is up to a $2,000 deduction for hybrid cars and up to a $4,000 credit for an electric car. The California Air Resource Board is giving out grants of up to $9,000. Check this at www.arb.ca.gov and look for the zero commission vehicle information.

SCHOOL DAYS DEDUCTION FOR TEACHERS. There is an above the line deduction on your federal return for up to $250 annually of classroom expenses. You can deduct everything but the hickory stick. You can still itemize the remainder of those business deductions.

TEACHERS ARE GETTING SUSPENDED. At least their tax credit is. Because of the deficit in California and because there’s not another gubernatorial election for four years, the Teacher’s retention credit has been suspended. You might want to send in an estimated tax to cover the credit. There will be no penalties for those who underwithhold because of this suspension.

THERE’S GOOD NEWS REGARDING STUDENT LOAN INTEREST. The first $2,500 of interest is deductible. The income phase-out has been increased. For a single person the AGI phase-out begins at $50,000 and finishes at $65000. Married couples have a phase-out that begins at $100,000 that continues to $130,000.

MAJORING IN BUSINESS, MINORING IN DEDUCTIONS. There’s a new above-the-line education deduction. Taxpayers with AGI that does not exceed $65,000 ($130,000 for Married Couples) are entitled to a maximum deduction of $3,000 per year. Taxpayers must choose between deduction and credits. You don’t have to major in business to get the credit.

EDUCATION IRA RENAMED OR ACTUALLY CORRECTLY NAMED. It’s now called the Coverdell Education Savings Account. So now you don’t have to embarrass yourself at the bank. Also you can contribute up to $2.000 a year. As if interest rates aren’t embarrassing enough.

YOU MAY NOT GET SOCIAL SECURITY BUT YOU WILL DEFINITELY BE PAYING FOR IT. The maximum FICA rate is increasing again. It has been increased from $80,400 in 2001 to $84,900 in 2002. For the average person making more than this, the increase in taxes is $279. The maximum will increase to $87,000 in 2003.

SEPTUPLETS HELP WITH CHILD TAX CREDIT. If your income is less than $75,000 as a single person and $110,000 for a married couple this credit is available. In the soon to be proposed Bush tax plan this could go up to $1,000 per child.

KEEPING THE REVOLUTION OUT OF AMERICA. Frequent flyer miles are not taxable.

YOU CAN NOW GIVE PEOPLE $11,000. The annual gift tax exclusion is $11,000. This includes gifts to your pet ostrich.

CAPITAL GAINS, CAPITOL GAINS. The new tax bill continues to tinker with capital gains. There is a 10% and 20% capital gains tax for assets held more than 12 months, depending on your tax bracket. There is now an 8% and 18% capital gains tax for assets owned for more than five years. The 18% bracket will not count until January 1, 2006. The whole problem with capital gains tax manipulation is that there is 1.7 trillion dollars of loss floating around. Actually President Bush is suggesting raising the allowable loss from $3,000 to $8,000. Maybe he invested in Enron.

DEPRECIATION CAN BE YOUR FRIEND. Starting in 2001, there is a new 30% depreciation allowance for certain property purchased after 9/10/01. I know a lot of you bought property on September 12th. There were few lines etc.

STANDARD DEDUCTION FOR MILEAGE INCREASES. The standard rate is now 36.5 cents per mile. It is 14 cents a mile for charity and 13 cents for medical and moving. If you’re moving a church there are a lot of deductions.

YOU CAN ALWAYS AFFORD A LUXURY CAR. Luxury cars are now considered any car that costs at least $15,300. If you are contributing a luxury car to charity or any car that is worth at least $5,000, there must be an appraisal. The appraisal can be from a car dealer.

SELF INSURANCE DEDUCTION IS INCREASING. In 2002, you can deduct 70% of your health insurance premiums from your income. In 2003 it will be 100%.

EVEN THOUGH NO ONE WHO ISN’T IN THE GOVERNMENT WON’T BE ABLE TO AFFORD TO RETIRE, THE PENSION RULES HAVE IMPROVED.

The traditional IRA can now be $3,000 and even be $3,500 if you’re over 50. There are phase outs for those with retirement plans. There is a $500 catch up provision for those over 50. You know who you are. Note: This doesn’t apply to anyone in Los Angeles since no one here claims to be over 50.

The Roth IRA contributions are the same as the traditional IRA.

NOTE: If your Roth IRA has gone down in value, if you take out the principle, there is no tax or penalties.

SEP plans have increased to 25%. If you are self-employed, the 25% is really 20%. The maximum deduction is $40,000. That’s the good news. The bad news is that you need $40,000 or at least $40,000 minus the tax savings.

IRAS FOR THE PRODIGAL SON. There is a non-refundable credit for contributions made by eligible lower income taxpayers to certain plans. The maximum annual contribution is $2,000. Of course the credit rate depends on the AGI of the taxpayer. The credit rate can be up to $1,000. So not only can you get a $1,000 credit but you can use the retirement plan as a deduction. Probably the only people who will be able to afford this are those people with parents who have $2,000 to give. The credit goes from 10% to 50%. The person can not be a full-time student or a dependent.

CALIFORNIA CITIES HAVE DECLARED WAR ON SMALL AND EVEN SMALLER BUSINESSES. As many of you know Los Angeles has sent out letters to anyone who has a schedule C (your own business, even if it’s making no money), as well as partnerships, LLC’s, LLP’s and corporations. The letters are requesting financial information so that you can be assessed for a business license tax. All California cities are doing the same. You can call your Council members and protest if you like. But you should respond. The State insisted on the tax being related to Gross Receipts and not profitability. Ironically, state tax revenues will go down because the license is deductible.

END OF THE YEAR TAX PLANNING. Use your credit cards for charitable, medical and business related deductions. Since tax rates are going down, your deductions will be worth more in 2002.

BUSINESS MANAGEMENT? We have been offering this part or full service for the past ten years. We can pay your bills, invoice your clients and keep your books. We handle both Quicken and QuickBooks on PC or Mac. We even do Windows. 2000 that is.

ELECTRONIC RETURNS. You can get your refunds in a matter of days. Unfortunately, you can still spend it in a matter of seconds.

L. A. TAX SERVICE is preparing for its twenty year anniversary celebration. It seems like we’re always celebrating our first anniversary which is paper. Everyone here is ready to give you the perfect L.A. Tax Service experience. No, we’re not getting rid of the stairs. Dom, our office manager, has been here since almost the beginning. It’s amazing that she’s still twenty-three. Patty tells jokes that are at least twenty years old. Chuck, our resident CPA philosopher, is currently working on the L.A. Tax Service philosophy. Zen and the Art of Tax Preparation. Jim is celebrating by making sure everything runs smoothly with the tax returns and the business management clients. Hadas is trying to get us to adopt a dress code but I don’t look good in a dress. Mercy tells me that buying china is the way you celebrate a twenty year anniversary. As our resident Chinese person, we should send her to China. And Anna, our receptionist will be turning 21 so we’ll be celebrating that too.