Benjamin Franklin once said that two things are inevitable in life: death and taxes. And the nice thing about death is that there are no Y2K problems.
1999. The year started out with Bill Clinton about to be impeached and ended with Hillary Clinton announcing her senatorial candidacy and moving to New York. Bill has his own Y2K strategy. If we all go back to 1900, there will be no presidential two term limit and Clinton can run under the Bull Moose Party.
It turns out that the Y2K bug was invented by some people who owned land in Montana.
As of this writing, it appears that the presidential election of ’00 will be between Al Gore Jr. and George Bush Jr. So in boxing lexicon, we will have a battle of Jr. Lightweights.
A new religion has been formed. People have been praying to www.god.com.
Mathematicians and physicists have embraced “string theory.” The theory would expand the universe into 11 dimensions, and even dispense with space and time. The new song refrain would be “I’ve got the world on eleven strings.” One of the dimensions in the U.S. Tax Code.
George Bush Jr. has been signed to star in “Being George Bush Senior.”
The Jet Propulsion Lab was embarrassed when it helped lose the $125 million dollar Mars Climate Orbiter in September. They had confused English and metric units. An angry senator said that “the problem with JPL is that if you give them an inch, they’ll take a kilometer.”
Al Gore Jr. has been signed to star in “Not Being Bill Clinton.”
Dr. Kervorkian discovered that there is life after death. A life sentence.
To spice up the presidential campaign, George Bush Jr. and Al Gore Jr. have agreed to at least one presidential debate. Well not exactly a debate, they will appear on the show “Who wants to be a Millionaire?” Right now their advisors are arguing on how many life-lines each one will get. Regis will ask, “Final answer” and George Bush Jr. will answer “Let me call George Schultz.”
There were so many plane crashes near Martha’s Vineyard that they’re changing its name to the Bermuda Shorts Triangle
Critically acclaimed movie “The Insider” has not done well in the box office. The three hour movie needs an intermission for smokers.
The Olympic committee will allow bribery as a sport in the 2008 games in the Cayman Islands.
Steve Forbes promised that when he is elected the show will be “Who Wants to be a Billionaire.”
TAX HIGHLIGHTS: Most of the interesting new tax deductions died behind the doors of Congress. Fiscally, Republicans became like Democrats. Democrats became like Republicans and President Clinton realized that it’s easier to veto than it is to lead. The American Public said no to their share of of the tax surplus. So we ended up with a few more benefits that last year but not many.
CHILD TAX CREDIT: You get a $500 tax credit for each child under the age of 17. To stop Bill Gates from adopting 500 million children and therefore avoiding taxes, there is a disclaimer. If you are married and have an adjusted gross income of $110,000 or are single earning over $50,000, your credit starts to phase out. If your children are over 16, kick them out or send them to college so you’re eligible for the…
HOPE CREDIT: This is a credit for the first two post secondary years. If your kid doesn’t want to go to college you can be eligible for up to a $2,000 credit. This covers dollar for dollar tuition and fees. There is the Bill Gates phase out: Between $80,000 and $100,000 if married, $40,000 to $50,000 if single. If someone in your family is past the first two post secondary years and wants to go to school there is the…
LIFETIME EARNING CREDIT: This is a credit for 20% of all tuition and fees. The classes must be taken at a school eligible for federal aid. The same Bill Gates restriction for the Hope Credit applies. So if you’re interested in handling hazardous waste, you can receive a credit and probably have a future medical deduction.
QUALIFIED STATE TUITION PROGRAMS: This is for those taxpayers who want to start investing now for their child’s college education. The basic idea is that you can put money into a trust and the student can withdraw it at a lower tax bracket than the donor’s. There are no income restrictions. Bill Gates found that it was easier to buy your child a university. The upside to this program is that the donor can take the money away from the child at any time. The downside is that it will be invested in fairly conservative investments (approximately 8 per cent returns). This can be set up by grandparents, too. If interested the best information can be found at www.collegesavings.org or for the California plan call 1-877-728-4338. Or if you need to borrow money you might want to take a…
STUDENT LOAN DEDUCTION: This off the top deduction is limited to $1500. Taxpayers who qualify must be legally obligated to pay interest on qualified education loans during the first 60 months that interest payments are required. The Bill Gates’ deduction starts to phase out for married taxpayers who earn $60,000 and single taxpayers who earn $40,000.
QUIT SMOKING AND DEDUCT THE COST: A recent survey showed that the reason people didn’t stop smoking was because it wasn’t deductible. Now there’s no excuse. The costs of smoking cessation programs and prescribed drugs to alleviate nicotine withdrawal are medical deductions. Going to Paris so you don’t have money to buy cigarettes is not deductible.
IF YOU’VE GOTTEN THIS FAR IN THE NEWSLETTER, YOU PROBABLY DON’T HAVE ATTENTION DEFICIT, HYPERACTIVITY DISORDER.
Any special education programs for people with ADHD are also medical deductions. Having an ADHD child who smokes does not qualify as a double deduction.
DONATING YOUR CAR TO A QUIT SMOKING PROGRAM DOES NOT PROVIDE A SMOKE SCREEN FOR DEDUCTIONS: The IRS will be scrutinizing the car donation plans. Case in point: An ad from a Maryland newspaper states that “the donated car doesn’t even have to run. Just four tires on it so it can be towed if necessary and get full Blue Book value.” You need to prove the FMV of your car. Anything over $5,000 needs to be appraised.
HOW TO OWE THE IRS AND FLY TO HONG KONG IN THE PROCESS:
No, they’re not bringing back debtor’s prison. They’re allowing credit card payments and therefore frequent flyer miles for your tax deficits. Starting in March 2000, you can pay your estimated taxes by credit card. The fees are about 2.5 %. You can do this by calling 1-888-2PAY-TAX. This is only for Mastercard, Discover Card or American Express. Visa is not participating, though you will need a visa to go to Hong Kong.
SELF-EMPLOYED HEALTH INSURANCE DEDUCTIONS RISE TO 60%: This deduction comes off the top of your income.
HOW DO I LOVE THEE? LET ME COUNT THE DEDUCTIONS. The best deduction is if you’re self-employed and you hire your spouse as a bona fide employee. You can pay for the spouse’s medical insurance as well as her/his dependent’s which is you. Also, you can reimburse for all other medical, for the entire family. This works best if you have no other employees. There is a downside to hiring a spouse. If you’re not aware of it, you probably don’t have a spouse.
YOU CAN GO HOME AGAIN AND DEDUCT THE TRIP: You can now take a home office deduction for the administrative or management activities if there is no other fixed location of the trade or business. Also if you’re allowed to take a home office, you can deduct traveling to and from the home office for business purposes.
THE ULTIMATE LAWYER JOKE: If you are engaged in a trade or business and pay a lawyer for services, then you must send the lawyer a 1099. The lawyers fees can be as little as $50.
CHRISTMAS OR HANUKKAH EQUIPMENT BUYING: You can expense up to $19,000 worth of equipment in 1999.
THE HUMMER CAR DEDUCTION: Bigger is more deductible. If you have an automobile that weighs more than 6000 pounds, it can be fully deductible in a 5 year period and part of it can be expensed. The 6,000 weight does not include passengers or animals.
THE STANDARD MILEAGE RATE GOES DOWN: The IRS-specified rate for 1999 is 32.5 cents per mile until April Fools Day and thereafter reduced to 31 cents per mile. According to Avis the average car costs 55 cents a mile. You can always take your actual cost of driving.
PRINCIPAL RESIDENCE CAN BE YOUR PRINCIPLE WAY OF MAKING MONEY: Starting May 1997, you can exclude up to $250,000 ($500,000 if married filing jointly) when you sell your house. You must have lived in it for two of the past five years. You do not have to buy another house. You can buy and sell principal residences every two years.
RODIN AND ROTH: Many taxpayers have spent last year in the position of “The Thinker” contemplating about whether or not to convert their IRA accounts into a Roth. There was a time when people would spend time contemplating their existence but that’s the subject of next year’s newsletter if the tax code gets erased by Y2K.
The Roth IRA is a non-deductible IRA that has the nice provision that when you take it out at the age of 59 1/2, all of the money is yours. There is a Bill Gates phase out provision. Note: This will be called something else next year when the government compromise with Microsoft goes into effect. The phase out begins with unmarried taxpayers with adjusted gross income between $95,000 and $110,000 and joint filers with AGI between $150,000 and $160,000. Bill Gates makes this in the time it take to type Bill Gates.
TO CONVERT THE ROTH OR NOT TO CONVERT: First the AGI limitation is $100,000. All of the conversion amounts will be taxable in 1999. There is no four year spread. You usually convert when you are at a low tax bracket and think you will be at a higher tax bracket when you retire. Converting prior years non-deductible IRA’s is usually a good idea.
YOU CAN CHANGE YOUR MIND ABOUT LAST YEAR’S CONVERSION: You have until December 31, 1999 to change your mind about last year’s conversion.
1% of American taxpayers earn more than $227,500.
END OF THE YEAR TAX PLANNING?
Use your credit cards for charitable deductions as well as business related deductions. What you charge in December is what you deduct in 1999. If you have too many business deductions or capital gains, you may want to rethink this strategy and wait until 2000 to make these business purchases. Charity always helps.
BUSINESS MANAGEMENT? We do it. We have been offering this full service management for the past seven years. We can pay your bills, invoice your clients and keep your books. We handle both Quicken and Quickbooks.
1099’s? We have been reminding you about this for the past 18 years. In your business, if you pay anyone $600 or more for services or rent, you must send a 1099 form. We provide this service.
The offices are going through some changes. We are networking our computers. I threw away my ancient computer and exchanged it for an e-machine. In case the doomsday soothsayers are right about Y2K, I’m keeping my abacus.
The entire staff is gearing up for the next millennium’s tax season. Dom is organizing the new totally computerized L.A. Tax Office. If the Y2K bug hits, she will be in charge of parking people’s horse and buggies. Patty’s humor has been working full-time. Either she will be discussing receipts being lost in cyber space or helping us set up appointments by telegraph. Mercy knows that mercy is needed in any century. Hadas, the clothes horse, will be either wearing something “tres chic” or something Victorian. Jim will remain calm, cheerful and organized. Margo reminds us that 2000 is really the pre-transition to the millennium but there’s always a reason to panic. Tax Season is coming.