Benjamin Franklin once said that two things are inevitable in life: death and taxes. And the nice thing about death is there’s no recount or irregularities.
The beginning of the new millennium unless you are the fifty per cent of the world who feel that it begins in the year 2001. The courts are going to decide.
The year started out with the fate of the world depending on a group of computer geeks trying to get us under Y2K compliance and ended with the fate of the world depending on a group of people playing canasta in Florida.
We started out with George Bush, Jr. and Al Gore, Jr. fighting it out for the presidency and ended up with a group of lawyers slugging it out.
The Republicans decided that tort reform could wait until after the inauguration.
During the first debate, Bush accused Gore of fuzzy math. Now, they both accuse each other of fuzzy math.
Gore wanted to put Social Security in a lock box and Bush wanted to put Gore in a lock box.
Gore promised Senior Citizens a prescription drug program. He should have promised them prescription glasses.
We have a new four-letter word, “chad.” The country seems to be divided up between Chadists and Antichadists.
There were no dimpled chads in Texas. The people just shot them out.
Proving that Men are from Austin and Women are from Tennessee, 54% of women voted for Gore and 53% of men voted for Bush. This gender gap started when Gore kissed his wife passionately during the Democratic Convention. Women turned towards their husbands and said, “that’s what’s going to happen in a Democratic administration.” Men replied “I’m voting for Bush.” Which definitely gives him a MANdate.
Democrats tried to play pin the chad on the donkey.
A 250 million-year-old organism was found. Gore lost some votes in the scientific community when he said it shows that Social Security, too, could survive that long if placed in a lock box.
Environmentalist Gore tries to turn the Floridian Butterfly into an endangered species.
Biblically the Meek Shall Inherit the Earth but first they have to learn how to punch out a chad.
Both Bush and Gore refused to answer any questions during the debate about the film Matrix.
Katherine Harris was nominated for her role in the Grinch that Stole the Election. I prefer Green Eggs and Chads.
It used to be that political machines controlled elections now it’s voting machines. Though the name Daley is involved either way.
People are watching reruns of Survivor to understand this election.
When Bush heard that Cheney had a heart attack, he said “Oh no, now I have to be president.
Revisionism substituted for vision. People who didn’t like Victor Hugo’s down ending decided to rewrite his novel. It’s now called The Recount of Monte Cristo.
The day after the election, physicists announced the potential end of the world for the year 2029. It seems like an asteroid or some unknown large object could crash into the Earth and therefore solve our Social Security Problems. A couple of days later, they said that it was fuzzy math. The crash could happen in 2070 and instead of an asteroid it turned out to be a lock box.
The Democrats were contemplating challenging the last Supreme Court decision. It seems that Clarence Thomas was caught cheating off of Anthonin Scalia’s paper.
Not being able to go home again because he lost his home state, Gore will be nominated to be ambassador of Chad. Where every Chad counts.
TAX HIGHLIGHTS:
There were going to be a lot of tax law changes enacted this year. Unfortunately, no one could agree on anything. So if you’re waiting for your share of the surplus, you may have to wait until next year or maybe the next. There are some previous tax law changes that will effect you this year and there’s much to talk about. California decided to reward teachers and there’s an interesting court case involving head of household deductions for unmarried people who want to claim somebody else’s child..
If you have a taxable income of over $288,350, you’re at the highest tax bracket. 39.6% on Federal and 9.3% on California. Congratulations. If Bush’s tax plan is enacted you will benefit the most. Your vote will definitely be counted.
LONG TERM CARE COSTS ARE NOW A MEDICAL DEDUCTION. If Anna Nicole Smith was a licensed professional, Billionaire J. Howard Marshall could have deducted her as a medical expense. There are special tax considerations given to long term care premiums.
DEDUCT TRAVEL TO STOCKHOLM? Amounts paid by an individual for expenses, including transportation costs and registration fees, of attending a medical conference relating to the chronic disease of an individual’s dependent, can be deductible as a medical expense. All medical expenses have to exceed 7 ½ % of a taxpayer’s adjusted gross income.
CAPITAL GAINS LESS CAPITAL PAINS. 8% and 18% rate available for some sales in 2001. Effective in 2001, the year not the movie, a new rate structure has been created for assets held more than five years and sold after December 31, 2000. For those in the 15% bracket, the long-term capital gain rate is 8% regardless of when the five-year period begins. The 20% rate on long-term capital gains drops to 18% for assets purchased after December 31, 2000 and held for five years. The 18 per cent rate will not take into effect until 2006!
There is a special election to use the 18% rate instead of the 20 per cent rate. Taxpayers, other than corporations, may elect to treat capital assets, business assets and even readily tradable stock held on January 1, 2001, as if they had been sold for their fair market value so as to reset the acquisition date and qualify future appreciation for the 18 per cent rate. Gain from the deemed sale is subject to tax, however any loss resulting from this election is not allowed. The election is irrevocable. It has been calculated that this election is best used when the gain is less than 13.888%. Those of you in Florida who felt disenfranchised by the election in 2000 can consider this your special election.
WHEN I’M 65. You can still claim Social Security. Instead of having your Social Security benefits reduced $1 for every $3 you earn over $17,000 in wages, you will be able to collect their full benefit. Of course why you will still want to work is another question. Maybe there’s a pill. See promises for Senior Citizen prescriptions.
SOCIAL SECURITY’S NEW RETIREMENT BENEFIT CALCULATOR IS A http://www.ssa.gov/retire
IT STILL PAYS TO HAVE CHILDREN UNDER 17. There is a child tax credit of $500 for each qualifying child under the age of 17. There is a phase rate of $50 for each $1,000 of modified AGI in excess of the threshold. The threshold is $110,000 for married taxpayers filing joint returns and $75,000 for those filing single or head of household.
THERE IS HOPE EVEN FOR DEMOCRATS at least in the form of a Hope Credit. This is for the first two post secondary years. This up to $1500 credit covers dollar for dollar tuition and fees for the first $1000 of expenses and 50% of the second $1,000. There is a phase out between $80,000 and $100,000 if married; $40,000 if single. This is for you or your children. Of course if I go back to college, my children will have to drop out of school and support me. But if I did go back I could get 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. There is a similar phase out. And they thought the butterfly ballot was confusing.
YOU CAN BECOME WEALTHY AND STILL USE THESE COLLEGE CREDITS. This is for those who receive no benefit from the dependency exemption and lose the college credit because of AGI phase out limitations. Set your child free. If your child has a tax liability and is attending college, there are ways that he or she can take the credit.
QUALIFIED STATE TUITION PROGRAMS: This is for those taxpayers that want to start investing now for their child’s college education. The basic idea is that you can put money into a trust that will accumulate income and the student can withdraw it at a lower tax bracket than the donor’s. There are no income restrictions. If interested the best information can be found at www.collegesavings.org
AMERICAN EXPRESS, MASTERCARD AND YOUR TAX PAYMENTS. The Service has announced that estimated taxes can be paid with credit cards starting March 1, 2000. This option begins with 1st quarter estimated tax due on April 17, 2000. In addition, taxes due with extension requests can be paid with credit cards. Credit card users pay a convenience fee of 2.5% to use the plastic connection. This can be done by phone 1-888-2PAY-TAX. 1-888-272-9829
YOU CAN’T GO HOME AGAIN BUT YOU CAN SELL IT AND NOT PAY TAXES. A taxpayer may exclude up to $250,000 (500,000 if married filing jointly) of the gain realized on the sale or exchange of a principal residence. The residence must have been owned by the taxpayer for at least two of the five years before the sale or exchange. Also it must have been a principal residence for at least two years. This is limited to one sale in two years. There are interesting scenarios that allow the sale to be less than two years. So if you’re contemplating selling, call us. Note: Clinton can not sell the White House, though he used to rent it.
STANDARD MILEAGE RATE INCREASES. For the year 2000, the mileage rate is 32.5 cents per mile. Starting in the year 2001, the rate will rise to 34 ½ a mile. And you thought Bush and Cheney’s relationship with the oil industry was detrimental. It may be better to take the actual cost of driving instead.
YOU CAN OWN A LUXURY CAR NO MATTER WHO’S THE PRESIDENT. Luxury car rules apply when a car’s cost is over $15,400. This means you can only depreciate that amount over for the first five years. Each succeeding year is $1775.
GAS GUZZLERS ARE A GAS, GAS, GAS. This is not a commercial song by the Rolling Stones for the AM General Hummer. It just means that if your car, SUV or Truck is rated at 6,000 pounds of gross vehicle weight you can take a much larger deduction. Rating includes cargo that can be carried, not just the unloaded weight. Costs of these vehicles can be expensed up to $20,000 in a single year. To find the G.V.W. of your car, look at the inside edge of the driver’s side door for a small metal plate.
ELECTRIC CARS GIVE MORE THAN VOLTAGE. The electric car depreciation is tripled that of the luxury car.
SELF-EMPLOYED HEALTH DEDUCTION IS STILL 60%. If the Democrats and Republicans were still speaking to each other, this would now be 100%.
IRA’S ARE GETTING BETTER AND EVEN THOUGH SENATOR ROTH LOST HIS BID FOR RE-ELECTION, THE ROTH IRA IS STILL IN FORCE. An individual can have an IRA even if his or her spouse is an active participant in a plan. This is phased out for taxpayers with AGI between $150,000 and $160,000. $2,000 is the maximum that an individual can contribute. The Roth IRA has the same rules but you can have a pension plan and still have a Roth if you fit in the AGI rules.
If you decide to change your IRA into a Roth, you have six months to change your mind. You can not recharacterize your IRA is you make more than $100,000. If you are having difficulty deciding you can try two web sites: www.rothira.com and www.troweprice.com.
If you have a web site for your business, it must be depreciated over a three-year period. It will take us three years just to get our web site running.
RICH TAXPAYERS FACE FEWER AUDITS THAN THE POOR. In the early 1990’s the opposite was true. I guess the rich get richer and the poor get audited.
OFFER IN COMPROMISE? For those with IRS debt, your chances of a compromise with the IRS are much better than they used to be. 62% of offers are accepted. But it takes about a year before they get back to you. So holding your breath is not recommended.
CHILD CARE CREDIT HAS RETURNED TO CALIFORNIA. If you make under $100,000 and are eligible for a Federal child care credit, you can receive a state credit of up to 63 per cent of your federal credit. Your federal credit is 20% of your childcare expense up to $480 a child, maximum of $960 a family. This is a refundable credit. So even if you have no state tax, you can still receive a credit.
THOSE WHO CAN DO. THOSE WHO CAN’T GET DEDUCTIONS. There is now a California teacher retention credit. It allows credentialed teachers who teach in a qualified education facility for at least four years a credit based on their years of service as a teacher. This is for private or public schools through 12th grade. The credit ranges from $250 to $1500. The credit may not be more than fifty percent of the taxpayer’s tax. If you receive income as a principal or a counselor, that income does not qualify.
Now those of you who have been waiting for the head of household story. The State Board of Equalization grants head of household filing status to a lesbian taxpayer who has a child at home who is not her own or was adopted by her but there is an intent to parent. The child must be conceived by alternate biological means. This relates to anyone in this situation. In fact, it would have allowed Joseph to deduct Jesus and claim head of household.
END OF THE YEAR PLANNING? Use your credit cards for charitable deductions as well as business related deductions. When you charge it, is when you deduct it. Pay your January home mortgage in the middle of December and deduct it for 2000. Be sure to put a stick ‘em on the check and say you want to deduct it in 2000. If you think you have too many business deductions, you may want to rethink this strategy and wait until 2001 to make these deductions. Charity always helps. Being charitable to yourself than maybe you’re interested in…
BUSINESS MANAGEMENT? We do it. We have been offering this part or full service for the past eight years. We can pay your bills, invoice your clients and keep your books. We handle both Quicken and Quickbooks.
ELECTRONIC RETURNS? We will be able to beam up your returns electronically this year. If only you could pay your taxes with electrons.
The offices are already in full gear. Our transformation from the abacus to doing the returns in-house has worked out very well. This is because of our very competent staff. Dom will be in charge of electronic filing. So it won’t be “beam me up Scotty” it will be beam me up Dommy. She even has electronic pictures of her child Alyssa. Patty’s laughter fills up the rooms. Hopefully she’s laughing with us and not at us. Jim keeps his head even while we’re losing ours. Hadas’ clothes could remain unwrinkled during a cyclone. Of course so would she. We have a new employee, Nancy. She’s the nice sounding one answering the phones. You should know that she was a tenth ranked prizefighter. If she challenges you to a fight, ask for Mercy. She’s working on payroll downstairs.