Benjamin Franklin said that there are two things inevitable in life, death and taxes. The bad thing about death is that Arthur Anderson won’t do the final accounting.
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.