Benjamin Franklin said that there were two things inevitable in life: death and taxes. And the nice thing about death is that there is better cell phone reception.
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.