Benjamin Franklin said that two things were inevitable in life: death and taxes and the nice thing about death is that there are no mid-term elections.
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 28th. 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 24th 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 25th Anniversary and some of us are celebrating by having our hair turn silver.?
Tags: Tax Planning