Benjamin Franklin said that there are two things inevitable in life: death and taxes. And the nice thing about death is there are no picket lines.
2007 – The Iron Age was during the 12th century B.C.We seemed to be entering the Irony Age.
England has banned fat Santa Clauses.The government feels that fat Santa Clauses promote childhood obesity. California has gone a few steps further.They have stopped Santa Clauses from saying Ho. Ho.This, they say, has been promoting a childhood dessert.Those of you who don’t know what a HoHo is, it’s not the same as a Ho which is an adult dessert.But I digress.Santa Clauses can now say ‘Broccoli.Broccoli.’Next year they will probably be banning fake Santa fur.Stuffed animals have feelings, too.
007.This is definitely a year we could have used James Bond. Unfortunately, he too was outed by Scooter Libby.
The curse of the Red Sox appears to be back. The Redo Sox are expected to win every year. Maybe they can trade David Ortiz and reverse the curse.
Atlanta Quarterback Michael Vick had his endorsement contract with Hush Puppies cancelled.
Ironically, anti-war movies bombed.
The good news about global warming is that there is little chance for hell to freeze over.
The Bush Administration has moved away from ignoring Global Warming to ignoring the Global Cooling of the stock market.
The Republican Party has gone Hollywood . They are referring to the Democratic Congress as ‘Superbad.’ They don’t seem to realize that bad means good. Candidate Romney, showing that he’s cool, started referring to the Democrats as Supergood, meaning bad. No one got it, so he retracted it.
Hilary Clinton has changed her campaign slogan to be more Hollywood, too. No Country for Old Men.
It’s a bad sign that I know more names of Angelina Jolie’s children than I do Supreme Court Justices.
The Iraq-Afghanistan war(s) have cost us 1.7 trillion dollars. Because of the shrinking of the dollar it is really a lot less than this.
60 is now the old 40. O.J. Simpson proved to all AARP members that you’re never too old to commit armed robbery.
Very few Southern Californians went to see the Noah’s Ark film: Evan Almighty. Southern Californians didn’t know what rain was.
Speaking of water. When did water turn so bad?WATERgate, WhiteWATER, WATERboarding and now BlackWATER.
On a more hopeful front, there is now a fledgling religion that is offering the internet in the after-life.
The Middle Class has just entered the endangered species list.
Larry Craig taught all of us what to do or what not to do when in a men’s restroom.
Mike Tyson served a one day sentence for DUI.Nicole Richie served 82 minutes.Her four hour sentence was reducedfor good behavior.
2008 will be the year of the early primary. Each primary wants to be first and therefore most important. This has led to the ‘2012’ Rhode Island Primary to moved up to Jan 27th of 2008.Right now, the front runners are Jenna Bush and Chelsea Clinton.When asked why they moved the primary up so early, the Governor said’What’s the matter? Can’t the voters double task?’
Speaking of double-tasking. Men have once and for all proved that they can double task. In a recent experiment men showed that they can have sex with one person and still think of Pamela Anderson. Or George Clooney depending on what side of the men’s room, you are standing on.
TAX HIGHLIGHTS AND LOWLIGHTS: 2007 began with minimum tax problems and ended with even a greater one. Minimum tax is the black hole of tax law. It’s even worse than the killer in No Country for Old Men. First the name ‘alternative minimum tax’ is ironic. It’s not a minimum tax it’s a maximum tax.It’s so bad that a teacher in Tennessee was jailed for naming a teddy bear after it. It started out in 1969 to stop 155 wealthy people from not paying taxes. It now affects 23 million people. It spreads like the plague, except the rats are in Washington . In 2006, there was a temporary reduction in the minimum tax.Everyone wants to keep the temporary reduction. However, the Democrats want to keep it revenue neutral and they want to close some foreign corporate tax loopholes. The Republicans do not want to raise taxes. We are at an impasse. If there is no tax bill in the next two weeks, the tax season may be delayed into mid-February. Maybe longer. It takes seven weeks for the government to reprogram their computers. Stay tuned.
On the good news front, there will be a deduction for MORTGAGE INSURANCE PREMIUMS. Ironically, few people have mortgage insurance premiums any more. It is not a deduction for those making more than $110,000. It is only for mortgage contracts issued after December 31, 2006.
THE PERSONAL EXEMPTION PHASE OUT HAS BEEN PHASED OUT. This was the phase-out that caused the wealthy to give their children to the poor. For people who had lost their children and personal exemptions because their income was too high ($159,950 for single people and $282,450 for married filing jointly.) Now you can take 1/3 of your children as a deduction as well as your self. Next year 2/3. The following year, you will be whole.And that’s something to be thankful for.
MAXIMUM 15% CAPITAL GAIN TAX EXTENDED TO DIVIDENDS THROUGH 2010.This is the tax deduction that caused multi-billionaire Warren Buffet to call it voodoo economics. I guess he already has enough money to tip at Denny’s.
MEDICARE ‘B’ PREMIUM SURCHAGE STARTING IN 2007. If the Social Security recipient’s 2005 adjusted gross income is above $80,000 single and $160,000, there will be Medicare B surcharge. It starts at $93.50 a month and goes to $161.40. The law provides for re-determination based on a major life-changing event. Having a Medicare B premium surcharge is not considered a life-changing event.
YIKES. CANCELLATION OF DEBT CAN CREATE INCOME. And, therefore, more debt to the taxman. But if you”re lucky enough to: go bankrupt, have insolvent borrowing, but to the extent of insolvency, HAVE qualified real property business debt, seller financing, certain student loans, then it won’t be income. So the old song, ‘another day older and deeper in debt’ can be a good thing. When you buy a house, you get a non-recourse loan. The bank can’t come after you. Once you refinance, then it can.
TOO MUCH RETIREMENT FUNDS? You can transfer funds from your retirement accounts directly to Charity. You have to be 70 1/2. For those of you who contribute substantially to charity but can’t itemize, this would be make sense.
IT’S MORE DIFFICULT TO PRETEND TO GIVE TO CHARITY. Starting in 2007, you need a receipt or cancelled check for all cash contributions. So, when they pass the plate, make sure they also pass the credit-card machine. Also you will need a receipt from the charity if you donation is over $250.
BUT THOSE WERE DESIGNER JEANS CLOTHING DEDUCTION HAS BEEN TIGHTENED. To take a deduction of more than $500 for a non cash item(s), you must attach a receipt to your tax return. To claim a deduction of more than $5,000, you must have an appraisal. It seems to be easier to set up a foreign corporation for deductions than it is to give away your underwear and take a deduction.
ADULTS ARE NOW CONSIDERED KIDS WHEN IT COMES TO KIDDIE TAXES. Starting in 2008, children who are 19 years old or are full-time students over age 18 but under 24 will now be subject to the kiddie tax law. This means that they will be paying higher taxes than they would if were considered to be adults.
Now, there’s no reason to keep those 18 year-old kids in the house. Kiddies stop being kiddies in California when they are 14. California did not conform to the Federal rules.
NEW ENERGY-EFFICIENT IMPROVEMENT CREDITS. They include insulation systems that reduce heat loss/gain, exterior windows (including skylights), exterior doors, metal roofs. There are also credits for main air circulating fans, hot water heaters. Check with the manufacturer. There are also solar, photovoltaic or fuel cell equipment. There is no personal thank you note from Al Gore.
HYBRID CREDITS SWALLOWED BY THE BLACKHOLE OF MINIMUM TAX. There is still a credit for buying a hybrid vehicle except when you are subject to minimum tax. Also since Toyota has reached its sales limit, if you bought a Toyota hybrid after 10/1/07, you will not be eligible for the credit.
MAKE SURE YOU WILL BE ELIGIBLE TO BE A SUPREME COURT JUSTICE. If you pay any household employee $1500 or more, you must pay them on a W-2. In many cases it’s much better for the employees to be paid this way. If you need help, let us know.
IRA’S AND ROTH IRA’S ARE STILL $4,000. Next year it will go up to $5,000. There is a $1,000 additional catch up for those 50 and over in 2007. Unfortunately, I have no clients who admit to being 50.
MAXIMUM SEP PLAN IS $45,000 IN 2007 AND $46,000 IN 2008.
DRIVE YOUR WAY TO FINANCIAL SUCCESS. The Standard mileage rate is 48.5 cents a mile. Medical and moving standard mileage is 20 cents a mile. The trick is to keep good track. It will be 50 cents a mile in 2008. You can always take the actual cost of driving. In Los Angeles , it’s about 63 cents a mile. Remember to get an appointment book for 2008.
YOU CAN DEDUCT UP TO $125,000 IN EQUIPMENT IN 2007. For me that’s a lot of adding machines.
DON”T LET YOUR BROTHER SLEEP IN YOUR HOME OFFICE. A home office must be used exclusively as such. There shouldn’t even be a sofa there. Remember the IRS tests for DNA.
THE GRAY AREA HAS TURNED BLOOD RED. Preparer penalties have increased substantially. It used to be if the preparer thought there was at least a 1 in 3 level of confidence that the deduction was correct, there would be no penalty. That has been replaced by a greater than 50% level of confidence. If the preparer thinks the position is less than 50% likely to be accepted, then he or she must fill out a form stating such. We don’t take ridiculous deductions but the IRS is getting more serious now.
EVEN THOUGH ALL AUDITS ARE AUDITS FROM HELL, THERE IS A REAL AUDIT FROM HELL. The IRS started a new compliance study for individual taxpayers. There will be 13,000 random audits for each of three years. Each line on the tax return will have to be proved. And even if you leave the country they will find you. Rumor has it that is why Bin Laden can’t be found.
USE TAXES? If you buy something on the internet or in another state that doesn’t charge sales taxes, you are supposed to report it on your state return. If you buy something overseas, you don’t have to pay use tax if it costs under $800.
THE CALIFORNIA TEACHER’S RETENTION CREDIT IS DEAD. After suspending it for the past three years, it has been officially killed.
IF YOU’RE CURIOUS ABOUT THE MENTAL HEALTH TAX. There is a tax surcharge at the rate of 1% on taxable income in excess of $1,000,000. If you feel like you don’t have mental health, you can not collect any of this money.
REGISTERED DOMESTIC PARTNER?This is a California distinction and not a Federal one. If you are registered as a domestic partner (as of Sept 2007, there are 43,790), you must file married/ Registered Domestic Partner for California but not for the Federal Government. This will create a myriad of differences between the Federal Return and the State. If you are registered, you should check with us.
So between Alternative Minimum tax and Domestic Partnership, confusion reigns. Some people feel that Global Warming can take care of all this.
WHAT SHOULD YOU KEEP? You need to keep tax returns, fax correspondence, audit reports, and contracts forever.. Keep bank statements and sales records for six years. Tax receipts for four years. If you”re planning on an afterlife, be sure to find a religion that will allow you receipts in your postmortem.
END OF THE YEAR PLANNING. If you are not subject to minimum tax, then it pays to pay your property taxes and state estimated taxes by December 31st. You can still use your credit cards for charitable, medical and business deductions. It”s the date of the charge that counts. Make sure you keep the actual receipt for your purchase.Having a credit card statement is usually not good enough proof for an audit.
Los Angeles Business Tax is still out there, waiting for you. If you work any job as an independent contractor, you must have a business license. If you get a ‘green’ envelope from the City in December, please fill it out by February 28th.
L.A. Tax Service is celebrating its 25th Anniversary. Just 25 short years ago, Esther and Scott decided to open a business together. We had about twenty clients between us. We rented the room that Scott is in, bought two used desks and didn”t have a computer. We put up a Chinese screen between us. We did have a lot of pencils.
We hired a 75 year-old woman named Millie Smilie who could only work on Mondays. We could only afford a woman who could only work on Mondays. And so we began. We ended up hiring Scott’s cousin Dom Gelband. She was probably only twelve at the time, but she looked older. Thirteen. Our first goal was to be busy enough to keep her busy. She did want to work five days a week. It took us a few years to make her a full time employee. She went from someone who didn”t know very much to someone who didn”t miss anything. Margo came here because she had the misfortune to share a hospital room with Esther. She became the employee and partner that literally never left. It seemed like she worked twenty-four hours a day. Then she had a friend named Hadas who was an accountant. She worked for us then left us to become a CPA and then magically returned two years later as a CPA. Her knowledge has been a great gift. Jim came to us after working at UCLA. I think we told him that we had our own Pac Ten basketball team. He”s been the rock of our office ever since. Patty came next. We weren”t looking for someone with a great sense of humor but that”s what we got. To run our payroll service, we had a world-wide search. We decided we needed someone who had military service in the Ukraine , knew everything about computers and could use a weapon in case of attack. We finally found it in Nataliya. To be the voice of L.A. Tax Service, we needed someone to answer our phones that was articulate, funny, compassionate and energetic. Becca more than fits the bill. Our most recent hire is Olivia. She is the one who sends those lovely e-mails to clients, where are your receipts. She is also Vice-President of deadlines for the accountants. Somehow we seem to have a deadline every week. So we keep her very busy.
There has been much sadness this year. Stan Levin passed away. He was a long-time client and friend. 25 years ago, he was moving his 8350 Melrose Ave offices downstairs . He thought that maybe his former office would make a good home for us. And it was. I always looked at him as the grandfather of our business.
Also Scott’s cousin Bill Gelband passed away.He was Dom’s father. 23 years ago, he thought that Dom would be a good employee for us. He was pretty smart about that. He had a great sense of humor and to Scott he was like Marco Polo. The adventurer, not the swimming pool game.
And Margo has passed on to the Valley. She moved her offices to smoggier pastures. She wanted to be closer to her family. She will be greatly missed.
The 25th anniversary is silver. With our clients and our employees, we feel like we struck gold. Thank you.