Benjamin Franklin said that two things were inevitable in life: death and taxes. And the nice thing about death is that the Congress doesn’t debate it.
2009.A year so tough that many people wish that the Mayan calendar ended three years earlier.
Those of you using the Mayan calendar as an appointment book be sure to ask for a discount on your 2012 one. It only lasts until December 21st. Do your Christmas shopping early.
2009 started out with the promise of change. It ended up with a promise of spare change.
South Carolina Governor Mark Sanford took a hike on the Appalachian Trail and ended up in Argentina. Finally a man gets a divorce for not asking for directions.
Men can’t win. To get closer to his feminine side, Dodger ballplayer Manny Ramirez took female fertility drugs and was banned for sixty days by Major League baseball. Now he may need directions to get to the Hall of Fame.
Cash for Clunkers? It ended early right before someone decided to turn in their member of Congress.
This recession seems to be like the old neutron bomb. Kills only people and leaves the buildings intact.
“Unfriend” was the top new dictionary word for 2009. The top new song was “Unbuddy, can you spare a dime?”
America’s answer to Tostoy’s novel War and Peace was the 2074 page Senate health bill. It’s just as long and just as many people haven’t read it.
Actress Michelle Phillips’s tell-all autobiography gives new meaning to the “Mamas and the Pappas.”
In Afgraftifstan, Abdullah Abdullah ran as an independent candidate for president. He was in a run-off with President Karzai. Abdullah Abdullah made the mistake of referring to President Obama as President Obama Obama. Abdullah Abdullah was then pressured to pull out of the presidential race. He learned quickly that those in power have less of a sense of humor than those out of power.
Tiger Woods has now shown that he has a hook to his drive. Will he try to deduct the three iron used by his wife? Stitches are a medical deduction.
There has been a California tax lien put on Arnold Schwarzenegger. He owes $80,000 in back taxes. He said that it was mistake. He had already paid those taxes with an IOU.
Maybe the recession is worse than we thought. Dubai announced that they need a six month reprieve on their debts until at least May. Maybe they’re just waiting for their tax refund.
Rumor has it Dubai will be reading about all the new tax laws from this newsletter.
HIGHLIGHTS AND LOWLIGHTS
What the Federal government giveth, the state government taketh away.
IT’S BETTER TO BE UNEMPLOYED THIS YEAR. The first $2,400 of unemployment will not be taxed. There are no income limitations. So the rich can benefit from being unemployed as much as the poor. Unemployment is not taxable by the state. But don’t let Arnold know this.
IT’S TIME FOR PEOPLE WHO HAVE LOW INCOME TO INVEST IN THE STOCK MARKET. Capital gains can be tax-free if you’re in the 15% tax bracket or less. This will last through 2010. Unfortunately, most people had losses in 2009.
TIME TO BECOME AN EX-PATRIATE? The first $91,400 of your income is tax-free in America. But I wouldn’t suggest moving to Dubai.
BUY A NEW CAR AND GET A DEDUCTION. Sales tax on a new car will be now deducted off the top of your income. Car limit is $49,500. The deduction is phased out ratably between $125,000 and $135,000 ($250,000 and $260,000 on a joint return. But the good news is there’s no limit to how many cars you can buy.
TIME TO GET A DISASTER LOSS? The standard deduction is increased by net disaster loss from federally-declared disasters. Even if California is considered a disaster, living here isn’t tax deductible. There have been no federal declared disasters in California in 2009. It is raining today so we can always hope.
DECLUTTERING AS A TAX DEDUCTION. You can still give away clothes or furniture to a charitable institution and get a deduction. The clothing must be in good condition. Of course, if it was in good condition why would you give it away. For cash donations of less than $250, you will need a cancelled check and written communication from the charity. For contributions over $250, you will need written acknowledgement that no goods were provided to you. Any property donations greater than $5,000 will need an appraisal. After four years, you can declutter these acknowledgements and shred them along with most tax documents.
THE GOVERNMENT HAS NOT MADE IT EASIER TO BORROW MONEY TO PAY YOUR TAX BILL. Credit and debit cards fees are now tax deductible for paying your tax bill. It is 2 ½ to 2 ¾%. This will come in very handy in future years when taxes go up.
THE HOPE EDUCATION CREDIT NOW TURNS INTO THE AMERICAN OPPORTUNITY TAX CREDIT. You can now get a credit of up to $2500 for the first four years of college. This includes tuition, fees and materials. The AGI phase out is $80,000-$90,000 for Single/Head of Household and $160,000-$180,000 joint. Note. The University of California has just raised its tuition by 32%.
MORE NONBUSINESS ENERGY CREDITS. Also known as the Ben Franklin Energy credit. The credit rate is increased from 10% to 30%. You can get $50 for each advanced air circulating fan. $300 for each item of qualified energy efficient property and $200 for windows. You are limited to $1500 in the aggregate credit for $2009 and 2010. If you want to research your energy credit potential check:
www.energystar.gov/index.cfm?c=products.pr_tax_credits#s1.
Check out the 30% Solar energy credits. The solar energy works even in the rain.
MAKING WORK PAY CREDIT. There is a credit of up to $800 for a married couple who are both working outside the home. You can not be eligible to be claimed as a dependent in order to get the deduction. There is a phase out for single taxpayers with a modified AGI in excess of $75,000 and couples with a modified AGI of $190,000. This is instead of the rebate check in previous years. There is a problem with this. Most of you have been getting a little bit of the rebate every week because of an adjustment of withholding. $8 a week. Many of you have been spending this foolishly on yachts and limos. Couples may find themselves ineligible for this credit because of high income or two jobs. You already got your rebate. Maybe.
NANNY TAX THRESHOLD. For those of you planning on being nominated for the Supreme Court or interested in doing the right thing, the Nanny Tax threshold is $1700. If you pay a Nanny or housekeeper $1700 or more, you have to withhold.
IT’S BETTER TO GIVE THAN TO RECEIVE. ..unless money is involved. You can give $13,000 to any individual without having any gift tax ramifications. Remember when you receive a gift, you have no tax ramifications.
IRA AND ROTH IRA CONTRIBUTIONS ARE $5,000 IN 2009 AND 2010. If have reached 50 years old, there is a catch-up provision of $1,000 that can be added to your $5,000 contribution.
ROTH CONVERSION PARTY IN 2010. You can convert your IRA into a Roth in 2010 without any income limitations. As with all Roth conversions, the amount of the conversion (less basis) must be recognized as income. You can spread income over 2 years. Remember you would have to have the money to pay the taxes. The conversion includes all your IRA accounts. Let’s discuss when I meet with you for our tax appointment.
PEOPLE WITH THEIR OWN BUSINESSES CAN HAVE A SOLO 401K. You can have a SEP plan and a deferral of 100% of compensation up to $16,500 for 2009 and $5500 for taxpayers age 50 or older. The only problem is finding that much spare change. This needs to be open by December 31st.
PATRIOT TO BUY. Businesses can buy up to $250,000 in equipment and deduct it completely. Individuals can buy up to $250,000 in holiday presents but you can’t deduct it.
NOTHING LIKE A GOOD DRIVE. The standard mileage rate for business is 55 cents mile in 2009
A PERSON’S HOME IS THEIR CASTLE AND MAY BE A GREAT TAX DEDUCITON. If you bought a house between January 1, 2009 and December 1st 2009, there is one set of rules. You can get up to an $8,000 credit on your taxes. It would be a refundable credit. First time homebuyers would mean some one who had no present ownership in a principal residence during the three-year period ending on the date of the purchase. There would be a phase out starting at $75,000 for single people and $150,000 for married people. This would be good from January 1st 2009 through November 30th 2009.
It was so popular that a 4 year-old bought a house. Because of the popularity and the fraudulent 4 year-old, the government passed an enhanced credit. Starting November 6, 2009 and before May 1, 2010. There is a $6,500 credit for certain non-first-time homebuyers, an increase in the AGI limitations to $125,000-$145,000 (single) and $225,000-$245,000 (married filing jointly.) You can’t buy a house for more than $800,000 and you can’t be a dependent on someone’s tax return or qualify as a dependent. No four-year olds. Also you need a property settlement statement.
HOT OFF THE PRESSES. You can beat IRS in court, but you can’t get make them apologize to you. But if they win, they can’t make you apologize either.
LOAN MODIFICATIONS? The best way to find out about this is to check out the web-site www.Makinghomeaffordable.gov.
REVERSE THE IDEA OF REVERSE MORTGAGE OUT OF YOUR MENTAL GARAGE. They were set up for people who have little cash but who have equity in their homes. The loan offers tax-free proceeds. To qualify you have to be 62 years-old. The fees are very high ($12K to 20K) and it may make it difficult for the recipient to qualify for Medicare.
FOREIGN BANK ACCOUNT? Remember when having a Swiss bank account was a good thing. Every year you have to file a form showing that you have an interest in or signature authority over a financial account. If it’s worth less than $10,000 at any time, it’s not a problem. The penalties are enormous if you don’t report it. Buying Swiss chocolate is always fine.
CALIFORNIA’S IOU’S INTEREST IS TAX-FREE. They were paying 3.75% interest per year. Much better than a bank.
CALIFORNIA GETS REVENGE ON THE OCTUPLET MOM. To balance the budget, California reduced the dependency deduction from $301 to $98. So those of you who have children, you will be paying $203 per child in California taxes. The Governor announced that he can balance the budget if more Californians have 8 children at a time.
CALIFORNIA TAXES RAISED SOME MORE. Individual tax rates were increased across the board by .25%
FEELING USED? SO IS CALIFORNIA. They want their “Use Tax.” Those of you who buy products on the internet or in a place that doesn’t charge sales tax, the State wants their money! They want their money from everyone. But for businesses that have gross receipts of at least $100,000 and are not registered with the Board of Equalization, you must register with the BOE and report and pay, by April 15th, any use tax due. You must file even if you don’t have any non-tax purchases. Form BOE-401-EZ. This is also true for people who have rental property that has $100,000 in income.
EX CALIFORNIA GOVERNOR GRAY DAVIS MUST BE TURNING AROUND IN HIS POLITICAL GRAVE. The car tax on noncommercial vehicles increases from .65% to 1.15%.
Remember when you charge an expense is when you can deduct it.
WHAT RECORDS YOU SHOULD KEEP. I still have my old Leonard Cohen ones. You, however, need to keep tax returns, fax correspondence, audit reports and contracts forever. There is a new religion that promises you storage space in the after life. For the current life, you need to keep bank statements and sales records for six years. Tax records for four years, longer if it’s regarding property or equipment. Keep stock purchases three years after you sell the stock.
CITY BUSINESS TAX LICENSE. Self-employed people who live or work in the cities of Los Angeles, Santa Monica, Culver City, Burbank and San Diego must get a city license. They are very strict about this. They are talking about having their own helicopters to enforce it. Check with your city.
IN THE SPIRIT OF ABDULLAH ABDULLAH, WE HAVE CHANGED OUR NAME TO L.A. L.A. TAX SERVICE. But you can call us L.A. Tax Service for short. We are excited entering our 28th tax season. While there are a lot of changes in the tax code, there are not a lot of changes in our offices.
Dom Gelband is still our office manger. She is similar to the Mayan God Quetzalalcoatl. She is such importance and power that every aspect of L.A. Tax life is influenced by her. She is still known to want human sacrifices.
Patty Alvarez is our female god Tezcatlipoca. Tezcatkuoica used smoking mirrors to e-file the Mayans tax returns. Tezcatkuoica also provided the comic relief in the Mayan culture.
Nataliya Shur is like the Mayan god Chac. Chac wore so many hats that one would think that she is four gods. Rumor has it that Chac was also very proficient with the computer.
Hadas Stein is our god Ah Cancum. The God of hunting. Ah Cancum hunted answers to many tax questions. Ah Cancum was the first CPA. But no one knows exactly what the CPA stood for then.
If the world does end in 2012, you won’t have to worry about filing extensions.