Benjamin Franklin said that two things were inevitable in life: death and taxes. And the nice thing about death is that you don’t need bipartisan cooperation.
2010. The year began with people singing the old depression hit “Brother Can You Spare a Dime?” and it ended with the country still out of tune.
The year started out with Sarah Palin abandoning her Alaska governorship. She thought lame duck were two four letter words. It ended with her living the American Dream… having her own reality show.
Liberals started their own Green Tea Party.
Mark Twain just had his autobiography published. One hundred years after his death. Jon Stewart has been compared to Twain. Of course, Mark Twain didn’t have a stable of comedy writers. Unless you want to count Samuel Clemens.
Once leader of the committee that writes tax law, Representative Charlie Rangel, learned how long it takes to fully depreciate a political career.
Bristol Palin proved the old political adage. Republicans can’t dance but they can sure vote. As a counter political move, Michelle Obama tried out for American Idol.
Scream 5 came out before Scream 4. Scream 4 actors David Arquette and Courtney Cox are separating.
The Transportation Security Administration justified their pat downs and imaging devises by stating that “Now we can pick out the terrorists. They’re the ones not annoyed by our procedures.”
WikiLeaks actually leaked this tax newsletter.
It seems like the North and South Koreans have nicer things to say to each other than Democrats and Republicans.
Many thanks to Charlie Sheen for establishing the base price for taking an escort out to dinner, $3500. Though most of us can not afford to tip a Patek Philippe watch. Valued at $165,000. Fortunately for the taxpayers, none of this was tax deductible. A deduction needs to be “ordinary and necessary” expense to promote one’s career. Though for Charlie Sheen it might be.
2010 was a perfect year to die if you’re wealthy. There were no estate taxes. This saved the Estate of George Steinbrenner $50,000,000. No wonder they can afford Derek Jeter.
Good news for taxpayers. In String theory, there are eleven dimensions. It’s been discovered that in one of the dimensions, everything is tax deductible. Wesley Snipes lives in that dimension.
HIGHLIGHTS AND LOWLIGHTS:
This is the spot usually preserved for the end of the year tax bill. As of this printing, there is no end of the year tax bill. The Republicans want to extend the Bush tax cuts to all taxpayers. The Democrats want to extend it to only those who are single and make less than $200,000 and to married people who make less than $250,000. Hundreds of billions are at stake. Both sides are willing to blink but as the old adage says: “if you blink too long. it’s the same as closing your eyes.
There was The Patient Protection and Affordable Care Act. This requires most of the 32 million uninsured to be insured. The bill contains over $400 billion in revenue raisers. So far it helped cost Democrats 67 congressional seats. Most of tax provisions take place in future years after the next presidential election. Before that happens, this is what you get in 2010.
2010
IT PAYS TO ADOPT. The adoption credit is increased by $1,000 to $13,170. It’s now refundable. Some people have been adopting the medically uninsured for maximum benefit.
ENERGIZE YOUR HOUSE AND THEN ENERGIZE YOUR WALLET. There is a maximum 35% credit for small business employers paying at least 50% of employees single-person health care coverage. Credit phases out when average annual employee wages increases from $25,000 to $50,000 or average number of employees increases from 10-25. Owner employee wages are excluded from the computation. So if you want to help your employer you can ask for a pay cut.
This is a really worthwhile credit. So if you have a business that pays at least half of the employees wages, please call us.
FOR THE SELF-EMPLOYED, KEEP YOUR CHILDREN HEALTHY. The tax bill recognizes that kids are growing up later these days. Income exclusion for employer health plans and for the self-employed is extended to children under 27. December is usually open enrollment month. This should be a priority.
THE TAX LAW THAT MAKES US PALE IN COMPARISON. There is a 10% excise tax on indoor tanning services. This should be called the anti-John Boehner Tax Bill. He’s the new Speaker of the House and has a tan that never fades.
THE RICH DON’T HAVE PARTIAL CHILDREN ANY MORE. There is no phase out of the exemption credit. No matter what your income is. Everyone will get $3650 for each exemption claimed. In the past, higher income people would not get all of their exemption credit. This was the major cause for rich people giving their children to the poor.
NO EXCLUSION FOR UNEMPLOYMENT BENEFITS IN 2010. In 2009, the unemployed could exclude up to $2400 of their benefits. But don’t despair…
YOU CAN ALWAYS SELL YOUR STOCKS FOR ZERO PER CENT CAPITAL GAINS TAXES. If you are in the 10 and 15% tax brackets. If you’re single and have a taxable income of under $34,000 or married filing jointly and earn less than $68,000, you can sell your stocks and not pay any capital gains. Income above these thresholds and you pay at a 15% capital gains rate. If the Bush tax cuts are not restored, the bracket will go up to 20% for higher earning taxpayers.
CHARITY BEGINS AT HOME BUT IT’S BETTER TO DRIVE FOR IT. Charitable driving is 14 cents a mile. Business driving is 50 cents a mile.
IMPROVE YOUR ENERGY CONSUMPTION, IMPROVE YOUR POCKET BOOK. Actually this sounds better in Latin. There is a nonbusiness energy property credit. There is now a 30% credit for all qualifying improvements with a maximum of $1500 for 2009 and 2010 combined. You need to get some energy to get this deduction before it expires by New Year’s Eve 2010.
2011
FSAs and HSAs will not include over-the-counter drugs. Drugs bought on street corners are never deductible. See note on Charlie Sheen.
2013
MEDICARE TAX ON THE WEALTHY. There will be a 3.8% tax on all capital gains and investment income for people in the Obama wealthy tax bracket. $200,000 single, $250,000 married filing jointly. This starts in 2013 and could possibly change. There’s another election between now and then. We’ll keep you apprised of this situation.
OTHER CHANGES:
ROTH IRA? THE ONLY IRA THAT IF YOU SWITCH THE WORDS YOU HAVE A PERSON’S NAME. This works like a regular IRA except that you pay the taxes upfront and when you take it out after you’re 59 ½, it’s all tax-free. There are, however, income limitations. In 2010, if you are single and you earn under $105,000, you can set up a Roth. If you earn up to $120,000 then you can have a partial Roth. The top limitation for a married couple is $177,000. For the maximum Roth, it is $167,000.
IMPORTANT NEW ROLLOVER RULES FROM TRADITIONAL IRA’S TO ROTH’S. If you like the idea of a Roth but have been unable to roll your IRA into one because you make over $100,000, you are in luck. Regardless of what you earn, you can roll over your IRA into a Roth. Of course, you have to pay taxes on the distribution but there’s no penalty. You can either pay the taxes on your 2010 return or you can split the income over 2011 and 2012. Confused at what you should do. There are more web-sites on this than there are opinions. Also you can check with us.
OWN A RENTAL PROPERTY. OWN SOME 1099 FORMS. Starting in 2011, you need to send out 1099’s to anyone who earns over $600 in a year doing your painting, plumbing, managing or gardening. You need to get a real name, address and Social Security number. Download a W-9 form.
2010 WAS A GOOD YEAR TO DIE IN BUT WHAT HAPPENS IF WAIT TILL 2011. As many of you know, 2010 had no estate taxes. Those of you who subscribe to Extreme Tax Planning, 2011 is a mess when it comes to passing away. If no bill is passed then in 2011, there will be only a $1,000,000 exclusion. The tax rate for everything above this is 55%. It may pay to hold on till 2013. Stay tuned.
TAX PLANNING? If you have a business, you can prepay up to all of your 2011 business deductions in 2010. Your April 2011 property taxes can be paid in December. This helps if you are not subject to alternative minimum tax. If a new tax bill doesn’t pass, virtually everyone will be subject to it.
Your charitable deductions can be made by check or charge to get a deduction. If you want to set up a solo 401K retirement plan, it must be opened by December 31st. A very good organization to give used clothing and furniture to is the National Council of Jewish Women. They actually itemize all of your gifts and attach a value to them. This is much more helpful than those organizations that give you a blank receipt. Remember, you can not deduct clothing that is in bad shape. It’s okay for you to be in bad shape but not your clothing.
CITY BUSINESS LICENSE. THERE’S NO ESCAPE. Even in the movie Inception, each of the levels of reality there were notices from the city asking for money. If you are self-employed, a corporation or a partnership and live or work in Los Angeles, you must have a city license. Other cities have similar requirements. Check with your city office.
LA TAX SERVICE ADMITS THAT WE ARE NOT WITCHES. In the spirit of Delaware Senatorial candidate Christine O’Donnell, we admit that we are not a coven. But sometimes we create magic.
Dom Gelband, our office manager admits that she’s dabbled in magic. She’s made mistakes disappear and has once turned an annoying client into a frog. You can still hear the REDEEP sound when you visit our kitchen.
Patty Alvarez admits to being able to e-file a tax return to both Fresno and Sacramento simultaneously without using her computer. Borrowing from Macbeth, you can hear her chant. “1040, 1040, toil and trouble. Fires burn and tax returns e-file.” Don’t try this at home.
Nataliya Shur, our payroll mystic, conjured up a tax decrease on Social Security Taxes for 2011. She admits that before she came to the United States she had the nickname “the Ukrainian Harry Potter.”
Marcy Krich, our receptionist and QuickBooks mystic, can fix a brew with the best of them. When you come in for your appointment, don’t be surprised if she asks you, coffee, tea or the eye of an IRS agent’s brew?” The brew will help you remember a $10,000 tax deduction that you had previously forgotten.