On Thursday, President Obama signed into law  the bill that repeals both the expanded Form 1099 reporting requirements mandated by last year’s health care legislation AND  the completely new Form 1099 reporting requirements imposed on people who receive rental income that was enacted as part of last year’s Small Business Jobs Act. 

The repeal essentially takes the Form 1099 reporting rules back to what they were before the changes were enacted.   Specifically, under IRC Section 6041(a), “All persons engaged in a trade or business and making payment in the course of such trade or business to another person” of more than $600 or more must report the amount and the name and the address of the recipient to the IRS and to the recipient.  This includes payments for items such as, but not limited to, rent, royalties, interest, compensation, remunerations, etc.  

Take note, however, that the increase in penalties for noncompliance with the Form 1099 reporting requirements which was included in last year’s small business and health care legislation were not repealed.  The increase in penalties remains in effect.  

Jeanette E. Anderson, CPA, CFE
Anderson Accountancy Corporation
762 Rio Del Mar Blvd.
Aptos, CA 95003
Ph 831-688-1977
Andersonaccountancycorp.com

Back in 2003, the top tax rate on dividends was lowered from 39.6% to 15% and the tax rate on capital gains was reduced from 20% to 15%.  These reductions helped to boost the economy following the 2000-2001 recession and helped support the equity markets after the bursting of the internet bubble in 2000. 

These reductions are set to expire at the end of 2010.  If no action is taken by Congress,  in 2011, the tax rate on dividends and capital gains will increase to prior levels.  Adding to the prior rates is the new 3.8% Medicare tax on investment income (passed as part of the healthcare reform acts), which will result in a top tax rate on dividends of 43.4% and a top tax rate on capital gains of 23.8%.  Note that these figures are federal rates only, CA income taxes are also paid on dividends and capital gains. 

These increases are significant and may have far reaching effects in that it can discourage productive capital formation and ultimately reduce wages and living standards of U.S. citizens.  A website that I believe has some good information about income taxes and the economic effects various tax laws have is www.taxfoundation.org.

Jeanette Anderson, CPA, CFE
Anderson Accountancy Corporation
(831) 688-1977

Keeping full and accurate homeowner records is vital for determining not only your home mortgage interest deduction but also the basis or adjusted basis of your home. These records include your purchase contract and settlement papers if you bought the property or other objective evidence if you acquired it by gift, inheritance, or similar means.

You should also keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. The following are some examples:

• Putting an addition on your home
• Replacing an entire roof
• Paving your driveway
• Installing central air conditioning or heating
• Rewiring your home
• Assessments for local improvements
• Remodel costs, including new flooring, appliances and the like
• Amounts spent to restore damaged property

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