Tax Planning & Information

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April 15, 2011

Obama signs bill to repeal expanded Form 1099

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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Form 1099 reporting requirements which was included in last year’s small business and health care legislation were not repealed.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

 

June 28, 2010

Dividend and Capital Gain Tax Rates

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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

 

May 10, 2010

General Guidelines on Record Retention for Homeowners

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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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April 10, 2010

Health Care reform related Tax changes for Small Business

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For owners of small businesses and their workers, the recently enacted health reform legislation has some key provisions to pay attention to. The major ones include: tax credits; excise taxes; and penalties. But whether a business will be affected by them depends on a variety of factors, such as the number of employees the business has. The following is an overview of the provisions in the new law with the biggest impact on small business.   See separate overview of the tax changes affecting individuals.

Tax credits to certain small employers that provide insurance. The new law provides small employers with a tax credit (i.e., a dollar-for-dollar reduction in tax) for nonelective contributions to purchase health insurance for their employees. The credit can offset an employer’s regular tax or its alternative minimum tax (AMT) liability.

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April 10, 2010

Health Care Reform related Tax changes for Individuals

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Now that the health care reform legislation (the 2010 Health Care Act and the 2010 Reconciliation Act) has passed, it’s time to provide a brief overview of the related key tax changes affecting individuals.   See a separate summary relating to the key tax changes affecting small businesses.

The specific changes will impact each person in a different way and so it is important that when needed, people consult with a qualified tax professional.  As I’ve said before, proper planning can make all the difference when it comes to a person’s income taxes and personal financial future!

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March 25, 2010

GOOD NEWS FOR CALIFORNIA HOME BUYERS!

Posted by whnscc under Monthly Updates, Real Estate Market Updates, Tax Planning & Information | Tags: , |
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A new bill is on the CA Governor’s desk awaiting signature which will enact a modified version of last year’s New Home Credit.  The bill provides CA tax credits for first-time home buyers and taxpayers buying homes that have never been occupied.  

Taxpayers who purchase a “qualified principal residence” on or after May 1, 2010 and before January 1, 2011, will be allowed a credit equal to the lesser of 5% of the purchase price of the home or $10,000.  The credit is also available to taxpayers who enter into an enforceable contract during the applicable time period, as long as the purchase is completed before August 1, 2011. 

Like the prior New Home Credit, there are some requirements:
1)      The home must be a “qualified principal residence”
2)      The taxpayer must apply the credit in equal amounts over 3 successive tax years
3)      The credits are non-refundable, will not reduce AMT & cannot be carried over 

Another important point – the state has established a $100 million dollar limit for this credit, which  will be used on a first-come, first-serve basis.  In order to ensure you are able to utilize this credit, make those purchases soon!  Once the total of $100 million in credits have been used by taxpayers, no more will be allowed, even if all other criteria are met.

Contact: Jeanette Anderson, CPA, CFE
Anderson Accountancy Corporation, (831) 688-1977
www.andersonaccountancycorp.com

 

January 14, 2010

2010 Federal Tax Brackets and Thresholds

Posted by whnscc under Tax Planning & Information | Tags: , , , |
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It’s the time of year that people and businesses are focusing on filing their 2009 tax returns.  However, it’s never too late to get organized and plan for the future!  Studies show that individuals who plan for the future and remain organized save more money, not only as a function of their personal savings efforts,  but also in the form of reduced expenses related to income tax preparation and other financial planning services. 

By law, each year, the dollar amounts for a variety of tax provisions must be revised to match inflation.  As we all know that inflation was minimal in 2009 as compared to prior years, there are no significant changes in the specific provisions for 2010 as compared to 2009.  Following are some of the key items affecting 2010 tax returns (and which are due to be filed by April 15, 2011 for most people):

  • The personal and dependency exemption will remain the same as 2009 levels, at $3,650 per individual or dependent.
  • The standard deduction for married couples filing jointly, married individuals filing separately and singles remain the same as 2009 levels.  Specifically, the standard deduction for each is listed below:
    Married couples filing jointly – $11,400
    Married individual filing separately – $5,700
    Singles – $5,700
  • The federal tax rate thresholds for 2010 are increased slightly from 2009 levels.  That means that individuals will need to earn slightly more money before their tax rate increases from 15% to 25%.
  • The maximum earned income credit for working families with 2 or more children for 2010 is $5,028, up from $4,824 for 2009.  Further, the upper income limit to qualify for the credit for joint filers with 2 or more children is $43,415 for 2010, up from $41,646 for 2009.
  • The annual gift exclusion will remain consistent with 2009 at $13,000 per individual.

The above information is a summary of some of the key items that will affect taxpayers in 2010, and are subject to changes by the IRS.  As such, it is important to consult with a qualified tax professional when dealing with tax issues as the rules are complex and include numerous qualifiers and phase outs.

 

January 14, 2010

NEW FIRST TIME HOMEBUYER CREDIT

Posted by whnscc under Tax Planning & Information | Tags: |
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Late in 2009, Congress passed The Worker, Homeownership and Business Assistance Act of 2009, which extended the First-Time Homebuyer Credit and expanded the credit to apply to more individuals.

Following are some of the key items that individuals should know with respect to the credit:

  1. To qualify, you must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010.  This means that second homes and vacation homes do NOT qualify.
  2. If you enter into a binding contract by April 30, 2010, you must close escrow on the purchase of the home before June 30, 2010 (this may prove difficult for short-sale and bank-owned properties).
  3. For purchases (see above) made in 2010, you have the option of claiming the credit on your either your 2009 or 2010 tax return.  This is great as it allows you to receive the benefit of the credit almost concurrent with the purchase.
  4. A reduced credit is now available for residents who have lived in the same principal residence for any five consecutive year period during the preceding eight year period that ended on the date the new home is purchased.  Additionally, to qualify under this provision, the settlement date for the new purchase must be after November 6, 2009.
  5. The maximum credit for long-time residents (see #4 above) is $6,500 for married couples filing jointly. For married couples filing separately, the maximum credit for long-time residents is $3,250 each.
  6. People with higher incomes can now qualify for the credit.  The new law raises the upper income limits for homes purchased after Nov. 6, 2009.  In order to receive the full credit, taxpayers must have adjusted gross incomes of $125,000, or $225,000 for joint filers.
  7. To claim the credit on homes purchased after Nov. 6, 2009, and all home purchases claimed on 2009 tax returns, the newly revised IRS Form 5405 must be used.  This form was revised in December 2009.  Failure to use the proper form may cause the credit to be denied.
  8. No credit is available if the purchase price of the home exceeds $800,000.
  9. The purchaser must be at least 18 years of age on the date of the purchase. 
  10. A dependent of another taxpayer is not eligible to claim the credit, even if over 18 years of age.

As a caution, the IRS has stated that there was much abuse of this credit during 2009 and as a result it plans to be critical of credits claimed on future tax returns.  To protect yourself and obtain the maximum credit for which you may qualify, it is important to consult with a qualified tax professional regarding the credit.

 

June 27, 2009

Federal Housing Tax Credit–questions

Posted by whnscc under Tax Planning & Information | Tags: , , |
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Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?

2. What is the definition of a first-time home buyer? How is the amount of the tax credit determined?

3. Are there any income limits for claiming the tax credit? What is “modified adjusted gross income”?

4. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

5. Can you give me an example of how the partial tax credit is determined?

Read the rest of the article at this link and get answers to your questions.

 

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