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Due Date for Filing Income Tax Returns

April 12th, 2010

April 15 is the due date for filing your Individual, Partnership, LLC and Fiduciary tax returns. 

There are a number of reasons for not filing your tax return by April 15th.  Some people have financial transactions or joint ventures which may be difficult to summarize by the April 15th deadline.  Others simply don’t get around to filing. 

If it sounds familiar and you won’t be able to file your tax return by the deadline, it’s time to start thinking about filing an extension as it can give you extra time to file your returns.

Filing a proper extension can save you from the penalties for late filing assuming that you in fact file the actual returns by the extended due date.

Let’s get together if you would like to file an extension or if you would like to get together before the due date to prepare your returns!

$10,000 Credit for California Home Buyers

March 30th, 2010

Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits.  The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.

 

This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).  Buyers also must be at least 18 years old and be unrelated to the seller.  First-time buyers are defined as those who have not owned a home in the past three years.

 

 

California Use Tax

February 1st, 2010

Generally, use tax applies when a person or business in California purchases tangible merchandise to be used, consumed, given away, or stored in California from a retailer who does not collect California tax on the sale. In other words, if sales tax would apply when a particular item is purchased in California, use tax applies when a similar purchase is made from a retailer outside the state and tax is not charged.More information about this use tax can be obtained at:

http://www.boe.ca.gov/sutax/useTaxRegFAQ.htm#usetax2

Standard Mileage Rates For The Year 2010

December 11th, 2009

IRS has announced standard mileage rates for the year 2010.  Beginning with the new year, it will be 50 cents per mile for business miles driven for the use of a car.  

It will be 16.5 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations

For more details, please go to:

http://www.irs.gov/newsroom/article/0,,id=216048,00.html

Year End Tax Planning Tips

December 10th, 2009

 Wish you happy holidays!

Here are couple of tax planning tips as we approach 2009 year end. 

If your real estate taxes are being impounded, you may be able to ask your lender to pay off both installment of taxes now!  This will generate the potential deduction for the 2nd installment during 2009.  Most likely, enough monies are sitting around in your impound account which may be earning little or no interest.  All you have to do is just conact the lender and instruct them to pay off both the installments.  If the reserves are not enough, sometimes the lender may change your monthly payments or they may not pay off all the taxes but it is worth looking into.

Similarly, you may be able to pay the January 2010 mortgage installment towards the end of December.  This will generally increase the amount of interest you have paid for the current year!  Please make sure it is treated as January payment and not as an extra payment.  Otherwise, your January payment may still be due! 

If you do it once, both of the above may have to be done annually thereafter.  Otherwise, the deductions may be less in the year in which you miss it!  Similarly, few other things may be doable to reduce your 2009 tax liability.  Now is the best time to estimate that liability and do the tax planning as needed. 

Increase In Section 179 Deduction

February 27th, 2008

The Economic Stimulus package also offers incentives to spur business investment. The legislation would save businesses approximately $50 billion in near-term taxes through a temporary change to the tax code that will allow American businesses that buy new equipment this year to deduct an additional 50 percent of the cost of their investment in 2008. This will encourage businesses to expand and create new jobs now because buying equipment, software, and tangible property this year will dramatically lower their taxes.

The legislation also increases expensing for small businesses. This means that a business placing less than $800,000 of equipment into service this year would be able to immediately deduct up to $250,000 – up from $128,000 – of its investment in 2008.

How The Economic Growth Package Will Benefit Americans

February 21st, 2008

The Economic Stimulus Act will allow Americans to keep more of their money to stimulate consumer spending.  The growth plan provides rebates to 128 million American households. Payments will go out through late spring and summer so we can get help to our economy when it is needed most. Under the legislation:

Individuals and families are eligible to receive up to $600 for individuals and $1,200 for couples.  A minimum of $300 per person and $600 per couple would be available to those with at least $3,000 of earned income. This relief would be available to everyone with adjusted gross income less than $75,000 for singles and $150,000 for married couples filing jointly. It will be phased out for taxpayers above those income thresholds. Taxpayers may qualify by filing a tax return for 2007 and including a valid Social Security number on their tax return.

Everyone eligible for this relief would also receive an additional $300 per child.  For example, this would mean up to $1,800 of tax relief for an eligible couple with two children.

Recipients of Social Security and certain veterans’ benefits are also eligible for rebates.  Those who receive at least $3,000 from any combination of benefits from these programs will receive rebates. The IRS and Treasury Department will be working closely with the Department of Veterans Affairs and the Social Security Administration, along with beneficiary organizations, to ensure that all eligible individuals are able to receive their payments.

Examples of Rebates

Different Types Of Business Entities

February 17th, 2008

If you operate your business as a sole proprietorship or general partnership, you are personally liable for the debts and other legal liabilities of your business.  If you operate as a corporation, your personal assets are generally beyond the reach of business creditors.  For this reason, many business owners choose to operate in corporate form.

There are two types of corporations – “C” corporations and “S” corporations.  A C corporation must file returns and pay tax on business profits.  When the corporation distributes those profits to business owners in  the form of dividends, the owners must include the dividends as income on their individual tax returns.  Business profits are, in essence, taxed twice – once at the corporate level and again at the individual level.

Unlike a C corporation, an S corporation generally does not pay tax on business profits at the federal level.  Annual profits are allocated to each owner and reported as income on their individual tax returns.  Dividend distributions to the owners are not subject to tax.  The net effect is that S corporation profits are taxed only once.

In order to be an S corporation, your business must have no more than 100 shareholders.  Generally, the business must adopt a tax year that ends on December 31.  Also, each shareholder must agree, in writing, to elect S corporation status.  These written consents generally must be filed with the IRS by March 15 of the first year S corporation status is elected.  So if you are thinking of converting your C corporation to an S corporation and want to have the change effective for the current year, you must usually act by March 15.

Originally, the S corporation was designed to allow small business owners who operated as sole proprietors to gain the limited liability protection of corporate status with a pass-through tax device. Recently, the limited liability company (LLC) is also serving that role.

One of the biggest advantages of LLC’s is that it allows foreigners to be members/partners/owners of it unlike an S corporation.  However, the state of California is also “taxing” it on its gross income.  Besides, the pass-thru income from an LLC is also subjected to the self employment taxes.

In evaluating which business form is right for you, there is no “one-size fits-all” answer so always check with a professional first to determine which entity is right for your business.

Rebate Phone Call Scam

February 16th, 2008

The Internal Revenue Service has warned taxpayers to beware of several current e-mail and telephone scams that use the IRS name as a lure.

At least one scheme using the word “rebate” as part of the lure has been identified. In that scam, consumers receive a phone call from someone identifying himself as an IRS employee. The caller tells the targeted victim that he is eligible for a sizable rebate for filing his taxes early. The caller then states that he needs the target’s bank account information for the direct deposit of the rebate. If the target refuses, he is told that he cannot receive the rebate.

This phone call is a scam. No legislation has yet been enacted that would allow the IRS to provide advance payments to taxpayers or that determines the details of those payments. Moreover, the IRS does not force taxpayers to use direct deposit. Those who opt for direct deposit do so by completing the appropriate section of their tax return, with bank routing and account information, when they file; the IRS does not gather the information by telephone.   

Economic Stimulus Package Highlights

February 15th, 2008

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million individuals. The stimulus payments will go out through the late spring and summer.

The vast majority of Americans who qualify for the payment will not have to do anything other than file their 2007 individual income tax return to receive their payment this year. The IRS will use information on the tax return to determine eligibility and calculate the amount of the stimulus payments.

For more information on the stimulus payments, including the amounts and eligibility requirements:

  • View IR-2008-18, IRS Will Send Stimulus Payments Automatically Starting in May; Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate.
  • View FS-2008-15, Facts about the 2008 Stimulus Payments.
  • Listen to the Feb. 13 media briefing on the economic stimulus checks.
  • Listen to IRS acting Commissioner Linda Stiff summarzing the key points of the economic stimulus payments in English or in Spanish.