CLIENT
NEWSLETTER
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Call:
(213)-365-1040 to register
website: http://www.taxwork.com/
email: angel@taxwork.com Offices:
California EA Practice
P.O. Box 4326,
Burbank, California, 91503 |
This year, we introduce you to our: Tax Management Planning Discretion Collaborative. It is a new and innovative tax service program that assists clients reduce their taxes and remove the stress with their income tax return filing. It is a new approach to tax filing compliance and the alternative to the April 15 “deadline.” As I inform you in the coming weeks, I will give you more information. Meanwhile, the following tax news is our continuing effort to client professional service.
Some 25 million Americans would no longer be taxed with the “Alternative Minimum Tax.” The law has been signed on December 26, 2007. For married individuals filing together with your spouse, your taxable income should be less than $66,250. If you are single or the head of household, it should be less than $44,350. And if you are married filing a separate return, your taxable income should be less than $33,125. Approximately 3 to 4 million taxpayers affected by this change will not be able to file their tax returns early, at least not until after February 11, 2008 due to IRS system programming change. This could apply to you if you have education tax credits, residential energy tax credits, and child and dependent care expenses, etc.
A week earlier also, on December 20, 2007, President Bush signed another law. This one gave a tax break to the effects of home foreclosure with a mortgage debt discharge, mortgage cancellation or mortgage deficiency of up to 2 million dollars. The mortgage generally must be the original loan to get this tax break. There was no solution given to capital gain from foreclosure under this new law. This new law will be in the books up to year 2010 that indicates the expected real estate tumble will continue during the next 3 years.
For two (2) more years from the death of a spouse, the deceased spouse will continue to be entitled to the $250,000 capital gain exclusion from the sale of the family’s home for as long as the deceased spouse has met the period of residency. This is good news.
Late this week, an accountant had consulted with me about an undergoing payroll tax audit conducted by the California Employment Development Department (EDD) that resulted to an imminent tax assessment of about $25,000. The business was a restaurant that hired Hispanic nationals without work permit and valid social security numbers who were paid minimum wages. They were hired and worked “under the table” like normal employees. EDD interviewed all employees they found at the restaurant and on the basis of their testimony established the wages that were not paid with payroll taxes. If your business depends on the work of illegal aliens, be aware that an EDD audit could put you into big trouble. One disgruntled employee caught in a love triangle reported the restaurant’s illegal payroll practice to EDD. After some discussion, I recommended the proposed tax assessment could be appealed with good legal arguments before an administrative law judge, but the facts of the case will remain and could only be disputed; they cannot be altered. Be careful when you take business risks on payroll.
One (1) out of every four (4) offers received by IRS from taxpayers to settle with their taxes is approved/accepted. There is a filing fee of $150 dollars, plus the required 20% non-refundable deposit with the offer. There is no magic bullet to this process. Taxpayers have to go through the extensive requirements to qualify. We have helped taxpayers on this process for many years, but the law keeps on changing and we need a lot of patience now. Offers are categorized under three (3) justifications, ie, “doubt to collectibility,” “doubt to liability,” and “effective tax administration” offers. Each offer must be dealt with and justified differently.
Let us take a short glimpse of the California tax laws and see how it differs from the Federal. Congress enacted six (6) tax bills in 2006 and 2007. California has conformed to almost none of the provisions of these federal bills. There is taxwork to sort out these differences. Two (2) differences stand out very important, ie, (1) California’s maximum allowable IRC-179 deduction is only $25,000, not $125,000. (2) mortgage insurance premium is not allowed as tax deduction in California.
There are now 85,000 Registered Domestic Partners in California who would be filing their tax returns jointly like husband and wife. They require three (3) tax computations on two (2) different tax returns, ie, Federal and State, that does not make their tax life simple at all.
The California State Disability insurance contribution rate has gone up one fifth of a percent, at 0.8% percent on a maximum wage of $86,698, or $194 more. The penalty for under-reporting the correct sales and use tax is now 40% of the tax due, now double like violating traffic laws in a construction zone. This should cause merchants to be honest in collecting and reporting this indirect tax.
Lower your taxes in seven (7) easy steps. These steps are usually skipped in electronic filing because the government suggests fast and easy filing to collect more. Taxpayers are blindsided to quick electronic tax filing compliance that we believe is wrong. Think, think, think, and consider these steps before joining the bandwagon. Here are the steps. (1) maximize tax-free income (2) get the advantage of tax credits (3) defer taxes (4) maximize your tax deductions (5) reduce your tax rate (6) shift income to others (7) take advantage of your filing status and tax exemptions. If you skipped these important steps and proceeded to electronic filing fast/blind the way the government wants you, you lose---you pay more. Let us help you. |
