Sacramento Tax Blog: October 2009

Friday, October 30, 2009

The Ever-Popular Estate (Death) Tax

Here it comes again!

Four members of the House Ways and Means Committee introduced legislation designed to stop estate tax rates from rising at the end of 2010. Sponsored by Rep. Shelley Berkley (D-NV), the Estate Tax Relief Bill of 2009 (HR 3905) would gradually increase the current exemption from $3.5 million to $5 million by 2019, and index it against future inflation. The measure would also reduce the estate tax rate from 45 percent to 35 percent over the same ten-year period.

Berkley's legislation, which was introduced on October 22, was co-sponsored by Reps. Kevin Brady (R-TX), Artur Davis (D-AL), and Devin Nunes (R-CA). The bill does not include a revenue offset. Under current law, the estate tax would be eliminated for one year in 2010, but return at a 55-percent tax rate for estates over $1 million in 2011.

House Majority Leader Rep. Steny Hoyer (D-MD) recently remarked that the estate tax issue will be resolved before its expiration at the end of this year (but after health care reform is completed). Who knows if the Berkley proposal will be the version of estate tax reform that will be implemented.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
Sacramento Tax Preparation
Sacramento Tax Representation
IRS Tax Help, Bookkeeping Services, Payroll Services

Unemployment Benefits, Homebuyer Credit & Net Operating Losses (NOLs)

Well, they've finally done it. But wait; it's on hold.

Legislation that would extend unemployment benefits and extend and expand a tax credit for first-time homebuyers remained stalled in the Senate Thursday in a partisan stalemate over other amendments. The bill (HR.3548), as passed by the House, would allow unemployed individuals in all 50 states to draw an extra 14 weeks of benefits, with six more weeks available to those in states with a jobless rate exceeding 8.5 percent.

The Senate is poised to add language to extend the $8,000 credit for first-time homebuyers who enter sales contracts by April 30, 2010, and close within 60 days. Individuals would be able to claim the credit for purchases in 2010 on their 2009 tax returns, which would mean they could get the money relatively quickly. The measure would also add a $6,500 credit for some existing homeowners, as long as they have lived in their homes for five consecutive years. The income cap for qualifying would be raised to $125,000 for individuals and $225,000 for married couples, up from $75,000 and $150,000, respectively. Homes sold for more than $800,000 would not be eligible for the credit.

Additionally, the Senate is expected to add a provision that would allow money-losing companies to offset current losses against up to five years of past profits. Both tax provisions are expected to be offset by a multi-year delay in the effective date of a law (PL 108-357) that gives multinational corporations more flexibility in how they handle their interest expense as well as by a provision increasing penalties for taxpayers failing to file timely partnership and S corporation returns (as we go to press, we don’t know the details on the penalties).

The House leadership has signaled they would act on and likely support a bill including all the provisions when provided by the Senate. No one can predict when the final version of the bill will be put forth but anticipate it will be sooner (likely next week) than later due to the nearing expiration dates of both jobless benefits and the homebuyer credit.

Sunday, October 25, 2009

Let's talk about the estate (death) tax for a moment

One of the most oft-asked questions of me as a tax professional is: "I just inherited a bunch of money from old uncle Albert, how much do I owe?" When I answer, "Well, probably nothing," they're shocked!

The truth is that on the FEDERAL level, there is only the ESTATE tax (which hits very few people). That is paid, if at all, by the estate you get the inheritance from. Some states have an inheritance tax (check here for your state).

So, inherit away!

Friday, October 23, 2009

A little longer post than usual ... about the home buyer credit

Wow. I knew that there was fraud in the new home buyer credit, but this is ridiculous!

19,351 taxpayers claimed $139.4 million in credits for homes they had not yet purchased but would allegedly purchase in the future.
70,005 taxpayers claimed more than $479 million in credits, despite indications that they were not first-time homebuyers.
582 taxpayers under 18 years of age who claimed almost $4 million in First-Time Homebuyer Credits. The youngest taxpayers receiving the Credit were 4 years old.

"Steps taken by the IRS prior to the 2009 filing season were not sufficient to prevent waste, fraud, error and abuse," commented J. Russell George, the Treasury Inspector General for Tax Administration. "The IRS should immediately implement TIGTA's recommendations in order to prevent further fraud and abuse of First-Time Homebuyer Credits."

Here is the full text of the testimony before Congress.

Wednesday, October 21, 2009

I kinda sorta knew this would come up some day ... deductibilty for pets

That's right, a tax break for up to $3,500 for your pet. Seems that with the economy the way it is, people need a break. And, it's called the "HAPPY Act."

Tuesday, October 20, 2009

And another one from TIGTA...IRS Employee Access to Taxpayer Accounts

We heard this during the election: IRS employees looking up high-profile candidates' tax records. And employees looking up ex-spouses. You get the drift.

Well, the good news is that progress has been made slowing down such unauthorized access, but more needs to be done.

IRS needs to do a better job at controlling dishonored checks

TIGTA has been busy issuing reports.

This one takes up the issue of how to better deal with checks that taxpayers bounce on the IRS.

News ... tax volunteers make mistakes

That's right, TIGTA has found that they're just not that accurate.

More on the home buyer tax credit

But, this time, it's all about the fraud!

Monday, October 19, 2009

Tax Shelters are not gone ...

Not yet, anyway, according to this article.

And, I love this quote mentioned in the article:

Former Internal Revenue Service Commissioner Donald Alexander once said, "As a citizen, you have an obligation to the country's tax system, but you also have an obligation to yourself to know your rights under the law and possible tax deductions -- and to claim every one of them."

Wednesday, October 14, 2009

Apparently we're not paying enough penalties

That's right! According to a new TIGTA report, the IRS is not assessing the "accuracy-related" penalty often enough during examinations (audits) of self-employed's tax returns.

The $8,000 Homebuyer Credit May be Getting Extended ......

.... It's getting closer.

Now the GAO suggests that losses on Schedule C be limited

Yes, it's back to the tax gap argument again. And, this time it's not the IRS or TIGTA; it's the GAO that says that one of the solutions to the so-called tax gap is to limit losses on Schedule C.

Tuesday, October 13, 2009

Don't go it alone, but ....

This is a pretty good looking site the IRS has put together about retirement plans.

Hey, what's constructive receipt, anyway?

It's when you owe taxes but never got any money!

Good explanation of what happens when you get one of those pesky 1099-C or 1099-A forms. There's more stuff that you can get taxed on and this explains just a few of the many that lurk in the US Tax Code.

Wednesday, October 7, 2009

Oh, and they missed a few phone calls, besides!

As a follow-up to our last post about IRS mistakes. Well, this isn't a mistake, exactly, but they missed a few phone calls. Like 22.4 million of them.

Big Surprise!

Does the IRS make mistakes? Yes, they do. Over 400,000 of them, in fact!

Tuesday, October 6, 2009

Health Care and the IRS

According to the following article, courtesy of Dow Jones, the IRS would become intimately involved in any health care overhaul.

Are you waiting too long on hold with the IRS?

The Treasury Department thinks so too. That's why you should come to a tax professional who has nearly instant access to highly trained IRS personnel who can resolve most issues.

There's a chance that the $8,000 home buyer credit will be extended

That's right. November 30 may not be the last day. It may be extended for up to six more months. See this news.

Saturday, October 3, 2009

Will It Pay to Die in 2010?

The estate tax is scheduled to be repealed beginning on January 1, 2010. However, it is not likely to happen as Congress will probably pass a bill later this year to cancel the repeal and continue in 2010 with the 2009 exemption and tax rate. This is USA Today's take on it.

IRS Strategic Plan for 2009-2013

Goal 1: Improve Service to Make Voluntary Compliance Easier

Objectives:

• Incorporate taxpayer perspectives to improve all service interactions

• Expedite and improve issue resolution across all interactions with taxpayers, making it easier to navigate the IRS

• Provide taxpayers with targeted, timely guidance and outreach

• Strengthen partnerships with tax practitioners, tax preparers and other third parties in order to ensure effective tax administration

Goal 2: Enforce the Law to Ensure Everyone Meets Their Obligation to Pay Taxes

Objectives:

• Proactively enforce the law in a timely manner while respecting taxpayer rights and minimizing taxpayer burden

• Expand enforcement approaches and tools

• Meet the challenges of international tax administration

• Allocate compliance resources using a data-driven approach to target existing and emerging high-risk areas

• Continue focused oversight of the tax-exempt sector

• Ensure that all tax practitioners, tax preparers and other third parties in the tax system adhere to professional standards and follow the law

Goal 3: Invest for Higher Performance

Objectives:

• Make the IRS the best place to work in government

• Build and deploy advanced information technology systems, processes and tools to improve IRS efficiency and productivity

• Use data and research across the organization to make informed decisions and allocate resources

• Ensure the privacy and security of data and the safety and security of employees

For more details, read the Treasury Inspector General for Tax Administration's Plans.

Friday, October 2, 2009

Make Work Pay Credit and Withholding Confusion

With only three months left in the calendar year, you may wish to consult the IRS withholding calculator so you can be sure you haven't over- or under-withheld for the year. The prevailing thought among tax professionals is that this credit (which showed up as a $13 increase on your paychecks beginning in April) is going to create tax liabilities where people thought they were getting extra money. So check this calculator out to make sure you are not in for an April 15 surprise.

Owen S. Arnoff, Enrolled Agent

Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
Sacramento Tax Preparation
Sacramento Tax Representation
IRS Tax Help, Bookkeeping Services, Payroll Services

If you've been hit by a job loss ...

OK, this is valuable, so listen up.

The IRS has just revised a publication, Tax Impact of Job Loss (Pub. 4128). It has some valuable information for you to read if this affects you. Interestingly, when job losses mount, people with skills very often start their own businesses and this usually jump starts the economic engine of the nation. With that in mind, taxpayers who pay attention to one of the questions about starting their own businesses may wish to consider reviewing Publication 334, Tax Guide for Small Businesses.

Thursday, October 1, 2009

I'm a Day Late on This

This came out yesterday, but for those of you that don't own a TV or radio, here's the latest tax proposal for Californians.

47% Will Pay $-0- in Taxes

At least according to CNN, quoting the Tax Policy Center.

Blah, Blah, Blah

The IRS just updated the rules for substantiation of business expenses for employees and self-employeds. Not much change here, but some good reminders. According to the bulletin from the IRS, the new procedure provides transition rules for the last three months of calendar year 2009 and updates the simplified "high-low" per diem rates and the high-cost/low-cost localities.

Friday, October 30, 2009

Sunday, October 25, 2009

Friday, October 23, 2009

Wednesday, October 21, 2009

Tuesday, October 20, 2009

Monday, October 19, 2009

Wednesday, October 14, 2009

Tuesday, October 13, 2009

Wednesday, October 7, 2009

Tuesday, October 6, 2009

Saturday, October 3, 2009

Friday, October 2, 2009

Thursday, October 1, 2009

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Owen S. Arnoff, EA & Better Business Ventures, Inc.

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