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Treasury Releases Obama Administration’s FY 2011 BudgetThe president released his FY11 federal budget proposal this past Monday. The “Green Book” (as the document is called by Beltway insiders) weighs in with a record overall price tag of $3.8 trillion. As expected, Obama laid out a number of his priority tax-related provisions, though you need to keep in mind that Congress, not the president, writes budget and spending bills. At the end of the day, the Green Book, while detailed and robust, is really just the president’s "wish list":• The 2001 and 2003 Bush tax cuts are scheduled to expire by 2011. Not surprisingly, Obama is sticking to his call to let those tax cuts expire for high-income households ($200,000 for individuals; $250,000 for families). This provision would raise the top two individual income tax rates to where they were in 2001, before passage of the Bush tax cuts. The 33% bracket would become 36% and the 35% bracket would rise to 39.6%. In addition, the long-term capital gains tax rate for these higher earners would increase to 20% (up from 15% currently). • The president proposes to cap at 28% the rate at which high-income households can itemize deductions. You may remember that President Obama attempted last year, without success, to move this proposal. There were many objections in Congress, including the complaint that if this proposal is enacted, charitable giving would be adversely affected. Those objections will not have gone away in the interim; in addition, the real estate lobby is bound to be up in arms to oppose such a cap on mortgage interest deductions. If the measure gains any traction at all this year, it seems likely that Congress would limit the cap to apply only to certain types of deductions, thereby dampening (probably significantly) its intended revenue-raising effect. • The president's budget assumes the estate tax (currently repealed) will be made permanent at a $3.5 million exemption level per person and a top rate of 45% on taxable estates. While it is much more generous than the repealed law (providing for a $1 million exemption level and a 55% top rate starting in 2011), it is much less generous than a proposal getting bipartisan support in the Senate. The Senate proposal offers a $5 million exemption level per person and a top rate of 35%. Early rumblings this year point to the likelihood of the Senate enacting estate tax reform that will apply retroactively to January 1, 2010. • There are currently capital gains tax breaks in place for investors in small businesses, defined as companies with gross assets of $50 million or less. But the president is proposing to eliminate the capital gains tax altogether on stock in small businesses held for at least five years. The proposed measure, however, would only apply to stock acquired after Feb. 17, 2009. • The president's budget assumes all the 2001 and 2003 tax cuts will be made permanent for everyone making less than $200,000 ($250,000 for couples). Given that this range of income defines most Americans, today's rates on income tax, capital gains and dividends would remain the same for most filers. • The administration assumes in the president's budget that Congress will permanently change the parameters of the AMT. This change, if adopted, would shield tens of millions of middle-income families from having to pay the tax, which was originally intended only for the highest earners. • The budget calls for a one-year extension of the Making Work Pay tax credit created in last year’s stimulus bill. • The stimulus package temporarily expanded the Earned Income Tax Credit for very low-income families with three or more children. President Obama wants to make that increase permanent. • Under the president's budget, families making less than $85,000 would be able to claim nearly double the child and dependent care tax credit for which they currently qualify. New Regulatory Requirements Placed On All Paid Tax Return Preparers and The Impact On Fees We Charge For Tax Return PreparationRegistration and payment of user fees to the IRS, competency testing, continuing education, compliance checks, due diligence and ethical standards are areas where sweeping changes were made by the IRS. Our review and documentation processes have been burdened with additional procedures. It seems that the IRS wants the paid preparers to virtually audit the taxpayer before filing the tax return, based on the penalties in place now, which include a minimum $1,000 penalty for taking an unreasonable position to a $5,000 minimum penalty for understating a tax liability due to reckless or intentional disregard of these rules and regulations.These regulatory requirements coupled with increased costs in every facet of our business are forcing us to increase the fees we charge. While we make every effort to hold our fees to a minimum and have not increased our fees in over three years, we must implement this increase in order to maintain our tax practice. Even with the new fee increase, you will find our rates very competitive. Our commitment to you has never been stronger. We anticipated these changes and began implementation of steps and measures that have been phased in over the last two years. For example, we scan all of the documents our clients bring to the office for use in preparation of their tax returns. We return the originals to the taxpayer, and maintain our secured digital copies should one of these items on your return be questioned in the future. This has the added benefit of a backup copy should your documents be lost or destroyed. Want to "Go Green" and Help us Save Trees? Ask about getting your "keep copies" of Tax Returns in electronic format.The number of trees required to produce the paper we generate at our office each year is 16.2. We would like to lower this number, but it will require assistance from you. One tree produces about 16.67 reams of paper, or approximately 8,335 sheets of standard business paper. We can provide your "keep copies" of tax returns in password protected pdf format. To learn more about going green, just ask your agent.New Year tax tip for anyone that uses their automobile for business purposes.Take your car or truck in to be serviced as close to the end of the year or beginning of the year as possible. Save the printout or receipt that shows the mileage (odometer reading) of your vehicle. Even if you are claiming the mileage rate and not actual expenses, this will serve as a third party verification of the odometer should you be audited. The IRS is routinely checking the mileage deduction more and more.Visit our Tax Department for a summary of the latest tax law changes.The President signed HR 3548 Worker, Homeownership and Business Assistance Act of 2009.Important aspects of the new tax legislation include a provision for homebuyers who have owned a home for 5 of the previous 8 years, and buy a new home to get a tax credit of up to $6,500. The Bill also extends the $8,000 credit for first-time home buyers through April 30, 2010.I Just Received a Notice from the Internal Revenue Service. What Should I Do?If you have received a notice or letter from the Internal Revenue Service, you should pick up the nearest telephone and call us at 1-800-551-6253 immediately. If we prepared your tax return for the year in question, all we need is a copy of the notice or letter by fax, email or regular mail.If we did not prepare your return, then we will need a copy of your tax return for the year in question in addition to a copy of the IRS letter. Our fee for assisting you will be well worth it. Never just write a check to the IRS without investigating the issue, they do make mistakes. Many of the recent IRS letters we see have to do with self-employment tax or cancellation of debt. Proposed Legislation for Gun Owners ... Report gun ownership on your Federal Income Tax Return!When I first heard about this, I thought it was the craziest proposal I'd ever heard. After reading it, I still do. If you are like me and think "that is just too crazy to be true", believe it! I've posted the full text of HR 45 here so you can read it for yourself. Tax Settlements – Are They Real?You’ve seen the advertisements on TV, “settle
your tax liability for pennies on the dollar”. The IRS does have a
program called Offer In-Compromise (OIC) by which a taxpayer can have
their tax debt settled for “pennies on the dollar”. To qualify, a
taxpayer must meet strict criteria. The American Recovery and Reinvestment
Act (ARRA) provides numerous tax
incentives for individuals; First-Time Homebuyer Credit Expands.
Homebuyers who purchase in 2009 can get an $8,000 credit with no payback
requirement. Money Back for New Vehicle Purchases. Taxpayers who
buy certain new vehicles in 2009 can deduct the state and local sales
taxes paid as an "above the line deduction" even if you don't itemize.
Enhanced Tax Credits for Tax Years 2009, 2010. A new higher
education benefit, increased earned income tax credit, additional child
tax credit and the American Opportunity Credit. Up to $2,400 in
Unemployment Benefits Tax Free in 2009. Individuals that will
receive more than this amount should check their withholding because the
excess will be taxable. $250 for Social Security Recipients, Veterans
and Railroad Retirees. The Economic Recovery Payment will be paid by
the Social Security Administration, Department of Veterans Affairs and
the Railroad Retirement Board. Energy Efficiency and Renewable Energy
Incentives. Too much to list here. Health Coverage Tax Credit.
The credit increases from 65 percent to 80 percent of qualified health
insurance premiums, and more people are eligible. There are several tax law changes that
may have a negative impact for you this year. Specifically, the Making
Work Pay Tax Credit means you will have less tax withheld this year. To
make sure enough tax is withheld, we should review your withholding. The IRS has issued a special warning to
married persons about the "Making Work Pay Tax Credit"... married
couples with two incomes should pay particular attention to their
withholding as you could have less than you need or want withheld from
your paychecks. WASHINGTON — National Taxpayer Advocate Nina E. Olson delivered a report to
Congress that identifies the priority issues the Office of the Taxpayer Advocate
will address in the coming fiscal year. Among the key areas of focus will be
working with the IRS to improve taxpayer services, enhancing IRS oversight of
federal tax return preparers, improving the accessibility of the offer in
compromise program, and working with the IRS to improve its ability to
administer refundable tax credits effectively. If you have an IRA
(Individual Retirement Account) that has dropped 45% in value, there may be
no better time than right now, to convert to a ROTH IRA if you qualify.
Consult your agent or advisor before taking any action. Please
be sure that we have your most current email address. If you are
comfortable communicating by email, it will help lower our significant
telephone costs. In addition, if you are using a cell phone plan where
you have unlimited long distance service, please call us on
256-586-4111. You will rarely get a busy signal because we pay for extra
phone lines where incoming calls will automatically flip or rotor to the
next available line when this number is dialed. First, call and schedule an appointment at a time that is convenient for
you (see hours and
appointment times in the grey box). When you arrive at the office you
will check in with the Receptionist in the lobby. She will get some general
information from you and create a new file for us. Greg Cook will come to
the lobby to greet you, give you a short briefing about the firm and our
process, then escort you to the Tax Department to your assigned
Agent. If you have
a tax problem, we can help. Our Fee Schedule is based on the Forms and Schedules required
to prepare your returns. Our Control Card is a work
order that is attached to each file. The Control Card also has a place for
each member of our firm that works on your file to initial off and date that
your file passed through that station. We have a
Ten Step Process that each file goes
through from start to finish. ...read more and
see Fee Schedule Save Time - The average person that
prepares their own tax returns spends 16 to 81 hours on the project (IRS
Reference). With us you spend 30 minutes to an hour. What's your time
worth? ...read more about the
benefits of retaining us |
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