We got notification last night that Justin has passed the fourth and final of the CPA Exams!
This is the last major hurdle to getting my license. Now it’s a matter of paperwork – ethics, experience affadavit, application, etc.
I’ll have to take some time to celebrate after the tax season.
The new stimulus package contains hundreds of tax changes. We will spend some time highlighting these throughout the year, but we want to start with an issue that affects employers and employees.
The “Making Work Pay” credit is going to cause a lot of confusion for a lot of people. The idea is that you get up to $400 ($800 married) against your social security tax (6.2% of income). The credit will appear on your tax return in 2010, but you’ll also see a decrease in federal income tax withheld.
This means that if you have net pay of $1000 and usually have $50 of federal tax withheld, you might only have $40 withheld, increasing your net pay to $1010. (For employers, this is an anti-stimulus. Instead of holding onto that $10 for two to six weeks, you’ll have to pay it with each paycheck).
The change in withholding means that the credit will not increase your refund next year. If you reduce withholding by $400 and increase tax credits by $400, the net result is a $0 change in tax/refund due.
Do you have multiple jobs? Be careful! The withholding tables don’t know how many jobs you have. You might see a decrease at each job, even though you only get one credit. Furthermore, the credit phases out if you make too much money; a worker with multiple jobs might have withholding reduced and yet not qualify for the credit to offset it.
For information from the IRS, see this page.
As most men realize, when you get two or more women together their natural instinct is to conspire. Now, as a woman I feel perfectly comfortable and indeed proud to admit to that. Without productive conspiring (or “brainstorming” as is probably the more politically-appropriate term would say) for the mutual good, we women would not be making use of one of our best skills!
Today’s business women are gathering in record numbers, times, locations, and with record enthusiasm to help one another grow their businesses. Yes, that’s another thing about business women that sets us apart somewhat from business men — that lower level of competitiveness and higher level of appreciation for the joys of helping lift one another up. Now, that’s not always the case, and I know there are some very competitive women at the helm of enormous corporations doing fantastic things in the world, and I admire many of them greatly. But, at the grass roots of business, as we women emerge one at a time into the realm of business ownership, we look to one another for shared wisdom and guidance, mentoring and encouragement, and we are finding it in what many seasoned business people might think the oddest places!
Now, here in the Northwest there is a Starbucks on pretty much every corner, and at times you’ll even find two sharing the same parking lot. You just can’t seem to throw a rock without hitting a coffee house of some sort, and gathered around at least one table at any given time of the day you will find women on laptops and women gathering in small groups talking business, strategizing and encouraging, sharing their experiences and wisdom, ideas and solutions. If you wander into any eatery you will find the same thing happening. The coffee house and quiet restaurant back corner have become our boardrooms where fantastic business ideas are launched and supported, where new connections are made and business relationships are built.
If you go online to places like Biznik you’ll find us there as well, putting together events designed to uplift and spark the creative juices from which great business opportunities are born.
So, if you have an idea for a new business, but you aren’t sure exactly how it might be received, or maybe you would love to have some fresh perspective on it and some really wonderful brainstorming, don’t hesitate to stop and chat a moment with that group of women over at the coffee house who are talking enthusiastically about something. They would LOVE to stop and hear your idea and give you some pretty amazing feed-back and encouragement and offers of support. Seriously — whether you are a man or a woman trying to launch or grow a new business, you won’t find a better think tank than a group of energetic, focused, and dedicated business women who are out meeting in the community just for that purpose — to help others grow their businesses!
We’ve talked about this before, but a reminder is always good. In their latest Tax Tips newsletter, the IRS says:
You probably already keep records in your daily routine. This includes keeping receipts for purchases and recording information in your checkbook. Keeping these and other records will help you avoid headaches at tax time. Good recordkeeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.
Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:
Good recordkeeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.
Did you know that most Washington businesses file monthly, quarterly and/or annual reports on 14 or more different forms? And that they report to at least 7 different government agencies?
We will be conducting a free workshop, called “What to expect when you’re expecting business” which is open to all who are interested.* We’ll be covering what to expect when you register a business, such as who to register with, what taxes you’ll be paying and how to know if you’ve done everything right.
* Just get a free Biznik membership to attend.
The workshop is on Friday, February 20, 2009 at the Inside Scoop in Mill Creek. Space is limited to 12 people.
The IRS has responded to pressures from the Taxpayer Advocates to help those who may have trouble paying their taxes this season. Full details can be found on their site.
One of the things that many people don’t know is that you can make payments by credit card. I don’t recommend this necessarily, since you’ll face an extra fee of about 2.5%. But failure to file penalties are 5% per month and failure to pay penalties can be as high as 10% for payroll tax deposits.
The IRS is also improving how they deal with people when it comes to missed installment payments, collection actions and levy releases.
From the IRS Tax Tips Newsletter:
First-time homebuyers should begin planning now to take advantage of a new tax credit. Available for a limited time, the credit:
The credit operates much like an interest-free loan because it must be repaid in equal installments over a 15-year period. Taxpayers will claim the credit on new IRS Form 5405, First-Time Homebuyer Credit.
Only the purchase of a main home located in the United States qualifies. Vacation homes and rental property are not eligible. For a home that you construct, the purchase date is the first date you occupy the home.
Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.
If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. If you make an eligible purchase in 2009, you can choose to claim the credit on either your original or amended 2008 return, or on your 2009 return.
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $75,000 or more. The credit normally must be repaid over a 15-year period starting the second year after the year the credit is claimed.
The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income. In general, for a married couple filing a joint return the phase-out begins at $150,000 and is completely phased out at $170,000. For other taxpayers, the phase-out range is between $75,000 and $95,000.
Not everyone will qualify for the credit. There are other rules that may impact your eligibility and decision to claim the First-Time Homebuyer Credit. Get all the information at IRS.gov.
Last year, Congress authorized the IRS to provide “Economic Stimulus Payments” (often abbreviated ESP). Many of our clients received these payments last year. They were worth $300 if you had any income at all, $600 if you owed income tax, plus $300 per dependent child.
This year, ESP’s twin is the Recovery Rebate Credit, or RRC. The calculations are the same, the law is the same, but the name is different.
While this is confusing for some people, just remember it this way:
In Revenue Procedure 2008-48, the IRS has announced some new rules that apply to parents who support children that they cannot (or do not) claim as dependents, but still provide medical care or insurance to them.
Traditionally, the IRS position has been that if you cannot claim the dependency exemption for a child (because they don’t live with you, often), you cannot claim deductions for medical expenses that you pay for the child. Many colleges and businesses used this rule when considering how their benefits apply.
The new rule changes this. A noncustodial parent can now claim payment for medical expenses. Furthermore, they can also include the dependent on company health plans and use funds from an MSA or HSA to pay for medical expenses for the noncustodial child. Furthermore, this ruling is retroactive.
What does that mean for you?
1. If you pay child support, consider making some of the payments specifically for medical services
2. If you have a company or college health plan that prevented you from covering a child in the past, talk to your HR department about this change.
3. Review your taxes for 2005, 2006 and 2007. If you paid any medical expenses for noncustodial children in those years, you can still amend them and get a refund.
Just to make sure we can never rest on our laurels too much, the IRS has released a new Form 990, the tax/information used to report non-profit activities to the IRS and (for many non-profits) to the public as well. From the IRS press release:
The Internal Revenue Service released the revised instructions that tax-exempt organizations will need to fill out the redesigned Form 990, which must be filed starting with tax year 2008 (filed in 2009).
Most charities and other tax-exempt organizations must file an annual informational return with the IRS to maintain their tax-exempt status. Information reported on Form 990 is made available to the public.
“These instructions are the final step in a tremendous effort to bring the Form 990 up to date and to reflect the diversity and complexity of the tax-exempt community,” said IRS Commissioner Doug Shulman. “The revised form will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax-exempt community.”
Form 990 had previously not seen major revisions since 1979.
The revised instructions feature several new tools that make it easier to answer questions line-by-line and that facilitate uniform reporting. Input from the tax-exempt community played a major role in how the new instructions were designed.
“We were gratified by the amount of help the IRS received from the tax-exempt community through public comments to redesign the Form 990 and revise its instructions,” said Steven T. Miller, Commissioner of the Tax Exempt and Government Entities Division. “This input helped us achieve our goal of improving compliance while minimizing burden. We will now begin working with the tax-exempt sector to help organizations complete the form and prepare for the 2009 filing season.”
The IRS expects to release instructions to the 2008 Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, in the next few weeks.
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