January 2012
Alternative Minimum Tax Patch
This is a BAD tax that was created more than 40 years ago and has been put off by each Congress since Clinton was in office, a "patch" to hold it at certain income levels. The reason each session has patched it, is because they know it's bad for middle class, working Americans. This tax will hit people with incomes as low as $33,750. While touted as another tax on the rich, it is not. According to Government estimates, if this is not repealed or patched again, this tax will hit an estimated 31 million taxpayers.

Higher mass transportation benefit
This credit, really doesn't effect most people in the western US, as this is mainly a benefit for public transit users. This little piece of legislation was part of the 2009 Stimulus act.

Deduction for direct IRA payouts to charity
Currently, retirees 70 1/2 years and older can donate up to $100,000 of their IRA distributions directly to charity, and deduct that amount from their taxable income. Congress should extend the this or better yet, make it permanent.

State income or sales tax deduction
Petty much self explanatory. This was a part of the deduction inside your Schedule A for Itemized Deductions if you qualified. Not any more.

Teacher's supplies deduction
While this was a pathetic amount at a $250 deduction, which was originally proposed to Congress at up to $1,000, it was a line item on page one of the 1040. This small reimbursement, so to speak, for teachers who buy class materials out of pocket, also goes away.

Tuition and fees deduction
While these deductions have bounced around and changed for the last 15 years that I have done taxes, they essentially stay the same other than the dollar amount, which is currently as much as $4,000 in specific tuition and fees. Of course this is limited by your income and this will probably be extended or rewritten. I guess we'll have to wait and see.

Mortgage insurance deduction
If you made less than a certain amount, you could claim this deduction of your mortgage insurance premiums on policies issued after 2006. This will most likely go away permanently.

December 22, 2011
Today the House of Representatives gave in on the Senate's 2 month extension on a part of the Bush tax cuts.

This is ridiculous! This will create an accounting nightmare for business everywhere, whether they have accounting services or not.

The logic of extending the cuts is sound, but the truth is they should be made permanent and both sides of the isle have had an opportunity to do just that. Neither side wants to. The Democrats and President Obama chose a cowardly way out with a 2 month extension while the Republicans wanted a slightly less cowardly 1 year extension.

If either side had any actual concern for the common taxpayer, let alone the businesses who have to deal with their tax nightmares, they would pass a clean bill addressing nothing but the tax cut permanence.

Instead, we get yesterday's result. All we can hope is that when congress returns from it's vacation in mid-January, they choose the smart path and extend it to at least the end of 2012.

October 2011

Essentially, President Obama's AJA is nothing more than suggestions he would like the supercommittee to approve. The problem is many on both sides, don't like what they see.

From the expiration of the Bush tax cuts to the increase of the higher income tax rates, capital gains rates and the estate tax rates. Until congress gets together on what this will be, there is only room for more speculation.

Either way, it's looking like "tax increase" is the phrase of the year.

October 2011

President Obama's plan would allow the 2001 and 2003 ordinary income tax rates to expire for high-income individuals beginning in 2013. As a result, the current-law 33 percent and 35 percent brackets would increase to 36 percent and 39.6 percent, respectively, while rates on capital gains and qualified dividends would rise to 20 percent and 39.6 percent, respectively.

The President is proposing a cap on the dividend rate at 20 percent though. According to the President, the new tax rate increases would only apply to those with “household income above $250,000 per year” (and likely to singles earning above $200,000).

The estate tax exemption and top rate ($5 million and 35 percent top rate under current law) are in his sights and would revert to 2009 law ($3.5 million and 45 percent top rate) beginning in 2013.

The White House claims these changes would raise $866 billion over 10 years.

September 2011

WASHINGTON –– The Internal Revenue Service announced in June, that approximately 275,000 organizations under the law have automatically lost their tax-exempt status because they did not file legally required annual reports for three consecutive years. The IRS believes the vast majority of these organizations are defunct, but it also announced special steps to help any existing organizations to apply for reinstatement of their tax-exempt status.

Congress passed the Pension Protection Act (PPA) in 2006, requiring most tax-exempt organizations to file an annual information return or notice with the IRS. For small organizations, the law imposed a filing requirement for the first time in 2007. In addition, the law automatically revokes the tax-exempt status of any organization that does not file required returns or notices for three consecutive years.

In addition, the IRS announced transition relief for certain small tax-exempt organizations – those with annual gross receipts of $50,000 or less for 2010 – that were made subject to the new "postcard" filing under the PPA. The relief allows eligible small organizations to regain their tax-exempt status retroactive to the date of revocation and pay a reduced application fee of $100 rather than the typical $400 or $850 fee.

The list of organizations whose tax-exempt status has been revoked for failing to meet their filing requirement, available on the IRS website at www.IRS.gov, includes each organization’s name, Employer Identification Number (EIN) and last known address. It is searchable by state. It also includes the effective date of the automatic revocation and the date it was posted to the list. The IRS will update the list monthly to include additional organizations that lose their tax-exempt status.

If you or your organization has lost their exempt status, we can help you get it back. Just give us a call, and we'll start the paperwork.

October 2011

On September 8, 2011, the Provisional Measures for Foreigners to Participate in the PRC Social Security System has been finalized and  the Implementation Rule will officially take effect on October 15, 2011.

This means that all foreign individuals who legally work in the PRC with either a work permit, resident permit, or permanent residency certificates are required to participate in the PRC Social Security System. The only exception to this rule would be those workers from Germany, as they are the only country with a signed social security Totalization Agreement.

All employers with signed contracts in China are urged to check with the PRC and follow the guidelines laid out. The employers are required to notice the PRC with 30 days of the emnployees signed contract. We also recommend contacting us immediately if you have employees working in the PRC, Hong Kong, Taiwan or Macau, so we may help you navagate these new rules.

July 2011

Based on the proposed new federal debt ceiling of $16.7 trillion dollars, which would give the Federal government the ability to continue to borrow money through 2012.

FOX News has developed an interesting Debt Calculator. This online tool helps you to see in real numbers what your portion of the federal debt would be is the ceiling is raised. The tool is at http://www.foxnews.com/topics/politics/possible-new-federal-debt-limit.htm.

Just put in your annual household income and click the submit button to be scared out of your mind. Example: $55,000 annual household income, owes $73,295!!! We're not sure how scientific the calculator is, but it does give you a good idea of just how much trouble the country is in.

July 2011

The Affordable Care Act of 2010 makes some changes to healthcare programs offered by employers. If you participate in any of these programs, here’s what you should know about using your 2010 funds and planning for 2011.

Beginning Jan. 1, 2011, over-the-counter (OTC) drugs, like nonprescription pain relievers, will be reimbursable through healthcare programs like flexible spending arrangements or health reimbursement arrangements only if the OTC drugs are prescribed. Also, OTC drugs will no longer be a qualified medical expense after

Dec. 31, 2010, unless you have a prescription. This means that a distribution from a Health Savings Account or Archer Medical Saving Account for an OTC drug will be tax-free only if it is prescribed.

This is effective for all OTC purchases made on or after Jan. 1, 2011—even if the funds were set aside in 2010. This change does not affect eligible OTC drug purchases made on or before Dec. 31, 2010.

In addition, the additional tax for distributions from Health Savings Accounts for non-qualified medical expenses increases from 10 to 20 percent and from 15 to 20 percent for Archer Medical Savings Accounts in 2011.

There are different types of healthcare programs that offer certain income tax advantages and offset the cost of healthcare.

Tax-favored healthcare programs include:
• Health Savings Accounts (HSAs)
• Archer Medical Savings Accounts (Archer MSAs)
• Health Flexible Spending Arrangements (FSAs), and
• Health Reimbursement Arrangements (HRAs)

Consider these changes when you set aside money for your 2011 healthcare account.

July 2011

The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect this year and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.

Small Business Health Care Tax Credit
This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

Changes to Flexible Spending Arrangements
Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met.

Health Coverage for Older Children
Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.

Excise Tax on Indoor Tanning
A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. The first payment of the tax was due Monday, Nov. 1. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.

Employer-Provided Health Coverage — Not Taxable; Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012
Starting in tax year 2011, the Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. To give employers more time to update their payroll systems, Notice 2010-69, issued last fall, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued

Adoption Credit
The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

Medicare Shared Savings Program
The Affordable Care Act establishes a Medicare shared savings program (MSSP) which encourages Accountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality of care provided to Medicare beneficiaries and reduce unnecessary costs.

Medicare Part D Coverage Gap “donut hole” Rebate
The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS.

Additional Requirements for Tax-Exempt Hospitals
The Affordable Care Act adds requirements in the Internal Revenue Code that tax-exempt hospitals must meet to maintain their tax-exempt status. The 2010 Form 990 and Schedule H include new questions relating to the new requirements that are in effect for tax years beginning after March 23, 2010, addressing the financial assistance, emergency medical care, billing and collection policies and charges for medical care.

Employer Shared Responsibility Payment
Starting in 2014, certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply.

Here are 10 IRS tax tips military members can keep in mind to help with filing a tax return next year.

1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.

2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.

6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

9. Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.

10. Tax Information: IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics.  Publication 3 is available for download at IRS.gov.

Here are the top seven things the IRS wants you to know if you plan on opening a new business this year.

First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.

The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.

Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.

Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.