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Tax Tips Jan 08
Tax Time Getting Ready We are going to hear a lot about Taxes in the coming months. When its election time Taxes seem to be one of the areas that all politicians want us to believe they can fix. Over the years Taxes have been fixed so many times that we have the most complex, confusing and irrating system ever. Start getting ready early for preparing your tax return. Set up a filing system for storing your important documents and records. As you receive Forms W-2, 1099 and other tax documents file them immediately. This will reduce time looking for them later. Have a financial plan and a budgeting system to monitor your income, expenses and assets (what you own) and liabilities (what you owe). This information will help you plan for retirement or keep you on track if you are already retired. There are changes this year and some will affect a good number of people. The Alternative Minimum Tax is an issue that needs to be fixed for good and not just patched up to get by another year, but that is exactly what our Congress did, and it was December 19, 2007 before they patched it. To fix the AMT the regular tax needs to be properly fixed first and that would require too much time and work for our politicians who spend most of their time running for re-election. As a result of the foot dragging the IRS will not be able to accept returns from tax payers who have Education, Energy, Child and Dependent Care or Mortgage Interest Credits until after February 11th. It is possible the AMT Tax could affect their amount of tax due or refund total. The IRS must re-tool all of their software because of the late passage of the tax bill. It is estimated that over 14 million tax payers will be affected. Some changes to keep in mind are *Increased amounts for the Standard Deduction and the Personal Exemption. *Increased income limits for Student Loan Interest Deduction and Hope and Lifetime Learning Credits. *Limit increase on Itemized Deductions. *Increase in Earned Income Credit amount. *New record keeping rules for Charitable Contributions. *Deduction for Mortgage Insurance costs. *Adoption Benefits increased. *Bigger deduction for Long-Term Care premiums. *Larger deduction in Sec.179 depreciation for Business. *New rules for Traditional IRA’s and Qualified pension plans. If you have questions and concerns make a list and take it with you to your Tax interview. Mary Burr To TopTax Tips Feb 08
It’s tax timeTax Tips March 08
It’s tax time: Do it yourself or get professional help? Finding a professional tax preparer to help you put together the numbers, or taking the time to research the tax forms in order to prepare your own return can be a critical decision. Increasing numbers of taxpayers are preparing their own tax returns on affordable software that guides them through a maze of questions to hopefully arrive at the correct tax amount due or accurate refund total. For many taxpayers, with relatively uncomplicated tax returns, this works well for them and can save money over and above the cost of the software. Each year a new purchase of software is required as the tax laws change as fast as the weather in Nebraska. At last count more than 62% of taxpayers hire a professional tax preparer to crunch their numbers and take the responsibility of putting them together on the proper forms. The best reason to hire a professional in the tax field to assist you is because your financial picture may have grown so complicated that you are not confident in doing the job right. When situations in your life come about that might include the buying and selling of real estate or swapping real estate, cashing in stock options or selling stocks this could be the time for professional help. You may also want to have some assistance if you have opened a small business, tapped your retirement accounts or fallen into the dreaded clutches of alternative minimum tax. These are but a few of the reasons to seek help in reporting to Uncle Sam. Tax professionals have acquired an extensive range of education, certification and experience. They spend many hours each year in seminars and additional schooling to stay up to date on the many changes that come about each year and to sharpen their skills. Another thing to keep in mind is that if you are notified of audit only a professional can represent you at an IRS audit. Most professionals specialize not only in tax preparation, planning and consulting, but also in auditing. I am a firm believer that each high school should offer within a required course the information on how to properly fill out a form W-4 for employment, and to prepare a 1040EZ and a State of Nebraska 1040NS. Many students have a part time job and earn several thousand dollars a year and owe no Federal or State taxes. Their employer should not withhold any taxes if they would, when filling out their form W-4 (Employee’s Withholding Allowance Certificate), mark box 7 which states “exempt” that they do not make enough money to be taxable. Students and others who must file need to be aware of www.IRS.gov a web site for free filing their return with E-file available at no charge. Some might even choose to prepare their return the old fashioned way, fill out the forms by hand, and send it snail mail. No need to go to a professional and pay big $$ to have them prepare these forms which requires 3 or 4 lines filled in that they could very easily do themselves with just a little background information. Students, that are claimed as a dependent on their parent’s tax return, can make W-2 wage income up to $5,150 and not be taxable. If they also have other income, like interest or dividends, the rules are a bit different but not difficult. Maybe some day all of the multitude of rules will become clearer, until then, try not to let it be to taxing. Mary Burr To TopCutting Your Capital-Gains Tax Bill to Zero Affluent People Maneuver To Exploit New Break Meant for Lower Income Brackets
Coming Soon. To TopSummer Up Date-July 2006
I can hardly believe it is post 4th of July already, my time clock is back somewhere pre memorial Day. I have not up-dated anything on our web page since April. I had to rest up after the tax dead-line of April 17th, but two and one half months is a long rest even for me. There are things happening all the time. New tax laws. Changes to some of the old tax laws and clarifying other laws. For those of you planning to gift this year the new exclusion for gifts made is now $12,000 an increase of $1,000 from last year’s $11,000. The unified credit, which is the credit used to reduce or eliminate estate taxes, rose to $780,000 per person, up from $555,800. A number of small businesses are eligible to file and pay their payroll taxes once a year now, rather than quarterly. Eligible businesses are those with an estimated employment tax liability of $1,000 or less. Not many businesses fall into that category. Also they are telling us that they expect to announce soon, a reduction in the reporting burden on corporations and shareholders and that it will be easier to file their tax returns electronically. The IRS will stop collecting the federal excise tax on long-distance telephone service. Tax payers will claim this refund on their 2006 tax returns and the IRS says it will soon announce a simplified method by which an individual may get the credit. We’ll see! It always worries me when they say simplify. Remember the mileage rate is 44 and ½ cents per mile. I wonder if that will increase some as gas continues to go up and up and up. I’ll try to pass information along to you as we get it. We have already attended a number of seminars and put in a good many hours of school time but we will be attending a lot more as we move into the fall months. For those of you that have been by the office you know that we are in a bit of a mess with our remodeling. Things are happening. I think we will have our final approval on our permits from the city this week so we should start to move along even faster. We are all excited to have more room and see just how everything will look. We’ll keep you up-dated and when you come by feel free to look. Next month I will give you some tips on how to protect yourself from Identity Theft, and in September a review of situations that would require you to call your Tax Professional to get advice on how your tax picture would be impacted. Until then, stay tuned Mary Burr To TopFall Up Date-September 2006
Tax Increase Prevention and Reconciliation Act of 2005 Signed into law in 2006 includes Sec 179 deduction is up to $100,000. The alternative minimum tax exemption amount is increased. Non refundable personal tax credits may be used in full against the AMT in 2006. The 15% tax on long term capital gains/dividends is extended to Dec 31, 2010. The Kiddie Tax now applies the top marginal income tax rate of the parents to unearned income above $1,700 of any child under 18. The $100,000 income ceiling for converting a traditional IRA is eliminated after 2009. Offer-in-compromise to settle tax liabities has changed.
The standard amounts that most long distance customers can use to figure thier telephone tax refund range from $30-$60, enabling millions of individual taxpayers to request the refund without having to dig through old phone bills. In general anyone who paid the long distance telephone tax will get the refund on thier 2006 federal income tax return. To get the standard amount, you only need to fill out one additional line on thier 2006 return. Unless you have all your phone bills. WOW The most controversial provision of the new legislation extends the maximum rate of 15% on capital gains and qualified dividends through the 2010 tax year. Without the extension, the rates were to return to 20% after 2008. The rates for taxpayers in the 10% and 15% marginal brackets will remain at 5% for 2007 and be reduced to 0% in 2008, 2009 and 2010. The 28% rate for collectibles was left unchanged. Wow maybe you should look at waiting, this is on rental property and stocks. If you are planning to sell some appreciated assets don't forget to call us. To TopWinter Up-Date December 2006
Hard to believe that it is time to prepare for the 2006 Income Tax filing season. Election time found the American people speaking out for change. I hope we know what we are doing. We are in a time of very low unemployment at 4.4%. Gas prices have come down from a high of over $3.00 a gallon. The stock market is at an all time high of over $12,200. Home sales have slowed a bit but new construction is continuing, and not one American city has been attacked in over 5 years, since 9/11. Corruption in our government representatives and the war in Iraq is what people want changed. In January, with a new majority in the House and Senate, could things get better? Hot tip: For those of you over 70 ½ years of age that must take mandatory distributions from your IRA each year, you can now do charitable giving from that distribution tax free. Example: If your mandatory distribution is $1,000 and you decide to donate to a charity, or several charities, a total of $500 - your Form 1099 would read only $500 taxable not $1,000. Your Broker or Financial Institution, that handles your IRA account, will do this for you. They will write the checks to the organizations that you specify and mail them to you so that you can forward them to your charities. There are some Energy Credits for energy improvements to your home and also for the purchase of certain alternative fuel vehicles. There are some changes to the tax laws for Military personnel. Retirement plans have higher contributions levels. A welcome change to Alternative Minimum Tax rules with a higher exemptions amount. Also you can now have your Federal Tax Refund directly deposited into more than one account. Stay tuned for more up-dates in January. Happy Holidays from all the staff at Burr Business service. To TopNew Tax Bill 06
The President just signed (December 20) the 2006 Extender Bill. For most of our clients and us, here is what has changed:
• The Sales Tax deduction (Schedule A) has been extended thru 2007. Calculate the deduction on Line 5 of Schedule A with the notation "ST"
• The Tuition deduction (Form 1040) has been extended thru 2007. Take the deduction on Line 35 of Form 1040 with the notation "T". This line is also used for the Production Deduction (Code "B") and if both are taken, a statement should be attached to the return.
• The Educator expense deduction (Form 1040) has been extended thru 2007. The deduction should be taken on Line 23 of Form 1040 with Code "E"
• HSA contributions for tax years starting in 2007 do not have to be pro-rated for partial years
• HSA contributions for tax years starting in 2007 are no longer limited to the lesser of the deductible or the IRS limit, they are now limited only by the IRS maximum ($2,850 single, $5,650 for MFJ in 2007)
• A 1-time transfer (penalty-free) from IRAs to HSAs (up to the annual HSA deposit limit) will be allowed after 2006. The transfer must be trustee to trustee and is not available to SEP's or SIMPLE's.
• The 15-year special life for leasehold improvements and restaurant property has been extended thru 2007
New State Income Tax Credit--Available for Endowment Donors
Nebraska lawmakers approved Legislative Bill 28, the Endow Nebraska Act, on June 1st that will create an incentive to contribute to long-term endowments in the state of Nebraska. The tax credit takes effect January 1, 2006 and is available to both individuals and businesses that donate to long-term, nonprofit endowments based in Nebraska. The credit is applicable only to contributions used for Nebraska charitable purposes and expires after 2009. State leaders hope that LB 28 will encourage Nebraskans to invest in Nebraska. If you would like more information on LB 28, www.nchsfoundation.org or call 888-345-1374. Article from Home talk foundation Spring 2005 addition.
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