Tax Relief Blog

Essential year end tax planning

November 12, 2009 | Mike Habib, EA

Year-end tax planning could be especially productive this year because timely action can nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them. These include, for individuals: the option to deduct state and local sales and use taxes instead of state income taxes; the standard or itemized deduction for state sales tax and excise tax on the purchase of motor vehicles; the above-the-line deduction for qualified higher education expenses; tax-free distributions by those age 70 1/2 or older from IRAs for charitable purposes; and the $8,000 first-time homebuyer credit (expires for purchases after Nov. 30, 2009). For businesses, tax breaks that are available through the end of this year but won’t be around next year unless Congress acts include: 50% bonus first year depreciation for most new machinery, equipment and software; an extraordinarily high $250,000 expensing limitation; the research tax credit; the five-year writeoff for most farm equipment; and the 15-year writeoff for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements. Finally, without Congressional “extender” legislation (which has come at the eleventh hour for several years), alternative minimum tax (AMT) exemption amounts for individuals are scheduled to drop drastically next year, and most nonrefundable personal credits won’t be available to offset the AMT.

High-income-earners have other factors to keep in mind when mapping out year-end plans. Many observers expect top tax rates on ordinary income to increase after 2010, making long-term deferral of income less appealing. Long-term capital gains rates could go up as well, so it may pay for some to take large profits this year instead of a few years down the road. On the other hand, the solid good news high-income-earners have to look forward to next year is that there no longer will be an income based reduction of most itemized deductions, nor will there be a phaseout of personal exemptions. Additionally, traditional IRA to Roth IRA conversions will be allowed regardless of a taxpayer’s income.

Roth IRA Rollover

November 11, 2009 | Mike Habib, EA

Roth IRA Rollovers

Mike Habib, EA

I am writing to tell you of an interesting new rollover opportunity that’s coming up in a few months. After 2009, you will be able to roll over amounts in qualified employer sponsored retirement plan accounts, such as 401(k)s and profit sharing plans, and regular IRAs, into Roth IRAs, regardless of your adjusted gross income (AGI). Currently, individuals with more than $100,000 of adjusted gross income as specially modified are barred from making such rollovers.

Extended homebuyer tax credit

November 11, 2009 | Mike Habib, EA

Extended and liberalized homebuyer tax credit rules

Mike Habib, EA

On November 6, the President signed into law H.R. 3548, the ”Worker, Homeownership, and Business Assistance Act of 2009.” The new law extends and generally liberalizes the tax credit for first-time homebuyers, making it a much more flexible tax-saving tool. It also includes some crackdowns designed to prevent abuse of the credit. These important changes could it make it easier for you or someone in your family to buy a home. And because the changes generally aid buyers and aim to improve residential real estate markets nationwide, they also could make it easier for you or someone in your family to sell a home. This Client Letter fills you in on the details you need to know about the first-time homebuyer credit.

IRS Back Taxes

November 6, 2009 | Mike Habib, EA

IRS Back Taxes

Mike Habib, EA

You incur IRS back taxes when you haven’t been filing your income tax returns religiously every year. Tax season can be a stressful time and there are a lot of people who tend to overlook the deadlines so they find themselves having to rush to make it in time. For those who are not so lucky, they have to incur penalties because of late filings. Things could get uglier once the government finds that you’re years behind in your income tax filing. You don’t want to have to pay IRS back taxes but in case you find yourself in this rut, understand that you do have options to get you out of this mess.

Tax Debt Relief

November 5, 2009 | Mike Habib, EA

Tax Debt Relief

Mike Habib, EA

877-788-2937

Year-end tax planning letter

October 29, 2009 | Mike Habib, EA

Year-end tax planning letter

Mike Habib, EA

As year-end approaches, taxpayers generally are faced with a number of choices that can save taxes this year, next year or both years. Employees too are faced with these choices. However, employees have some special considerations to take into account that retirees and other nonworking individuals don’t face. To help our clients who are employees take advantage of these special tax saving opportunities, we have put together a list of items to consider.

Tax Relief for the Unemployed

October 28, 2009 | Mike Habib, EA

Tax Impact of Job Loss

JOB LOSS CREATES TAX ISSUES

The Internal Revenue Service recognizes that the loss of a job may create new tax issues. The IRS provides the following information to assist displaced workers.

Bartering Tax Problem

October 28, 2009 | Mike Habib, EA

Do You Barter?

Mike Habib, EA

Bartering is the trading of one product or service for another. Usually there is no exchange of cash. Barter may take place on an informal one-on-one basis between individuals and businesses, or it can take place on a third party basis through a modern barter exchange company.

Commissioner Doug Shulman address

October 22, 2009 | Mike Habib, EA

IRS Commissioner Doug Shulman addressed the National Association of Corporate Directors Governance Conference

WASHINGTON — I realize that the IRS Commissioner has not customarily addressed the NACD’s corporate governance conference…but what I want to discuss with you this afternoon is the important role that boards of directors can play in overseeing tax risk and tax strategies of corporations. After all, taxes are one of the biggest expenses of a corporation, so how they are managed is very important to most corporations.

Clearly, corporate boards of directors play an incredibly important role in the vibrancy of businesses and our economy. Boards are a source of creative ideas, strategic thinking, and, importantly, governance and oversight. Boards hold management accountable, and in that role, understanding the risk posture of the company is critically important.

US Citizens Residing in Canada Liable for AMT

October 22, 2009 | Mike Habib, EA

U.S. Citizens Residing in Canada Liable for AMT Based on Foreign Tax Credit Limitation (Jamieson, CA-DC)

Married U.S. citizens residing in Canada were liable for the alternative minimum tax (AMT) because the amount of foreign tax credits they could claim was limited by Code Sec. 59(a)(2) (prior to repeal by the American Jobs Creation Act of 2004 (P.L. 108-357)) and was not offset by additional credits under the U.S.-Canada Convention With Respect to Taxes on Income and on Capital. Applying the last-in-time rule, the AMT foreign tax credit limitation under Code Sec. 59(a)(2) was the last expression of sovereign will and took precedence over the treaty, to the extent of any conflict between them.

The couple’s argument that the government could reconcile the treaty and the statute by allowing taxpayers to claim foreign tax credits after calculating the entire U.S. tax liability, including AMT, was rejected. This interpretation restricted the scope of Code Sec. 59(a)(2) to taxpayers who worked in a foreign country that did not have a treaty with the U.S. limiting double taxation. To the extent that there was any ambiguity as to whether Code Sec. 59(a)(2) applied to taxpayers in countries with which the Unites States has double taxation treaties, the Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647) clarified that Congress intended for Code Sec. 59(a)(2) to supersede existing treaty provisions prohibiting double taxation.