about rpa small business tax services retirement planning services & fees contact us email us     Dear Clients I haven’t written for a while as we are awaiting most of our legislators to finalize their healthcare reform of some sort and we remain awaiting this legislation as I write. Some new items on the forefront: As of the time of writing this letter, our congress and President are finalizing a bill which will expand the Home Buyer Tax Credit and extend the current credit until April 30, 2010. At this point, we know the $8000 credit for first-time home buyers will be extended in its current form until April 20, 2009. ($4000 credit for singles.) Congress has also awarded us a new form of the credit for those who have owned their current home for five of the last eight years. This credit of $6,500 will be available for those who purchase a home for less than $800,000. ($3,200 for singles). The AGI (Adjusted Gross Income) limitations are set at $225,000 for married and $125,000 for singles for this credit.         How are they paying for these credits: Congress is having trouble finding ways to pay for the costs of all the credits and bailouts which have already been done this year. As of writing this letter, IRS penalties as well as interest rates have increased dramatically in order to cover some of the costs. This means you have to be on the top of your game and ensure you have the correct amounts deposited for estimated taxes as well as making sure you meet all filing deadlines especially when dealing with payroll tax payments and the timing associated. All late payments will draw an electronic notice and the IRS will be much less likely to waive any penalties. Some examples: Penalty for late filing of a corporate return: $89.00 per day it is late Penalty for late filing of personal return: 5% of the tax owed for each month to a maximum of 25%. You do not want to represent yourself should you find you owe penalties or are late filing a tax return. Please contact us to represent you should you find yourself with an IRS notice. MAKING WORK PAY: In a new report from the IRS, the treasury estimates more than 15 million tax payers may be getting paid more for the “Making Work Pay” credit than they should. This means taxpayers will either get less of a refund or actually owe money back to the IRS when processing their 2009 taxes. Two earner couples, single or married filers who have more than one job, and filers who receive pension payments are all at risk. The “Making Work Pay” credit was created as part of the economic stimulus legislation enacted in February is equal to 6.2% of the earnings up to $400 per person ($800 per couple). For everyone, this credit is being paid in advance incrementally through payroll as the IRS has changed the withholding tables to automatically reduce the amount of taxes withheld. In cases where withholding is not accurate, filers could see increased estimated tax penalties.   Hobby Losses The IRS continues to target certain entrepreneurs for audit for “hobby losses.” After years of consecutive losses, the IRS may determine the business you are engaged in is not engaged in for a profit motive; therefore classifying it as a hobby and removing the loss as a deduction. Activities currently being targeted are as follows: Fishing Writing Horse Racing Auto Racing Stamp Collecting Bowling Bowling Entertainers Horse Breeding Rentals Dog Breeding Direct Sales Airplane Farming Gambling Yacht Charter Photography Charters Motorcross Racing Craft Sales Artists (Actually they list Bowling twice on the list, so I am unsure if they are focusing extra hard on bowling or if they just made a mistake in their audit guide.) In each case, you must show you have a profit motive in order to deduct the associated business expenses(losses) using several characteristics which have been announced. If you are engaged in these businesses and have several years of losses, please contact us so we can assist in justifying the deduction.         New Extension Period for Partnerships Changed from 6 months to 5 month: New regulations reduce the automatic extension of time to file form six months to five months for partnerships and LLCs filing form 1065. Residential Energy Efficient Property Credit: New legislation increases the energy credit for homeowners who make energy efficient improvements to their primary residence. The new legislation increases the credit to 30% of the cost of qualifying improvements to a maximum credit of $1500. These credits correspond to purchases of insulation, windows and doors, roofing, HVAC units, water heaters and there are expanded credit amounts for solar and wind energy products. Additional state credits for appliance purchases are set to be announced by the end of the year.         2009 IRS Tax Rate Schedule I am asked frequently what tax bracket a certain client is in. For 2009, the IRS Tax Rate Schedule is shown below.         6 Tips for Holiday Budgeting In a recent article on SmartMoney, I found a good list for budgeting the holidays. Below is an excerpt of that article. If you like, read more online here. Expect smaller markdowns Rather than raising their sales numbers, most retailers are focused on preserving their margins, or the profit they make off of every purchase... Start with the discounters The recession has been good for the discounters. Year-over-year sales at TJX stores, which include TJ Maxx, Marshalls and HomeGoods, increased 10% for the month of October, while Costco's sales were up 5%. Cultivate patience The first wave of wider discounts won’t kick in until Black Friday... Be vigilant Retailers schedule their rollout of sales and incentives for the holiday shopping season back in the summer. Even though sales increased in September and October, retailers are going to stick to those preplanned markdowns... Give books, music and movies While many retailers have ruled out discounts, book, movie and music junkies are in luck: Retailers selling these items are offering an array of sales, coupons and other promotions. Set your sights lower At this time last year, luxury stores including Saks Fifth Avenue, Stuart Weitzman and Tourneau introduced unheard-of sales. That’s unlikely to reoccur this year... The holidays are fast approaching and I wish the best of luck to you all in the holiday shopping frenzy.   Visit us online. Copyright 2009. All Rights Reserved.     ROBERT PALMER & ASSOCIATES 1171 Market Street, Suite 101, Fort Mill, SC 29708 803.547.7676