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DECISION MAKING MODELS - FLOWCHARTS


Pro Tips 2003 Tax Year
by Cindy J Harris CPA

This article contains the following tips: $100,00 Write-Off, Sale of Residence, Child Tax Credit, Clean Fuel Vehicle Deduction, and the Military Family Tax Relief Act of 2003. Click here to view the article.


CA Amnesty and More
If you missed filing a California income tax return, underreported or did not pay timely, there is a new Amnesty Program for Individuals and Business that may waive unpaid penalties and fees. Click here to view the article.


Happy New Year!
By Cindy J Harris CPA

While the last of the tax returns were being prepared in October of 2004, the Government was busy passing yet another series of tax law changes – two within weeks of each other. Click here to view the article.


Health Savings Account NEW!!!
This is new and differs from the old Medical Savings Account (MSA) and Flexible Spending Accounts (FSA). Click here to view the article (This is a zip of several files).


Tax Benefits for Armed Forces Members
The 2003 Military Family Tax Relief Act has various benefits related to military service. Earlier tax law provisions gave breaks to those serving in combat areas. Tax Information for Members of the U.S. Armed Forces is available at our office.



CA: Remember Independent Contractor Reporting
Any business or government entity that is required to file a federal Form 1099-MISC for services received from an independent contractor is required to report specific independent contractor information to EDD. Click here to view the article.


Fringe Benefits
Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes the benefit from taxation.
Click here to view the article.


Involuntary Conversions - Real Estate Tax Tips
An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Involuntary conversions are also called involuntary exchanges.
Click here to view the article.


To Itemize or Not to Itemize – See the NEW Stuff…
You will generally use the higher of the Standard Deduction (see amounts below) or add all of your Itemized Deductions from Schedule A. Some married filing separate returns and other special circumstances may produce a different result.
Click here to view the article.


Law Changes May Affect Your 2004 Taxes

Some recent tax law changes are effective for the 2004 Tax Year. If these items affect you, be sure to get the details when you prepare your tax return early next year.
Click here to view the article.


Medical Expenses – Surgery, Nonprescription items, FSA reimbursements and more
The IRS in 2003 issued guidance on several issues related to medical care. Some related to the deductibility of certain expenses, others related to Flexible Spending Arrangements (FSAs) and similar employer plans.
Click here to view the article.


Recordkeeping
Documentation is key!

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should your return for examination. Normally, federal tax records should be kept for three years, but some documents — records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer. See our Website for a grid of these rules. Click here to view the article.


Taxpayer Rights a Priority for IRS
You have Rights – access them!

The law requires a protection of taxpayer rights with the IRS. This includes explaining rights to taxpayers, keeping taxpayer information private and confidential and being professional and courteous.
Click here to view the article.


TSUNAMI RELIEF DEDUCTIONS
January 2005 Contributions Deductible on 2004 Tax Returns! (States may vary)

Generally, contributions are deductible for the year in which they are made.

A new federal law will allow taxpayers to elect to deduct on their 2004 tax returns certain contributions to qualified U.S. charities for Tsunami Relief made in 2005!

Contributions to domestic, tax-exempt, charitable organizations that provide assistance to individuals in foreign lands qualify as tax-deductible contributions for federal income tax purposes provided the U.S. organization has full control and discretion over the uses of such funds.

Remember to tell the person preparing your return that you want to consider this choice and ask assistance for what may be better for your tax situation.

Must You File a Tax Return – Don’t Overlook a Possible Refund
Consider the Earned Income Credit, any withholding or refundable tax credits


There are some instances when you may not be required to file a federal or state income tax return.

The federal government reports that more than 70 percent of those who file (even though they are not required to file) are due a refund, so it may be to your advantage to file!

Don’t forget to look at the federal Earned Income Credit issue that may provide you a refund even if you did not have any withholding throughout the year.

Each year new amounts are released showing who must file and return.

Who Should Itemize?
Tax Tip 2005-6, Jan. 10, 2005
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. According to the IRS, money paid for medical care, mortgage interest, taxes, contributions, casualty losses, and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.
Click here to view the article.

Firms with Inventory Allowed Cash Method
Small firms with inventory allowed cash basis. The IRS is letting firms with average annual gross receipts of $1 million or less per year over 3 years use cash-basis accounting and not maintain inventories. Qualifying businesses can treat inventories as materials and supplies that are not incidental. The goal: to simplify small company bookkeeping.

Social Security Earnings – Limit on Earnings Repealed
Social Security earnings limits for workers aged 65-69 are repealed retroactive to Jan. 1, 2000, by The Senior Citizens Freedom to Work Act. These workers no longer lose benefits for earnings over $17,000 in 2000. Disabled employees and early retirees (62-64) are not affected.

Yes, wages are subject to FICA regardless of retirees' age or whether they receive retirement benefits.

Income Reporting - Installment Method Change
A 1999 tax law change limited the use of the installment method (a method under which at least one payment is received after the close of the taxable year) for certain sales by accrual basis corporations, partnerships and certain proprietorships. Some business owners have complained that the law will make it harder to sell part, some or all of their assets on the installment method because the tax must be paid all at once. New rulings have been issued to clarify the reporting issues for the company versus the owner/shareholder/partner.

Checkbox Power of Attorney New for Year 2000 Returns
For next year's tax filing season, taxpayers can name a paid Preparer as their designee to resolve certain return issues. The Preparer will be able to speak directly to the IRS in response to notices of math errors, refunds or payments. Previously, a power of attorney was needed to discuss these matters. A formal power of attorney is required for examinations, underreported income, appeals, and collection notices.

State-Sponsored College Savings Plans
Parents are constantly looking at ways to pay for college education costs. The Plans were originally introduced to help families pay college tuition. However, the Plans now help families save for room, board and other expenses. With the limit on the allowable expenses you can use for the college tuition credit (the Hope and Lifetime Learning Credit), these Plans allow more flexibility in paying for college expenses.

The assets in the Plan have the opportunity to grow tax-deferred until withdrawn. The earnings are taxed at the child’s rate (often lower than the parent’s rate) and more. Some states exempt earnings from taxation. Discuss this issue with your tax Preparer.

New Independent Contractor Reporting Requirement for 01/2001 - DE 542 (10/2000)

New EDD reporting requirements for independent contractors. Any business or government reporting entity that is required to file a Form 1099-Misc for independent contractor services may be required to report within 20 days of making payments totally $600 or more or entering into a contract for $600 or more. This can include someone inside or outside of the Company State.

For example, a California-based company with a small office in Florida that hires a gardener may need to file a report regarding payments to the gardener. These new reports are designed to help collect child support. See EDD Web site at http://www.edd.ca.gov or call 916-657-0529 or go to our "Links" page and click on the EDD site.

Standard Mileage Rate for Tax Return Year 2000 Released
IRS Standard Mileage rates are updated as follows for year 2000 returns:

Business mileage = 34.5 cents a mile
Medical mileage = 12.0 cents a mile
Moving mileage = 12.0 cents a mile
Charity mileage = 14.0 cents a mile


Does a Divorce Decree stating who can claim the child as a dependent hold up in court?
A March 2000 court case says "no". The person who has custody of the child will prevail unless the proper IRS Form is attached to the return waiving the dependent. This could affect past and current filed returns.

Napa Valley Quake Victims Qualify for Special Tax Breaks
The September 3, 2000 Napa Valley taxpayers may be granted special tax breaks. The variety of breaks and the requirements for the breaks are too involved to list her - consult your professional. But, they include the ability to file for a refund this year (2000) instead of waiting until next year.

Transportation Fringe Benefit Rules Have New Proposed Regulations

Employee may receive payments up to $175 a month for parking and $65 a month for public transit passes/van pools. These plans can be offered under salary reduction plans.

Teachers Retention Credit approved for year 2000 Tax Returns

Credit ranges from $250 - $1,500. Certain criteria must be met to take the credit. California Form 3505 used to claim the credit. See our "Links" section to find the Form on the FTB Website.