BAY AREA TAXES

Probably not, but if you work for a large firm, the amount will be shown as an informational item on your W2.  It is not included in your taxable income.  Only large companies are required to report this information this year.  Next year, all companies will be required to report the amount of your health care premiums.

Information on a tax credit for paying all or part of your employees' health insurance premiums is on my web site.

4th-quarter payments of federal and California 2011 estimated taxes are due Tuesday, January 17th.  Because the 15th is a Sunday and the 16th is a holiday, the due date is pushed to the next business day.

If you have questions about the amount you owe, my web site has general information about quarterly estimated taxes. Or, if you would like to discuss your personal tax situation, please call or email me.

A tax credit (that's like a check from the IRS) of up to $9,600 is available now through the end of 2012 for hiring unemployed veterans.  Details are still being nailed down, but I have posted a summary of the available information about the tax credit for hiring unemployed veterans.

Even though changes to many tax laws are still being debated, there are a quite a few things we can do before the end of the year to lower our tax bills.  Because what's good for one person may not be good for another, I've broken the ideas into 4 parts:

General 2011 Year-End Tax Planning

Business 2011 Year-End Tax Planning

Tax-Planning After a Particularly Bad Year

Tax-Planning After a Good Year

Remember, these are general ideas meant for many people.  If you are contemplating an action that involves a significant amount of money, please talk to me first about your specific situation.

The IRS announced today that the standard mileage allowance will remain at 55.5 cents per business mile for 2012.

More information on my Mileage Allowance page.

With the Supercommittee still in negotiations, we don't know what the tax rules will be for 2012.  We aren't even sure about 2011, since some of the eventual changes will certainly be retroactive.  So, assuming that many tax breaks will not be extended, what year-end tax moves should we make?

Businesses  Right now, most businesses can immediately write off up to $500,000 of equipment.  That's scheduled to fall to $125,000 next year.  Also, the opportunity to quickly writeoff improvements to retail real estate expires next month.

Rental Properties  Right now, rental owners can use 100% bonus depreciation to immediately write off the cost of appliances, carpeting, and other non-structural items.  That's scheduled to fall to 50% next year.

Energy Items for Your Home  If you didn't take advantage of the tax credit for energy efficient windows, doors, skylights, water heaters, heating & air conditioning in the past, you have a second chance.  Here is a short IRS video about the Nonbusiness Energy Property Tax Credit.  The credit is scheduled to end this year, but the separate tax credit for solar energy equipment is scheduled to live on thru 2016.

What do these three year-end tax planning ideas have in common?  The equipment/appliance/improvement must be purchased and installed no later than December 31st if you want the benefit on your 2011 tax return.  Time to drive over to Home Depot?

Did your business receive a letter from the IRS this month saying that the names and i.d. numbers on the Forms 1099 you sent out don't match?  What are you supposed to do now?

First, look at the IRS letter and find the list of payees that are causing the problem.  Ask everyone on the list to give you their legal name & tax i.d. number.  You do this by sending them a Form W-9 and a "B notice."  Both of these are available on the Form 1099 backup withholding page of my web site.

Second, if the payee never gave you his legal name & i.d. number, you must withhold 28% of any payments you give to him, until you receive the signed Form W-9 back from him.  Then you can stop withholding.  (You must send any money you withheld to the IRS.)

Or, if the payee gave you his legal name & i.d. number previously, and now the IRS is saying that they don't match what's in their system, he has 30 days to give you the signed Form W-9 before you start withholding.

More information is available on the Form 1099 backup withholding page of my web site.

Yesterday was the final day to file your 2010 personal tax returns on time, unless you live in a declared disaster area.  Here are the most common things I hear from people who file late, and what you need to keep in mind:

"I'm getting money back, so it's okay if I file late tax returns."  If you file more than 59 days late, the IRS will keep $135 of your refund.  Or, if you wait long enough, the IRS gets to keep the entire refund!

"I don't have the money to pay the tax."  Mail your tax return anyway, and enclose partial payment, or even no payment.  Here's why: The penalty for filing late tax returns is 5% per month for the first 5 months, while the penalty for paying late is only 0.5% per month.  So filing late costs you 10 times more than paying late!  You can mail that tax return without enclosing any payment, and stop the penalty for filing late right now.

Recognizing how bad the economy is, the IRS has become more accommodating about arranging payment plans.  Right now, the interest rate on an IRS payment plan is only 3 percent.  You must file your tax returns for all years before the IRS will set up a payment plan.  More information about IRS payment plans is on my web site.

If you have a reason for filing late tax returns, you may be able to have some of the penalties forgiven.  Email me and let's discuss your situation.

Last April 15th, if you weren't ready to file your personal tax returns, you sent in an extension request.  That gave you 6 months longer to file, until October 15th.  But because the 15th falls on a Saturday, the deadline is pushed to Monday, October 17th. No additional extension of time is available, so after the 17th, your tax return is late. 

Some people don't worry about filing their tax returns late because they expect a refund.  But there are a few risks with filing late:  First, some credits and deductions can only be claimed on a "timely filed return."  Second, the IRS charges a penalty on all tax returns that are at least 60 days late.  And third, there is a limit to how long you can wait to claim your refund.  After that time lapses, the government keeps your money.

3rd-quarter payments of 2011 estimated taxes are due tomorrow, September 15th.

For general information, see my web page about how to determine your liability for quarterly estimated taxes.

If you would like to discuss your personal tax situation, please call or email me.

The IRS has posted a very short YouTube video about the Small Business Health Care Tax Credit. 

This tax credit enables you to get back up to 35% of your payments for health insurance premiums on behalf of your employees.  For more information, see the Small Business Health Care Tax Credit page on my web site.

Tax return extension deadline.  If your corporation, LLC, pship, or trust tax return is on extension, the tax return deadline is Thursday, September 15th.  If you can't file by then, aim for October 15th, to limit the amount of the failure-to-file penalty to just one month.

Quarterly estimated tax payment deadline.  The 3rd payment of 2011 tax is due on September 15th.  If you are calculating your estimated taxes using the safe harbor method based on your 2010 amounts, now is a good time to take a mid-year look at how this year is shaping up.  If your business is making less profit than last year, you may be able to reduce the payment due September 15th.  More information about calculating the amount of estimated taxes necessary to prevent penalties.

Also, if your personal tax returns are on extension, the October 15th tax return deadline will soon be here. 

Questions or concerns?  Please email me.

If you were able to increase your business' workforce even a little in 2010, a great tax credit of $3,000 per additional employee is available on your 2010 tax return.  I've written about this tax credit since it's beginning, and detailed information is on my page California New Jobs Credit.

The govenor is proposing to bump up the credit to $4,000 for each "full time equivalent employee," making this even more attractive.  Three things to keep in mind:

1. Owners count!  So if you aren't already on your company's payroll, now might be the time to start.
2. Only full-time employees count (35 hours or more per week.)  So hiring two part-time employees instead of one full-time person will cost you the tax credit.
3. The credit is based on an increase in your "full time equivalent" employees.  Example:  an hourly person who works for you for 1040 hours (and averages at least 35 hours/week) counts as 0.5 employee.  And a full-time salaried person who works for you for 13 weeks is counted as 0.25 employee.  So you if you hire that new person mid-year, or he/she doesn't stick with you the entire year, you can still receive partial credit.

For updates on the progress of the legislation, see the govenor's website.

For information on the tax credit, see my web page or the FTB's web site.

It's not illegal to have an account outside of the United States.  But if it holds $10,000 or more on even one day during the year, you must disclose it to the U.S. Treasury Department annually.  And, of course, include any income (interest, dividends, etc.) in your federal tax return.

The annual reporting requirement applies even if you are only a signer on the account.  For example, your parents have added you as a signer, or you have set up an account for sending money to your parents.

If you've haven't been meeting these requirements, you can take advantage of the amnesty program which expires at the end of this month.  It will involve filing amended tax returns for any year 2003 - 2010 in which you omitted income, and filing the missing annual Treasury reports, Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR.)

Besides the extra IRS tax, interest, and penalties, you will be required to pay a penalty based on the highest balance in the accounts during the unreported period. This is much lower than the penalty assessed outside of the amnesty, which is a percentage of the account balance for each unreported year.  The total can be much more than the account was ever worth.

The IRS has issued a last-minute summary of the OVID amnesty program.  It includes links to translations in 9 languages.

If you filed for an extension of time to file the 2010 tax returns for your corporation, partnership, or LLC, you have 8 weeks until the extension expires.  These types of tax returns are due on Thursday, September 15th.

This applies to both S corporations and calendar-year C corporations.

Good news for those of us who drive our cars for business!  After hinting in May that there would be no mid-year change in the standard mileage rate, the IRS has announced a huge increase in the business mileage allowance.

For the first 6 months of this year, the rate was 51 cents per mile.  For July - December, the rate jumps almost 9%, to 55.5 cents per mile.

For more information, I've added a page to my web site about deciding to use the standard mileage allowance or your actual car expenses.

Even though I posted about the FBAR deadline last month (see below) it's worth repeating since the failure to file penalty is $5,000 or more.  Intent to evade taxes is not necessary for the IRS to impose the penalty, just your failure to file for any reason. 

There is normally no extension for the June 30 deadline.  This year only, for those people who have only signature authority and no financial interest in the foreign account(s), there is a limited extension.

For my clients who are required to file an FBAR, I prepare it together with their tax returns.  But if you are determined to go it on your own, you should watch this short video from the IRS about preparing your FBAR.

Two years ago, California temporarily increased its sales tax rate from 7.25% to 8.25%.  On July 1st, the rate will fall back to 7.25%.

Because almost all counties and some cities add their own tax on top of the statewide sales tax, the rate where you are is probably higher than 7.25%.  Here are the sales tax rates for the Bay Area counties as of July 1, 2011:

San Mateo 1%, total 8.25%

San Francisco 1.25%, total 8.5%

Santa Clara 1%, total 8.25% (with extra tax in Campbell)

Alameda 1.5%, total 8.75% (extra tax in San Leandro and Union City)

The California Board of Equalization's web site has more information about sales and use taxes, and any last minute changes.

The second quarterly tax payments (federal and state) for 2011 are due on Wednesday, June 15th.  Here is more information on how to calculate your estimated tax payments.

It's not illegal to have an account outside of the United States.  But if it has a value of over $10,000 on even one day during the year, you must file a Report of Foreign Bank Account, Form TD F 90-22.1 (FBAR) with the U.S. Treasury Department no later than June 30th.

Many of my clients who are required to file don't actually own foreign accounts.  They are only signatories on their parents' accounts. That's enough to require you to file. 

The report is informational only.  There is no tax due.  However, the penalties for not filing can be astronomical.  There is no extension of the due date.

The IRS is hosting a free webinar on June 1st regarding the FBAR requirements and the newly redesigned form.  To register http://www.visualwebcaster.com/IRS/79501/reg.asp?id=79501

There is also a very short video at http://www.irsvideos.gov/SmallBusinessTaxpayer/BankSecrecyAct/WhenHowReportForeignFinancialAccounts