• The credit for 2009 is now a maximum of $8,000.
• The timetable that it is good for is after November 6, 2009, and before May 1, 2010, for purchases of principal residences.
• If there is a binding contract before May 1, then the deal has to close before July 1, 2010.
• There is no recapture of the credit…you earn it, you keep it, unless the home is no longer your personal residence.
• If the home is more than $800,000, then there is no credit, period.
• If the home is no longer your principal residence within thirty-six months of the purchase, then there is full recapture of the credit.
• There are some AGI (adjusted gross income) limits.
• This election can be taken in the prior year: 2009 purchase can be taken in 2008, a 2010 purchase can be taken in 2009.

Now, check this out!  If you are a “long-time resident” of a home, then you may qualify for a modified credit.

• The credit is a maximum of $6,500.
• You must have lived in a prior principal residence for five of the last eight years.
• There are some AGI limits.

The IRS has already figured out that this can be abusive, so there are some special requirements for filing.

• A copy of the settlement statement must be attached to the return.
• The taxpayer must be at least eighteen.  (Apparently some kid too young for kindergarden filed for the credit.)
• The credit cannot be claimed by a taxpayer who is a dependent of someone else.

The can be a huge tax planning opportunity for many people.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Compare this to the 2009 tax law and it is a crying shame that the 2008 law has not been amended.  Check out my article on 2009 First-Time Homebuyer Credit for the details.

Please do not try to forget about picking up the repayment for 2010, as the IRS has this all computerized.

Give me a call if you would like to discuss.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Sole Proprietorship (Schedule C). This is the easiest and simplest.

• No need to register with the IRS or the State.
• Just you, with no partners.
• If it does not work out, then it can be closed without fanfare.
• Any net income is taxed as regular income PLUS self-employment tax of just under 15%.
• Office-in-home may apply.
• The regular Form 1040, Individual Income Tax Return, is used for filing.  The business will go on a Schedule C.
• Schedule C expenses are not subject to Alternative Minimum tax.

Partnership (Form 1065). This is the “next step” if you have a partner and you still want to hold down costs and formalities.

• Generally, the net income is subject to self-employment tax.
• The business should keep a separate set of books and bank account.
• A separate Federal Tax ID number is obtained.
• There is no registration with the State (of California).
• There is generally no shelter from lawsuits.
• There can be separate splits among partners for income, losses, and equity.

So these are the two simple forms of businesses to have.  If you feel that these will work, then don’t do more that this to get your business up and running.

If you want some legal separation from yourself,  then the choices are:

• C Corporation,
• S Corporation, or,
• LLC, limited liability company.

C Corporation (Form 1120).  All corporations start “life” as C Corporations.  These are separate legal entities where they pay their own taxes.  This is where “double taxation” can occur.  The corporation pays taxes, issues a dividend to the shareholder, and he/she needs to pay taxes of this income, again.  Any month end can be chosen and there can be any number of shareholders.  Public companies generally are this form.

S Corporation (Form 1120S). Smaller corporations use this form.  The corporation pays no Federal tax and a small state (of California) tax. The business has a corporation “shell” (legal issue which is for the legal profession), but has nice tax benefits, as it does not get hit with double taxation.

LLC (Limited Liability Company). This is an entity not recognized by the Federal government, so the tax form can vary based upon the election made by the owners.  There can be good legal attributes (to be discussed by the legal profession), with the taxation not well defined.  This should be sorted out  when the entity is first formed.  An LLC can be reported on a Form 1040, 1065, 1120, or 1120S, depending on number of members and elections made.

To set up a business as a separate legal entity generally becomes a useful discussion when sales or gross income is planned to exceed $125,000 to $200,000 a year.  That is the minimum and can vary by industry or type of business.

Usually a tax projection can be developed which will show the difference among types of entities (Corporation, partnership, etc.).  This will provide a view of the financial side.  A legal professional can assist with understanding legal issues.

Many times an estimate of  the financial performance of this year, can assist in looking forward to next year.  If the result points to a new business entity form, like an S Corporation, then it is worthwhile to set it up for the new year.

Give us a call to discuss!

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Here is a summary check list of areas to address for begin the year-end planning process:

• Is business up or down compared to last year?
• How are the margins this year compared to last year?
• What amount of salaries have you drawn (as owner of the business)?

If the business is up compared to last year, then it is important to be looking at the “bottom line”.  If you have higher profits than last year, you may look to your overheads: expenses and cost of goods sold, to see if you can spend more before the end of the year.

If your business is down from last year, then look to the “bottom line” to see if you still have a profit.  If so, then you may not have much else to to.

If you are showing a loss, you may need to spend some more time on your year-end projections.  Can you “afford” to show a loss?  If you have creditors who you owe money to, like suppliers or banks, then they may expect you to be showing “cash flow” to cover your debt service (money you need to pay them).  Your options are to invoice out more in December to increase your Sales, and look at minimizing your expenses until the year end.  If this business approach will help you to look better by the end of the year, then that is the short-term plan.

This has been a hard year for many businesses.  The only way that the business has survived is through borrowing money.  If that is the case and there is no way that the business can show profitability, then very different tax planning may be in order.  Look ahead to next year: does it look like the business may become profitable next year?  If that is the case, then take all of your “hits” this year: do the opposite of the plan in the previous paragraph.  Don’t push to invoice out in December other than the minimum.  Take all of the expenses that you can in December.  The result will be to should a bigger loss this year, and give the business a chance to show better financial results for next year.

Planning is harder if the business is other than a “C” Corporation.  A “C” Corporation pays its own taxes.  Other entities, like LLCs, “S” Corporations, partnerships and sole proprietorships have the net income of the business linked for tax purposes to the business owner’s or owners’ personal tax returns.  Be sure to plan for both the business taxes and the personal taxes at the same time.  The objective is to minimize the overall taxes for the combined business and owners.

The purpose of this blog is to start the planning process.  The best result is to dialog with your tax professional to discuss the use of any carryovers or special tax treatments available to the business and its owners.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Taxpayer ID: bruce-00000XXXXXXXXXXXUS

Tax Type: INCOME TAX

Issue: Unreported/Underreported Income (Fraud Application)

Please review your tax statement on Internal Revenue Service (IRS) website (click on the link below): (I will not provide this).

It is signed “Internal Revenue Service”.

Please take note that the IRS May send out some information, but ONLY if you have subscribed to a feed yourself.  Any IRS correspondence looks just like the IRS.gov website, and always including an IRS logo.

If you connect, you will be exposing your personal information, so please put this on your Spam list and then delete it so it does not even sit in your e-mail box.

Any questions, please contact Bruce at Bruce@AndersenCPA.com.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

During the month to follow, anyone with maintenance plans, etc, which are entitled to an automatic upgrade, will be receiving the upgrade directly from Intuit.

Usually it takes us a couple of weeks to sort out features and how they apply to our existing clients.  Feel free to contact us to discuss.

If you are new to our client base or thinking about being a client, then give us a call to review your situation.

You can reach us at 818.225.8022 for Bruce or 818.222.1743 for Tom.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Everyone is involved in this process now.  The big brokerage firms, the big law and CPA firms, and, of course, the IRS and Treasury department.

This is really serious stuff.  The IRS realized that they have a really HOT TICKET so they are now sorting out what they will be able to make stick.

What I find interesting is that the IRS is now extending out the filing date out to June 30, 2010 for filing the 2008 and older tax returns.  This happens to extend through the end of the current year of 2009.  This is an opportunity to clear out your overseas’ accounts, should you have discretionary funds and don’t have a real reason or need to keep funds overseas.

This is an area that we focus on, so if you need specific consultation, please call our office at 818-225-8022 for an appointment.

This is general information not associated with any specific person’s tax information.  You must seek professional assistance for the application of specific laws.

Bruce Andersen, MS (Tax), CPA, Certified Tax Resolution Specialist  818 225 8022

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

For  individuals, this is the best time to start the year-end planning.  The year is over half-way done and it is possible to see to the end of the year for the purpose of knowing how the year will end up.

What information is handy to gather for a tax planning review?

• Is your net income up or down from last year?
• How will your cash flow be at the end of the year?
• Have you had any losses this year that need special work or consideration, such as foreclosing on a house, or writing off credit card debt?
• Are you still employed and will you be through this year, and/or into next year?
• If you have extra money this year, are there any tax deductible things that you can afford to buy?  This may include energy efficient items like solar panels, or new windows?
• What taxes have been withheld from your paycheck and/or what estimated tax payments have you made?

Armed with this information, make an appointment to see me to start the tax planning for the year.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

This is a hot topic right now.  The IRS has for years had rules for reporting income from all sources, world wide.  There is a treasury form which is to be filed annually by June 30th for prior calendar year.  This year the filing date has been extended until September 23rd.

This form may show unreported income.  Taxpayers have a chance to file the back taxes with a 20% underreporting penalty.  Wow, that is alot!  Yes, but compared to the amount that the IRS can charge for not voluntarily reporting is nothing.  For an example the IRS provides, for a $1,000,000 put offshore five years ago, the cost in penalties, etc to the IRS is over $2,300,000.

Please make an appointment with me if you have a reporting issue.

“This is general discussion of a tax topic and not specifically tax advise.  Please see a qualified tax professional.”

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.