Copyright (c) 2011 Stine Heiser and Buss Associates All rights reserved. http://www.codycpas.com/newsletter.cfm Recent Newsletters en-us Wed, 26 Jan 2011 5:51:12 PM GMT-05:00 5 kevenbuss@bresnan.net kevenbuss@bresnan.net Richbank-Studios RSS Builder (http://www.richbankstudios.com) 75 75 http://www.codycpas.com/newsletter.cfm http://www.codycpas.com/images/rss_news.jpg http://www.codycpas.com/newsletter.cfm?item=30 Admin Example 30 Wed, 26 Jan 2011 Senate Finance Committee Chairman Max Baucus, D-Mont., and Senate Majority Leader Harry Reid, D-Nev., on January 25 introduced a bill to repeal the new Form 1099 reporting requirements for businesses.  Both lawmakers said they expect the measure will attract bipartisan support as business owners have widely complained that the additional paperwork will be too burdensome. “We have heard small businesses loud and clear and are responding to their concerns,” said Baucus in a prepared statement.  “Many of my colleagues on both sides of the aisle want to work with the small business community to eliminate these requirements, and it is my hope we can come together to pass legislation quickly.” The Form 1099 requirements, signed into law as part of the Patient Protection and Affordable Care Act, mandate that all businesses file a return for payments to vendors in excess of $600 beginning in 2012.  The measure was estimated to raise some $19 billion over 10 years to help offset the cost of health care reform. Reid told reporters that the Senate would repeal the requirement, although he acknowledged that he did not know if the cost would be offset.  “Making it easier for small businesses to thrive should be something Republicans and Democrats can agree on," he said. By Jeff Carlson, CCH News Staff http://www.codycpas.com/newsletter.cfm?item=29 Admin Example 29 Tue, 04 Jan 2011   The IRS is warning taxpayers that it will not accept certain 2010 individual tax returns until mid- or late February due to tax law changes recently enacted by Congress (IR-2010-126). Taxpayers affected include all those who itemize deductions on Schedule A, as well as those who take certain recently extended deductions. The delays will affect taxpayers whether they e-file or file on paper.   The IRS is emphasizing that for most taxpayers, filing season will start in January, as usual. But because of changes made by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (PL 111-312), enacted Dec. 17, the IRS will need time to update forms and to reprogram its computer systems to handle certain items.   The change affecting the most taxpayers will be the fact that Form 1040, Schedule A, will have to be updated to reflect the extension of the state and local general sales tax deduction under IRC § 164. The IRS anticipates that it will be the middle of or late in February before it can accept Forms 1040 with itemized deductions on updated Schedule A. The IRS also has to update the state and local sales tax tables for use in calculating the state and local general sales tax deduction.   Other individual taxpayers affected by the delay include:   ·         Taxpayers claiming the IRC § 222 higher education tuition and fees deduction on Form 8917;  ·         Taxpayers claiming the $250 deduction for elementary and secondary school teachers under IRC § 62(a)(2)(D); ·         Taxpayers filing Form 4686 to claim casualty or theft losses; and ·         Taxpayers claiming the District of Columbia first-time homebuyer credit.   The IRS also has to update some other forms and its systems, primarily due to changes made by the Small Business and Jobs Creation Act (PL 111-240), delaying filing for taxpayers who file those forms. The affected forms are:   ·         Form 3800, General Business Credit; ·         Form 5405,  First-Time Homebuyer Credit and Repayment of the Credit; ·         Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit; ·         Form 8834, Qualified Plug-In Electric and Electric Vehicle Credit; ·         Form 8910, Alternative Motor Vehicle Credit; and ·         Form 8936, Qualified Plug-In Electric DriveMotor Vehicle Credit. http://www.codycpas.com/newsletter.cfm?item=28 Admin Example 28 Wed, 29 Dec 2010 The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act of 2010) provides a "payroll tax holiday" that is estimated to inject over $110 billion into the economy in 2011.  This is accomplished by reducing the employee-share of the OASDI portion of Social Security taxes from 6.2 percent to 4.2 percent for wages earned up to the taxable wage base of $106,800 in calendar year 2011.  The Medicare component is the same (1.45 percent), for a combined "payroll tax holiday" tax rate of 5.65 percent.  The employer's combined tax rate remains unchanged at 7.65 percent. Self-employed individuals also receive a two-percent reduction from (12.4 percent to 10.4 percent) on the OASDI portion of self-employment taxes.  When combined with the Medicare component of 2.9 percent, the total self-employment tax rate is 13.3 percent on self-employment income up to the same threshold amount. Under the Tax Relief Act of 2010, self-employed individuals calculate the deduction for employment taxes without regard to the temporary rate reduction (that is, one half of 15.3 percent of self-employment income).  An enhanced percentage that represents the employer portion of the deduction allows the self-employed individual to deduct the full amount of the employer portion of self-employment taxes.  For any tax year that begins in 2011, the self-employment tax deduction equals the sum of 59.6 percent of the applicable OASDI taxes, plus 50 percent of the applicable Medicare taxes. Unlike the Making Work Pay credit, which expires after 2010, the two-percent OASDI reduction is available to all wage earners irrespective of income level.  Becasue the payroll rate reduction does not phase out, any individual earning at or above the OASDI cap of $106,800 receives a $2126 tax benefit in 2011.  Individuals who do not pay into Social Security, including some public employees, will not benefit from the payroll tax rate redution, although they did benefit from the Making Work Pay credit. However, the IRS has cautioned Congress that it needs time to program its computer systems for any late year legislation.  Therefore, you may not see the effects of the payroll cut until mid-January of 2011. http://www.codycpas.com/newsletter.cfm?item=27 Admin Example 27 Mon, 20 Dec 2010 House Democrats and Republicans spent hours blaming each other for Congress' failure to address the nation's growing federal budget deficit before passing an $858-billion measure to extend the Bush-era tax rates, provide unemployment benefits, patch the alternative minimum tax and provide a two-year break for inheritance taxes.Lawmakers approved the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (HR 4853) by a vote of 277 to 148 on December 16, even though the measure is not paid for and will add to the deficit.  The final vote came after lawmakers voted down an attempt by liberal Democrats to provide a less generous tax rate for wealthier estates, which would have sent the measure back to the Senate for additional work.  Lawmakers rejected the amendment, offered by Rep. Earl Pomeroy, D-ND by a vote of 233 - 194.On December 15, the Senate passed the tax measure, which represented a bipartisan agreement by President Obama and Senate Republicans to prevent tax rates from rising and unemployment benefits from ending on January 1, 2011.  However, the bill's passage in the House was not as certain since some Democratic lawmakers were upset that the agreement broke the president's campaign promise to limit tax problems with lawmakers from both parties, however, with more than half of House Democratic caucus members voting against the bill.  GOP lawmakers, who complained that the unemployment benefits in the bill would add to the budget deficit, supplied the remaining votes for passage.  The measure now heads to the White House where Obama is expected to sign it. http://www.codycpas.com/newsletter.cfm?item=26 Admin Example 26 Fri, 17 Dec 2010 Here is a sample of information we need to prepare your Business Income tax return: General Ledger or QuickBooks (Accountant's copy) Bank statements and bank reconciliations as of the end of the tax year Accounts receivable listing (if accrual basis) Inventory balance at the end of the year (at cost) Listing of assets purchased and disposed during the year:  Purchases - Description, Date purchased, Purchase price and loan details, if any.  Disposals - Description, Date sold, Sales price and provide closing statements or bills of sale. Depreciation Schedule (if a new client) Broker statement for investments Detail of any other asset balances - loans, deposits, etc. Accounts Payable (if accrual basis) Loan statements All payroll tax reports for the year - Forms 941, 940, NC-5, and NCUI-101 Sales tax report for the end of the year Balances of any other liabilities - payroll withholdings, retirement plan contributions, etc. Details of any equity account changes or ownership changes http://www.codycpas.com/newsletter.cfm?item=25 Admin Example 25 Mon, 22 Nov 2010 This year has brought many federal tax changes that impact taxpayers of all types.  New or extended tax incentives, especially for businesses, can help maximize an individual’s or business’ tax savings at year-end. This letter highlights some of the year-end planning opportunities and challenges for individuals and businesses.   Individuals The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and subsequent legislation reduced the individual income tax rates to their current (2010) brackets of 10, 15, 25, 28, 33, and 35 percent. The reduced rates are scheduled to expire after December 31, 2010 to be replaced by rates of 15, 28, 31, 36, and 39.6 percent.  Bills have been introduced in Congress to extend some or all of the reduced rates either for two years or to make the rate reductions permanent. Congress may take up the fate of the reduced rates during an expected lame duck session after the November elections. Our office will keep you posted of developments.  In the meantime, individuals should consider accelerating income, if possible, into 2010, to take advantage of the certainty of the reduced rates for 2010. Employers may want to accelerate bonuses to employees. Other year-end planning considerations include contributing to a retirement savings account and converting a traditional IRA to a Roth IRA. A closely related planning consideration involves capital gains and dividends. Reduced capital gains and dividend tax rates are scheduled to expire after December 31, 2010, although, as with the regular income tax rates, Congress is expected to extend some, if not all, of them.  Individuals with investment gains may want to consider taking them in 2010 to lock-in at the reduced tax rates. To allow shareholders to take advantage of the current lower tax rates before they expire, corporations may plan to accelerate the distribution of dividends. Many individuals also must prepare for the expiration of the Making Work Pay Credit (MWPC).  The MPWC has been under most taxpayers’ radar because its benefit is seen in wage earners’ paychecks.  Individuals who receive a paycheck and are subject to withholding, the credit is handled by their employers through automated withholding changes in place since early 2009. These changes often resulted in an increase in the amount of take-home pay in 2009 and 2010.  Once the MWPC expires, individuals who saw an increase in take-home pay may experience a reduction in take-home pay from those amounts. Since the start of 2010, many individuals have been questioning whether the so-called “tax extenders” will be extended. These are popular but temporary tax incentives, many of which expired at the end of 2009. Some of the most popular are the state and local sales tax deduction, the higher education tuition deduction and the teachers’ classroom expense deduction. Congress could vote to extend these incentives through the end of 2010 during the lame duck session. Our office will keep you posted of developments. Many individuals are also waiting for Congress to enact an AMT patch for 2010. In recent years, Congress has “patched” the AMT to prevent it from encroaching on middle income taxpayers. The patch has traditionally provided higher AMT exemption amounts and other relief.  It is unclear if Congress will take up an AMT patch during the lame duck session. The patch is expensive because of the lost tax revenues. The fate of the federal estate tax is also complicating year-end planning for individuals.  The federal estate tax is scheduled to revert to pre-EGTRRA rates for decedents dying after December 31, 2010 and the applicable exclusion amount will be $1 million. Under current law, the federal estate tax is abolished for 2010, replaced by a carried over basis at death regime. While some compromise extension of the estate tax is expected, the final details are far from settled at this point. Additional year-end considerations for individuals include:                 Home energy efficiency projects, such as energy efficient windows and doors that may be eligible for energy tax credits; Impact of health care reform, such as new restrictions on the use of funds in health flexible spending arrangements (FSAs), new rules keeping children under age 26 on their parent’s family policy, no lifetime limits on coverage, and more; Navigating the variety of education tax incentives, including the expected expiration of the American Opportunity Tax Credit after 2010; Casualty losses from qualifying events; Tax incentives for job-search expenses; and Expiration of COBRA premium assistance.      Businesses Businesses, like individuals, are confronted with uncertainty in tax planning. However, recent passage of the Small Business Jobs Act of 2010 has provided some certainty. The new law extended two valuable tax incentives for businesses: 50 percent bonus depreciation and increased Code Sec. 179 expensing. Additionally, 50-percent bonus depreciation is extended for qualified property placed in service before January 1, 2011. The Small Business Jobs Act also allows taxpayers to claim additional depreciation for the purchase of automobiles and light trucks through the end of 2010. Code Sec. 179 expensing allows taxpayers to elect t o recover all or part of the cost of qualified property, up to a limit, by deducting it in the year it is placed in service. The Small Business Jobs Act of 2010 increased the Code Sec. 179 expensing dollar and phase-out investment limits to $500,000 and $2 million respectively for tax years beginning in 2010 and 2011. The Small Business Jobs Act also allows taxpayers to elect up to $250,000 of the $500,000 Code Sec. 179 deduction limit (subject to the investment limitation) for qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.  Taking bonus depreciation or Code Sec. 179 expensing, however, is not always the best choice, depending upon a business’s tax history. If a business has net operating loss (NOL) carryforwards from prior lean years, especially if they are about to expire, minimizing deductions and increasing the recognition of income currently to absorb those NOLs could be worthwhile year-end planning consideration. Businesses that hire new employees after February 3, 2010 and before January 1, 2011 may qualify for a special payroll tax exemption. The exemption effectively negates the employer’s share of Social Security taxes paid on qualified new hires after March 18, 2010 and before January 1, 2011. Businesses also may qualify for a worker retention tax credit. Health care costs are always of concern to employers, especially to small businesses. For 2010, small businesses may qualify for a new tax credit. The maximum credit is 35 percent for for-profit employers and 25 percent for non-profit employers. The maximum credit goes to employers with 10 or fewer full-time equivalent employees paying average annual wages of $25,000 or less. The credit is completely phased–out for employers with more than 25 FTEs or with average annual wages of more than $50,000. Additional year-end considerations for businesses include:                    Uncertainty over the fate of expired business tax extenders, such as the research tax credit, brownfields remediation incentives, incentives for film and television production, and more; Code Sec. 199 domestic production activities deduction, potentially valuable but often under-utilized; Work Opportunity Tax Credit; and Energy tax incentives.             If you have any questions about the year-end planning opportunities and challenges we have highlighted, please contact our office. Tax legislation before 2011 could also impact year-end planning. Our office will keep you posted of developments. http://www.codycpas.com/newsletter.cfm?item=24 Admin Example 24 Mon, 15 Nov 2010 Congress has passed a small business jobs bill (the Small Business Jobs Act of 2010) with valuable individual and business tax incentives.  Many of the $12 billion tax incentives are temporary so taxpayers have only a short window in which to take advantage of them. Others are permanent but require careful planning to maximize your tax benefits. This highlights the tax incentives and revenue raisers in the new law. As always, please contact our office for more details. We can discuss how you can maximize your tax benefits from the new law. Although the new law is labeled a “small business bill” it actually is much more. The new law includes a number of provisions targeted to small businesses and investors in small businesses, such as 100 percent exclusion of gain on qualified small business stock, an increase in the amount allowed as a deduction for start-up expenditures, and more. Other provisions may benefit businesses of all sizes, such as extended bonus depreciation and extended and doubled Code Sec. 179 expensing.  Many individuals will benefit from a new rule allowing rollovers from elective deferral plans to Roth designated accounts, along with other retirement savings incentives. Self-employed individuals benefit from a temporary deduction for health insurance costs in computing self-employment income. To ensure passage of the bill, supporters had to find revenue raisers to pay for the tax incentives. The largest revenue raiser designed to force greater disclosure of taxable income is a new information reporting requirement for rental property expenses, which is projected to raise $2.5 billion over 10 years. The new law also increases information return penalties.  An additional revenue provision places curbs on the cellulosic biofuel producer credit, and another shifts corporate estimated taxes in 2015. General Business Provisions Bonus depreciation.  The new law extends a popular business tax incentive: bonus depreciation. An additional first-year depreciation deduction equal to 50 percent of the adjusted basis was available for qualified property placed in service in 2008 and 2009 (2009 and 2010 for certain longer-lived property and transportation property). The new law extends bonus depreciation for qualified property acquired and placed in service during 2010 (or placed in service during 2011 for certain longer-lived property and transportation property). The new law also includes a special long-term accounting rule for bonus depreciation. Code Sec. 280F. The limitation under Code Sec. 280F on the amount of depreciation deductions allowed with respect to certain passenger automobiles is increased in the first year they are used in a business by $8,000 for automobiles that qualify and for which the taxpayer does not elect out of the additional first-year deduction. For 2010, therefore, maximum first-year depreciation for passenger automobiles is $11,060. Code Sec. 179 expensing. The new law increases the maximum amount a taxpayer may expense under Code Sec. 179 to $500,000 and raises the phase-out threshold to $2 million. Enhanced Code Sec. 179 expensing is available for tax years beginning in 2010 and 2011. The new law also allows taxpayers to expense qualified leasehold investment property, qualified restaurant property and qualified retail improvement property. The maximum amount with respect to real property that may be expensed, however,  is limited to $250,000. Start-up expenditures. A certain amount of qualified business start-up expenses may be deductible in the tax year in which the active trade or business begins. The new law increases the amount of start-up expenditures that a taxpayer may elect to deduct from $5,000 to $10,000 for tax years beginning in 2010. The new law also increases the deduction phase-out threshold so that the $10,000 is reduced, but not below zero, by the amount by which the cumulative cost of qualified start-up expenses exceeds $60,000. S corporation built-in gains tax. A C corporation that converts to an S corporation generally must hold any appreciated assets for 10 years following the conversion or, if disposed of earlier, pay tax on the appreciation at the highest corporate level rate (currently 35 percent). The American Recovery and Reinvestment Act of 2009 (2009 Recovery Act) temporarily shortened the usual 10-year holding period to seven years for dispositions in tax years beginning in 2009 and 2010. The new law further shortens the holding period to five years in the case of any tax year beginning in 2011, if the fifth year in the recognition period precedes the tax year beginning in 2011. Cell phones.  In 1989, the IRS identified employer-provided cell phones as “listed property.” For listed property, no deduction is allowed unless a taxpayer adequately substantiates the expense and business usage of the property. The listed property designation was imposed on cell phones when they were novel, expensive, and not many individuals owned one. Today, not only are cell phones widely available and used, but also necessary for doing business. In January 2010, the IRS temporarily suspended enforcing the strict substantiation on cell phone use.  The new law removes cell phones from the definition of listed property for tax years beginning after December 31, 2009. Small Business Provisions Small business stock. To encourage investment in small businesses, the American Recovery and Reinvestment Act of 2009 temporarily increased the percentage exclusion for qualified small business stock acquired after February 17, 2009 and before January 1, 2011 to 75 percent. The new law raises the exclusion to 100 percent for qualified stock issued after the date of enactment and before January 1, 2011. The stock must be acquired at original issue from a qualified small business and held for at least five years.   General business credit. The new law extends the carryback period for eligible small business credits from one to five years. Eligible small business credits are defined for purposes of the new law as the sum of the general business credits determined for the tax year with respect to an eligible small business. An eligible small business is a corporation whose stock is not publicly traded, a partnership or a sole proprietorship. Additionally, the average annual gross receipts of the corporation, partnership, or sole proprietorship for the prior three tax year periods cannot exceed $50 million. The extended carryback provision is effective for credits determined in the taxpayer’s first tax year beginning after December 31, 2009. Code Sec. 6707A penalty relief.   The new law reforms the Code Sec. 6707A penalty regime retroactively for taxpayers failing to disclose participation in reportable and listed transactions. Generally, the penalty would equal 75 percent of the reduction in tax reported on the participant’s return as a result of the transaction or that would result if the transaction was respected for federal tax purposes. Under the new law, the maximum penalty for an individual for failing to disclose a reportable transaction is $10,000 ($100,000 in the case of a listed transaction). The maximum penalty for all other taxpayers for failing to disclose a reportable transaction is $50,000 ($200,000 for all other persons). Provisions for Individuals Retirement savings. The new law includes several provisions to encourage retirement savings. With many employees now saving for retirement using 401(k) plans, the new law provides a major Roth conversion option that can mean significantly more dollars available at retirement. Under the new law, if a Code Sec. 401(k), 403(b) or governmental 457(b) plan now sets up a qualified designated Roth contribution program, a distribution to an employee or surviving spouse from a non-designated Roth account under a plan may be rolled over to a designated Roth account within the same plan. If an amount is rolled over in 2010, the new law helps ease that tax liability by treating the taxable converted amount as included ratably in income in equal amounts for 2011 and 2012 unless the taxpayer elects otherwise. The designated Roth provisions in the new law are effective for distributions made after the date of enactment. Self-employment.  Individuals who are self-employed may claim a deduction for qualified health insurance costs for income tax purposes. For self-employment taxes, the self-employed individual cannot deduct any health insurance costs. The new law allows the deduction for the cost of health insurance in calculating net earnings from self-employment for purposes of self-employment (FICA) taxes.  The provision is temporary and only applies to the self-employed taxpayer’s first tax year beginning after December 31, 2009. Additionally, the new law allows partial annuitization of a nonqualified annuity contract. Holders of nonqualified annuities (annuity contracts held outside of a tax-qualified retirement plan or IRA) may elect to receive a portion of the contract in the form of a stream of annuity contracts, leaving the remainder of the contract to accumulate income on a tax-deferred basis. Only a portion of an annuity, endowment or life insurance contract may be annuitized while the balance is not annuitized. The annuitization period must be for 10 years or more, or for the lives of one or more individuals.  The annuitization provision in the new law is effective for amounts received in tax years beginning after December 31, 2010. Annuitization requires careful planning; please contact our office for details. Revenue Raisers Rental property expense payments. Third-party reporting has been shown to increase tax compliance and in recent years Congress has passed a number of new information reporting requirements. The new law imposes information reporting requirements on certain recipients of rental income from real estate.  Rental income recipients making payments of $600 or more to a service provider will file an information return with the IRS and the service provider. The new law permits the IRS to exclude individuals for whom reporting would be a hardship and individuals who receive only minimal amounts of rental income from the requirement. Certain members of the military and intelligence services are also excluded. The reporting provision applies to payments made after December 31, 2010. Information return penalties. The Tax Code provides penalties for failing to file information returns. The penalty is tiered and capped. The maximum amount of the penalty varies depending when the information return is filed and if the taxpayer is a qualified small business. The new law increases the penalty generally across-the-board and imposes new maximum penalty amounts.  The new law also revises the penalty for failing to furnish a payee statement to provide tiers and caps similar to the tiers and caps for failing to file the information return.  The new penalty regime applies to information returns and payee statements required to be filed on or after January 1, 2011. Cellulosic biolfuel producer credit.  The new law makes crude tall oil and certain other substances, which are largely generated as byproducts of paper manufacturing, ineligible for the cellulosic biofuel producer credit. The new limitations on the cellulosic biofuel producer credit are effective for fuels sold or used on or after January 1, 2010. The curbs on the cellulosic biofuel producer credit are estimated to raise more than $1 billion over ten years. Income on guarantees.  Congress was unhappy with the Tax Court’s decision in a case about source rules for income on guarantees (Container Corp., 134 TC No. 5, CCH Dec. 58,131), which held that since the guarantee fees were treated as payments for services, the foreign parent was not subject to U.S. tax on them. The new law treats them prospectively as interest payments, whose source is determined by the position of the payor. Federal contactors. The new law allows the IRS to issue levies before a collection due process (CDP) hearing in the case of certain federal contractors.  The provision is effective for levies issued after the date of enactment. Corporate estimated tax payments. The new law increases the required payment of estimated tax by large corporations (with assets of at least $1 billion) by 36 percentage points for July, August, September 2015. The next required installment is proportionately reduced to reflect the increase. As we have highlighted, the new law is much more than a small business bill, although many small businesses and their owners will benefit greatly from its provisions.  Many provisions within the new law are broad-based and far-reaching. Moreover, many of the tax incentives are temporary, requiring prompt action to take full advantage of them. http://www.codycpas.com/newsletter.cfm?item=23 Admin Example 23 Thu, 04 Nov 2010 The IRS has issued proposed regulations that would eliminate paper coupons for deposits of employment taxes, corporate income and estimated taxes, and many other taxes.  The paper coupon payment system will be shut down at the end of this year. With this change, taxpayers will be required to used the IRS's Electronic Federal Tax Payment System (EFTPS) to make federal tax deposits of various withheld and estimated taxes.  The preamble to the proposed regulations notes that more than 97.5% of all federal tax deposits are already deposited electronically through EFTPS. There is an exception for businesses that are depositing a minimal amount of withheld income and FICA taxes.  Businesses that qualify can make their payments with their tax returns.  Employers with a deposit liability of less than $2,500 for a return period can remit employment taxes with their quarterly or annual return. The proposed regulations will require the following taxes to be deposited electronically:  Corporate income and corporate estimated taxes FICA taxes and withheld income taxes Federal Unemployment Tax Act (FUTA) Excise taxes Also, any other tax deposits you currently make with a paper coupon are subject to the new regulations.  These regulations would be effective for payments made on or after January 1, 2011, and the IRS says it expects to finalized the regulations before then. http://www.codycpas.com/newsletter.cfm?item=22 Admin Example 22 Mon, 04 Oct 2010 Buying a home is the single most valuable investment most families make, and home ownership offers tax breaks that make it the foundation for your overall tax planning. The tax law provides numerous incentives to home ownership, including the following:                    Buying, rather than renting, replaces nondeductible rent with deductible mortgage interest. For a limited time, qualified mortgage insurance premiums may be treated as deductible mortgage interest. Taxpayers can deduct an unlimited amount of property tax they pay on any number of residences. Homeowners can exclude up to $250,000 of gain ($500,000 for married couples filing jointly and certain surviving spouses) from taxable income when they sell. There is no penalty for an early withdrawal from an IRA for a “first-time” homebuyer for up to $10,000 so long as the proceeds are used for acquisition of a home. Self-employed individuals may deduct expenses for a portion of the home used for business. Energy credits are available for certain improvements to a residence. A temporary provision excludes the discharge of “qualified principal residence indebtedness” from gross income.              You may benefit from a close review of these provisions, particularly if you are considering transactions involving your home, including selling, refinancing, or renting. Or if you considering an investment in a vacation home, many home ownership tax benefits also apply to a second home. http://www.codycpas.com/newsletter.cfm?item=21 Admin Example 21 Tue, 07 Sep 2010 Your retirement plans and IRAs may be among the largest, if not the largest, assets that you have. Therefore, one of the most important planning areas for you is taking distributions from your IRAs and qualified retirement plans. Understanding the basic tax rules and then planning your distributions to meet your personal financial and estate planning objectives is essential. We can explain those rules and provide some strategies for you to consider as part of your overall tax plan. Some taxpayers may consider early retirement as a viable option. However, generally, a distribution made before you are 59 1/2 years of age is subject to a 10% penalty in addition to the tax otherwise payable on the distribution. There are some exceptions. The penalty may not apply for certain hardship cases, for first-time home buyers, or to pay certain medical or education expenses. Many distributions may be received tax free if they are transferred to an IRA or another eligible plan within 60 days of the distribution. Though there is a penalty for premature distributions, there is also a penalty for failure to commence distributions by a certain age. Minimum distribution rules are imposed to prevent participants from unreasonably deferring the tax on their retirement savings. Under these rules, distributions are required to begin, for a participant other than a 5-percent owner, no later than April 1 of the calendar year following the later of: the calendar year in which the participant reaches age 70 1/2, or the calendar year in which the participant retires. The minimum distribution rules do not apply to Roth IRA's, but do apply to traditional IRAs, deferred compensation plans, tax sheltered annuities, and qualified retirement plans.