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Current Tax News

Note: articles preceded by *New* have been posted within the last two weeks

*New* 'Rapid Refund' loans prompt warning from state attorney general
Loans can cost consumers hundreds in fees and interest and make only a few days' difference in when the taxpayer would see the funds. With tax time around the corner, the California attorney general's office is warning of the dangers of taking out high-cost tax-refund anticipation loans, sometimes presented as "rapid refunds," that can cost consumers hundreds of dollars in fees and come with high interest rates. Click here for additional information.

*New* Haiti earthquake relief donations before March 2010 may be deducted on 2009 returns
Under a new law enacted on Jan. 22, 2010, taxpayers may claim a charitable contribution deduction in tax year 2009 for cash donations made after Jan. 11, 2010 and before Mar. 1, 2010, for the relief of victims of the Jan. 12, 2010 earthquake in Haiti. See IR 2010-12 for additional information.

Offshore Outsourcing Revisited - Bringing Jobs Back to the U.S.

While India and other Asian nations remain prime destinations for many U.S. companies seeking to reduce costs, it may be surprising to know that the U.S. is the worlds most popular outsourcing destination receiving 22% of outsourced jobs. China is number 2 at 16% and India is third with 13%. Years of experience outsourcing to remote destinations has given rise to a new set of math for computing the benefits and true costs of outsourcing and a whole new language has developed with terms such as Farm-sourcing, Right-shoring, Back-shoring and many more. Click here to read the full article on CFO.com.

Tax Credits for Higher Education Expenses
Tax incentives have been bumped up to as much as $2,500 per student and are now available to families earning up to $180,000. But the tax break is good only through 2010. Click here for complete article.

Cyber Criminals Targeting Small Businesses
Cyber criminals are increasingly targeting small and medium-sized businesses that don't have the resources to keep updating their computer security. . . Click here for complete article.

Study: Startups risk failing with credit card debt
New businesses are more likely to fail in the first three years if they finance startup costs with credit cards, according to a study by Robert H. Scott III, assistant professor of economics and finance at Monmouth University. According to the study, a business's chances of closing increase 2.2% for every $1,000 it has in revolving credit card debt. "While it is not the only determinant of a business's stability, it appears to be an important factor in a firm's likelihood to survive," the study said. Click here for complete article.

Mortgage Forclosure Scams
Reports of mortgage scams are rolling in to the Department of Real Estate in numbers never seen before, said Thomas Pool, a department spokesman. The California Attorney General's office has created a website that provides information in avoiding forclosure scams and links to free counseling approved by the U.S. Department of Housing and Urban Development and the California Department of Real Estate's website, which has similar resources and lists trustworthy companies. Click here to go to the web site.

Home Ownership Is Not the Road to Riches
The primary value of a owning a house is that it provides a home for you and your family to live in. Clearly a home is a major investment for most people that own one, but investment value should not be the primary reason for ownership. Click here to read the full text of an article on this topic.

California Stops Accepting New Home Credit Applications
As of July 3, 2009, the Franchise Tax Board (FTB) is no longer accepting new home credit applications. The FTB has received over $100 million in new home credit applications and more than 12,000 applications. This tax credit was available for qualified buyers who on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date. Click here to view full article on FTB web site. Note: the federal new home tax credit of $8,000 for qualified purchases is still in effect.

Summertime Tax Tips Available on IRS.gov and Via E-Mail
The Internal Revenue Service is publishing Summertime Tax Tips to provide useful and concise advice on topics that affect taxpayers. The IRS is publishing three tax tips per week this summer. Topics range from how parents can get credit for sending their kids to day camp to protecting yourself from identity theft. Click here to go to the IRS's Summertime Tax Tips page. Of course, L&H is not responsible for the accuracy of the content posted by the IRS but we are always available to discuss any of the topics you may find there.

Possible Extension of the Home Buying Credit
On June 22, 2009, the USA Today reported that Congress is considering an extension of the first-time home-buyer credit that is other going to expire this fall. Some members in Congress are even proposing to raise the credit from $8,000 to $15,000 and apply it to anyone who buys a home. Click here to view full article.

Social Security Office Projects Social Security Wage Base Through 2018
The Social Security Administration's (SSA) Office is projecting that the Social Security wage base will remain at $106,800 in 2010. This is the first time in recent history that the wage base has not increased from the prior year, however, SSA is projecting the base could reach as high as $155,400 by 2018. Click this link to view full article.

2009 Hybrid Vehicle Credits
The IRS posted 2009 & 2010 model year hybrid vehicle credits on their web site. These credits are valuable in reducing income tax liability, however, be aware, they do not reduce AMT. Click this link to view the list on the IRS web site.

Business Use of the Automobile - Keep Good Records
Keeping good records to substantial the business use of your automobile is extemely important in order to sustain those deductions on audit. A recent Tax Court case disallowed deductions even where it was agreed by the IRS and the Court that there was significant use of the car for business purposes. Click this link to view the article.

Mandatory Californa E-Pay For Individuals
Beginning January 1, 2009, individuals are required to remit payments electronically once they meet either of the following conditions:

Make an estimated tax or extension payment greater than $20,000 for a taxable year beginning on or after January 1, 2009; or
File an original return with a tax liability greater than $80,000 for a taxable year beginning on or after January 1, 2009. Full article

IRS Announces New Mileage Rates
The IRS announced the new standard mileage rates for 2009. They are slightly lower than the second half of 2008 at 55 cents per mile for business, 24 cents for medical and moving, and 14 cents for charitable mileage. By contrast, the business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.

Charitable Contribution Planning
There are multiple strategies for maximizing your charitable giving and at the same time managing both cashflow and income taxes. Click this link to view several ideas.

Business Buy/Sell Agreements
It is important that businesses with more than one owner have a written buy/sell agreement specifying what happens when an owner withdraws from the business. A buy/sell agreement is a contract between the owners (or the owners and the business entity itself) that establishes rules and restrictions applicable to changes in ownership. Full article

Supreme Court Upholds Exemption for In-State Muni Bond Interest
The U.S. Supreme Court has upheld the traditional state tax treatment of municipal bond interest, under which a state exempts from its corporate and personal income taxes the interest on bonds issued by the state and its own localities, but taxes the interest on bonds issued by other states and their localities. The issue arose after the Kentucky Supreme Court case ruled that the different treatment of in-state and out-of-state muni bond interest was unconstitutional. Levering & Hvasta filed a number of refund claims with the State of California in anticipation of the U.S. Supreme Court ruling on the issue. Those refund claims are now moot and will not result in refunds.

Tax Rebate Info Posted on IRS Website
Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million individuals. The stimulus payments will go out through the late spring and summer.

2008 Stimulus Act Provides Benefits for Business
Two important provisions included to stimulate the econonmy are aimed at businesses and are intended to encourage investment in new property and equipment. These include a 1 year increase in the Section 179 expense that allows a current deduction for qualifying property $250,000, and 50% bonus depreciation for qualifying property that is purchased new (not used) and placed in service during 2008.

New E-Mail and Phone Scams Use IRS Name
http://www.webcpa.com/article.cfm?articleid=26645

IRS Is Likely to Get More Resources to Combat Cheating on Tax Returns
http://online.wsj.com/article/SB120225460358145477.html

Who is likeliest to get audited -- and tips for avoiding scrutiny
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/01/09/BU2AUBCA5.DTL

IRS Sets Rules for Charitable Contributions
http://www.webcpa.com/article.cfm?articleid=26385

Disaster Recovery Resources

In addition to the information from the IRS and Franchise Tax Board, the California Society of Certified Public Accountants has a very informative area on their web site regarding disaster preparedness and recovery at:

CalCPA Disaster Recovery Resources

Other Current Topics L&H Mid-Year Newsletter

Current Tax News

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