eBulletin

eBulletin is a complimentary service to our clients and friends to provide individual and business tax information throughout the year via short emails. If you would like to receive our eBulletin, simply email Michelle Noonan at michellen@bb-cpa.com and insert "eBulletin" in the subject line. You will be added to the list. We do not share our lists.

eBulletin 2006-14

November 20, 2006

Federal Telephone Excise Tax Refunds for Businesses and Exempt Organizations

Several federal court decisions have held that the federal telephone tax does not apply to long-distance service. The IRS is following these decisions and refunding the portion of the tax charged on long-distance calls. The IRS is also refunding taxes collected on telephone service under plans that do not differentiate between long distance and local calls.

The refund applies to taxes paid on bills for periods after February 28, 2003 and before August 1, 2006. In essence, taxpayers must determine how much excise tax they paid on long distance services during that period. The refund is claimed on the taxpayer's 2006 tax return.

Previously, the IRS announced a standard refund amount individuals can claim on their tax return in lieu of determining the actual tax paid. For more information on this offer, see http://www.irs.gov/newsroom/article/0,,id=161506,00.html.

The Internal Revenue Service has now announced a formula that will allow businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds. The details of this announcement are the following:

To request a refund, businesses (including sole proprietors, corporations, and partnerships) and tax-exempt organizations must complete Form 8913, Credit for Federal Telephone Excise Tax Paid. To complete this form, businesses and tax- exempt organizations may determine the actual amount of refundable long- distance telephone excise taxes they paid for the 41 months from March 2003 through July 2006, or use the formula to figure their refunds. Businesses should attach Form 8913 to their regular 2006 income tax returns. Tax-exempt organizations must attach it to Form 990-T.

Businesses and tax-exempt organizations can figure their refund amounts by comparing two telephone bills from this year to determine the percentage of their telephone expenses attributable to the long-distance excise tax. The bills they should use are the bill with a statement date in April 2006 and the bill with a statement date in September 2006. They must first figure the telephone tax as a percentage of their April 2006 telephone bills (which included the excise tax for both local and long-distance service) and their September 2006 telephone bills (which only included the tax on local service). The difference between these two percentages should then be applied to the quarterly or annual telephone expenses to determine the amount of their refunds.

The refund is capped at 2 percent of the total telephone expenses for businesses and tax-exempt organizations with 250 or fewer employees – which covers more than 99 percent of all businesses. The refund is capped at 1 percent for those with more than 250 employees. Most organizations in this category typically are able to figure the actual amount they paid in long-distance excise tax. However, the formula provides a more limited, but simpler, approach for those large employers who wish to use it. For example, if a business has an April 2006 telephone bill of $1,000, which includes Federal telephone excise tax of $28, the tax percentage is 2.8 percent. If the September 2006 bill is $1,100 including Federal telephone excise tax of $16.50, the tax percentage is 1.5 percent. The business’ long-distance excise tax percentage is 1.3 percent (2.8 percent for April minus 1.5 percent for September). The business multiplies 1.3 percent by its total phone expenses over the 41-month period to arrive at the amount of its refund. If this business had more than 250 employees, its refund would be limited to 1 percent of its total phone expenses for the period. If the business had 250 or fewer employees, the 2-percent cap would apply and would not limit the amount of the refund.

Options for requesting this refund vary for sole proprietors, who file a Schedule C with the Form 1040, depending on the gross income reported on the Schedule C. Sole proprietors who report gross income of $25,000 or less on their Schedule C may use the standard amounts previously announced or request a refund based on their actual expenses. Sole proprietors reporting more than $25,000 of gross income have three options: they can use the standard amounts which cover both personal and business expenses, they can use the formula for their business expenses and actual for their personal ones, or they can choose to use actual amounts for both business and personal.

Similar rules depending on the amount of gross income reported on Schedule F or Schedule E apply to farmers and individual owners of rental property. Trusts and fiduciaries may not use the standard amount available to individuals. They should use the formula to figure their refunds, or request the actual amount paid.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-13

November 1, 2006

Automobile Standard Mileage Rates

The IRS has announced the standard mileage rates for use in the year 2007 to compute the deductible costs of operating an automobile. The rates are effective January 1, 2007. They are as follows:

Business use – 48.5¢ per mile (up from 44.5¢ in 2006)

Charitable driving – 14¢ per mile (set by law and unchanged from 2006)

Driving for medical reasons – 20¢ per mile (up from 18¢ in 2006)

Moving expenses – 20¢ per mile (up from 18¢ in 2006)

The IRS has announced the standard mileage rates for use in the year 2007 to compute the deductible costs of operating an automobile. The rates are effective January 1, 2007. They are as follows:

Employers can reimburse their employee’s business use of their personal cars by the same 48.5¢ per mile in 2007 without the reimbursement being taxable to the employee, if the employer has an “accountable plan”. An accountable plan generally must require the employee to substantiate the business use and, if advance payments are made to the employee, must require any unsubstantiated advances to be repaid within a reasonable period of time.

The standard mileage rate can be used to compute deductible automobile expenses in lieu of computing your actual costs. There are some limitations to the use of the standard mileage rate.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-1

October 18, 2006

New Social Security Numbers Announced

The Social Security Administration announced that benefits paid to recipients will rise 3.3% in 2007. In addition, the maximum amount of wages subject to Social Security withholding (and earned income subject to self-employment tax) will increase. The relevant amounts are as follows:

Maximum earnings subject to Social Security withholding:

Social Security taxes must be withheld from wages until the wages reach the following amounts:

2006 - $94,200
2007 - $97,500

There is no earnings limit for Medicare withholding.

The same limits apply to earned income subject to the self employment tax.

The tax rate of 7.65% (15.30% for self-employed taxpayers) will not change.

Maximum amount of earned income you can receive without losing Social Security Benefits:

Individuals who have not reached full retirement age (defined below) can lose Social Security benefits if their earned income exceeds a defined amount. For individuals under the age of 65 during the entire year, the maximum amounts they can earn without losing benefits are as follows:

2006 - $12,480 per year ($1,040 per month)
2007 - $12,960 per year ($1,080 per month)

A special test applies to taxpayers who reach full retirement age during the year. For these individuals, the maximum amounts they can earn before reaching full retirement age are as follows:

2006 - $33,240 per year ($2,770 per month)
2007 - $34,440 per year ($2,870 per month)

Full retirement age is 65 years, 8 months for those born in 1941 and is 65 years, 10 months for those born in 1942.

Individuals who have reached full retirement age can earn any amount of income without losing benefits.

Average Benefits:

The Social Security Administration estimates that average monthly Social Security benefits are as follows:

All retired workers: Before 3.3% increase - $1,011
After 3.3% increase - $1,044
   
Aged couple, both receiving benefits: Before 3.3% increase - $1,658
After 3.3% increase - $1,713

For more information, you can go to the Social Security Administration website at www.ssa.gov.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-11

September 20, 2006

Taxation of LRA Grants

The IRS has announced how proceeds from the Louisiana Recovery Authority will be treated for income tax purposes. The Service states that, while the LRA money is not, itself, taxable, it does reduce the taxpayer's deductible casualty loss. Further, if the sum of the LRA proceeds, insurance reimbursement and other compensation for the hurricane damage exceeds the taxpayer's basis in the residence, a taxable gain results. However, the taxpayer may be able to avoid paying tax on the gain if he or she reinvests the proceeds in repairs to the residence or in a new residence or he or she qualifies to exclude the gain under the provision otherwise applicable to sellers of principal residences.

The following is an excerpt from the Service's "FAQs for Hurricane Victims" on its webpage:

Q: How do individuals treat grants in the maximum amount of $150,000 that the Louisiana Recovery Authority (LRA) and the Mississippi Development Authority (MDA) make to compensate them for the damage to or destruction of their primary homes by Hurricane Katrina?  

A: Individuals who received grant payments from the LRA and the MDA to compensate them for the damage to or destruction of their primary homes by Hurricane Katrina generally will not be required to include the grant proceeds in gross income.

The recipient of the LRA or MDA grant payment must reduce the amount of any casualty loss attributable to the damaged or destroyed primary residence by the amount of the LRA or MDA grant payment.  In addition, the recipient must reduce his or her tax basis in the damaged or destroyed primary residence by the amount of the LRA or MDA grant payment as well as by the amount of the allowable casualty loss deduction attributable to the damaged or destroyed primary residence.  If the recipient repairs the damaged primary residence, the cost of repairs ordinarily is capitalized and added to the recipient's tax basis in the damaged residence. For more information on determining your adjusted basis, see Publication 530, Tax Information for First-Time Homeowners; Publication 551, Basis of Assets; Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma;  and, for taxpayers affected by Hurricane Katrina, Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

If the LRA or MDA grant payment to compensate for damage to or destruction of the primary residence and/or insurance proceeds (and any other form of compensation for the damaged or destroyed residence) exceeds the recipient's adjusted tax basis in the damaged or destroyed residence, the recipient has realized gain for federal income tax purposes.  However, because the damage or destruction is considered an "involuntary conversion" of the residence for federal income tax purposes, the recipient may ordinarily defer reporting any gain if the cost of the repairs or the replacement residence is at least as much as the compensation received for the damage (including the LRA or MDA grant to compensate for damage to or destruction of the primary residence and/or insurance proceeds), and if certain other conditions are met.  For more information, see Publication 547, Casualties, Disasters, and Thefts; Publication 4492, Tax Information Related to Hurricane Katrina; and Form 4684, Casualties and Thefts, and Instructions.

If the primary residence is destroyed, the destruction may be treated as a sale for purposes of the tax provisions governing the exclusion of gain from the sale of a principal residence, and gain may be excluded up to $250,000 ($500,000 for certain situations involving joint returns), if certain conditions are met.  Additionally, because the destruction is considered an involuntary conversion of the residence, any gain in excess of the $250,000/$500,000 limitation may also be deferred by buying similar or related replacement property, if certain conditions are met.  For more information, see Publications 547 and 4492, and Form 4684 and Instructions.

The recipient of LRA or MDA grant payments to compensate for the damage to or destruction of the primary residence (and any other compensation for the damaged or destroyed residence) must reduce his or her "cost" basis in any replacement residence by the amount of any deferred gain from the damaged or destroyed residence.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-10

September 20, 2006

Tax Credit for Toyota Hybrid Vehicles To Be Reduced

Purchasers of hybrid motor vehicles can claim a tax credit on their income tax returns. The credit varies, depending on the vehicle. Under the current tax law, the credit for buying a hybrid vehicle begins to phase out during the second calendar quarter after the quarter in which an automobile manufacturer sells its 60,000th hybrid or lean burn technology vehicle. Eventually, hybrid vehicles for that manufacturer will not qualify for any credit.

The Internal Revenue Service has now announced that Toyota Motor Sales, U.S.A., Inc. has submitted quarterly reports indicating that its cumulative sales of qualified vehicles to retail dealers has reached the 60,000-vehicle limit during the calendar quarter ending June 30, 2006. This means that the credit for all new advanced lean burn technology motor vehicles or new qualified hybrid passenger automobiles or light trucks manufactured by Toyota Motor Corporation will begin to phase out on Oct. 1, 2006.

Vehicles purchased before Oct. 1, 2006 qualify for the full credit. For Toyota hybrid vehicles bought on or after October 1, 2006, and on or before March 31, 2007, the credit is 50 percent of the otherwise allowable credit amount. Taxpayers buying vehicles on or after April 1, 2007, and on or before September 30, 2007, can only get 25 percent of the credit.

Here are the credit amounts for Oct. 1, 2006 - March 31, 2007:

  • 2005 Prius -- $1,575
  • 2006 Prius -- $1,575
  • 2006 Highlander 4WD Hybrid -- $1,300
  • 2006 Highlander 2WD Hybrid -- $1,300
  • 2006 Lexus RX400h 2WD -- $1,100
  • 2006 Lexus RX400h 4WD -- $1,100
  • 2007 Camry Hybrid -- $1,300
  • 2007 Lexus GS 450h -- $775

Here are the credit amounts for Oct. 1, 2006 - March 31, 2007:

  • 2005 Prius -- $787.50
  • 2006 Prius -- $787.50
  • 2006 Highlander 4WD Hybrid -- $650
  • 2006 Highlander 2WD Hybrid -- $650
  • 2006 Lexus RX400h 2WD -- $550
  • 2006 Lexus RX400h 4WD -- $550
  • 2007 Camry Hybrid -- $650
  • 2007 Lexus GS 450h -- $387.50

Beginning October 1, 2007, taxpayers who buy a Toyota hybrid cannot claim the related tax credit.

BB recommends: The credit does not require you use the vehicle for business purposes. Personal-use vehicles qualify. Toyota is the first manufacturer to reach the 60,000 vehicle limit. If you were considering purchasing a Toyota hybrid vehicle, you need to act quickly to receive the full credit.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-9

September 11, 2006

Problems with Extensions

On August 25, 2006, the IRS announced it was delaying the due date for nonindividual income tax returns until October 16, 2006. However, by that date, many business entities had already filed requests for an extension of time to file their returns. For most nonindividual returns, an extension of time to file a return is requested using IRS Form 7004.

We have now learned that the IRS Service Center has erroneously rejected some of these extensions. Any rejected extension is being returned to the taxpayer (not to the tax preparer) with an explanation attached. This explanation will likely state that the extension was filed after the date the return was due.

Because of the additional time to file that is allowed for taxpayers affected by Hurricane Katrina, these extensions should not have been rejected. The IRS has now set up a procedure to correct this error.

  • If we prepare your return and/or the extension, send a copy of the extension along with the attached explanation to your BB professional. We'll contact the IRS to correct the problem.
  • If another CPA prepares your return, send the rejected extension to him or her and he or she will contact the IRS.
  • If you prepare your own return, call the IRS Disaster Hotline at 866-562-5227 to resolve the problem.

This issue only involves extension forms filed pursuant to the Hurricane Katrina extension. Any such return or form filed should have "Hurricane Katrina" printed in red at the top of the form (the Louisiana Department of Revenue requests that "Hurricane Katrina" be printed in black at the top of Louisiana forms).

Note regarding eBulletin 2006-8: When we issued eBulletin 2006-8 reporting that the IRS had extended the due date of estimated tax payments and nonindividual returns to October 16th, we indicated that the State of Louisiana would likely follow the IRS's lead. The Department of Revenue has subsequently confirmed this on its website. The State's original announcement stated that the extension did not apply to third quarter estimated tax payments due September 15, 2006, but the State included the third quarter estimate in the October 16th extension in a subsequent announcement.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-8

August 25 , 2006

Further Extension for Filing Returns and Making Payments

R-2006-135, August 25, 2006

WASHINGTON -- As part of the continuing effort to assist victims of Hurricane Katrina, the Internal Revenue Service will grant to businesses in the Gulf Coast an additional postponement of filing and payment requirements. The deadline will be Oct. 16, 2006, which is the same deadline established earlier for certain individual income tax return filers.

Based on recent meetings with tax practitioners and IRS employees in the disaster areas, the IRS saw the need to postpone the filing and payment deadlines for certain businesses to Oct. 16, 2006, in consideration of the continuing impact of Hurricane Katrina. The postponement applies to taxpayers located in the designated disaster areas.

Business taxpayers in seven Louisiana parishes and three Mississippi counties will automatically qualify for this postponement. In addition, taxpayers in other locations -- covering 11 Alabama counties, 31 Louisiana parishes and 48 Mississippi counties -- can also obtain the filing and payment postponements by self-identifying themselves to the IRS. A complete list of the areas included in these categories is shown below. Taxpayers do not need to self-identify if they have previously done so.

To ensure that they receive the relief to which they are entitled, affected taxpayers whose business, home or tax professional were in the disaster areas listed below should mark "Hurricane Katrina" in red ink on the top of their returns.  In addition, affected taxpayers may identify themselves as eligible for relief by calling the IRS Disaster Hotline at (866) 562-5277.

The postponement of time to make payments applies to tax payments, including estimated tax payments, due on or after Aug. 29, 2005, but before Oct. 16, 2006.  In addition, the failure to deposit penalty will be waived for affected taxpayers who are unable to make their deposits during this time period.

The filing and payment postponement applies to individual, corporation, partnership, estate, trust, S Corporation, generation-skipping, employment and certain excise tax returns with original or extended due dates that fall on or after Aug. 29, 2005, but before Oct. 16, 2006.

Although IRS can postpone the time to file the 2004 and 2005 returns until Oct. 16, 2006, the law does not authorize the IRS to grant additional interest and failure to pay penalty relief for the 2004 tax year.  Taxpayers can request that the IRS grant relief from the penalty if the failure to pay is due to reasonable cause and not due to willful neglect.

Areas Where Taxpayers Qualify for Automatic Postponement

Louisiana Parishes: Cameron, Jefferson, Orleans, Plaquemines, St. Bernard, St. Charles, St. Tammany

Mississippi Counties: Hancock, Harrison, Jackson

Areas Where Taxpayers Can Request Extra Time by Self-Identifying to the IRS

Alabama Counties: Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, Washington  

Louisiana Parishes: Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee,  St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Mary, St. Martin, St. Tammany, Tangipahoa, Terrebonne, Vermillion, Washington, West Baton Rouge, West Feliciana

Mississippi Counties: Adams, Amite, Attala, Claiborne, Clarke, Copiah, Covington, Franklin, Forrest, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, Yazoo

The state of Louisiana apparently will also extend its deadlines accordingly, but this has not been confirmed.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-7

July 12 , 2006

Safe Harbor Methods to Determine Your Casualty Loss

We have stated in the past that determining your casualty loss from the hurricanes is a three step process. The first step is to determine the difference between the fair market value of the property before the storm and the fair market value immediately after the storm. The second step is to take the lower of that number or your basis (cost) in the property. The third step is to subtract insurance and other compensation.

IRS regulations provide two methods to determine the reduction in value called for in the first step. The first way is by having the property appraised before and after the casualty by a qualified appraiser. Alternatively, the cost of repairs to the property is acceptable as evidence of the decrease in value of the property if certain requirements are met, including that the repairs have actually been completed.

Recognizing that taxpayers in this area are struggling to meet the requirements of either of these two methods, the IRS has now issued Revenue Procedure 2006-32. This document provides three safe harbor methods you may be able to use to determine the amount of your casualty loss to your principal residence and a fourth safe harbor method for personal contents.

"Safe harbor" means that, if a taxpayer qualifies to use one of these methods and applies it properly, the IRS will not challenge the taxpayer's determination of the decrease in fair market value of his or her residence or personal contents.

The three methods available for qualifying principal residences are

  • Using your insurance company's report of the damage
  • Using a signed detailed contract with a licensed contractor, even if the work has not been completed (or even started)
  • Using IRS-provided tables, based on the nature and extent of the damage.

The Revenue Procedure is lengthy, but fairly straight-forward to apply. Under the third method, for example, suppose your 2,120 square-foot residence was substantially damaged by the flooding from the levee break. It qualifies as a "near total loss" as defined in the Revenue Procedure. Instead of getting appraisals or repairing the house, you simply look up table 2 in the Revenue Procedure and find a factor of $120 per square foot. The reduction in value of your home as a result of the flooding is $254,400 (2,120 * $120).

The fourth safe harbor method, which applies to qualifying personal contents, involves determining the replacement cost for your contents and reducing that cost by 10% for each year you owned the property.

We have posted a summary of Revenue Procedure 2006-32 to our website, www.bb-cpa.com.
Click on "Hurricane Katrina Information" and then
"Safe Harbor Methods to Determine Casualty Loss".

BB Recommends: These safe harbor methods provide an objective way to value your casualty loss. We encourage you to consider using one of them. If you need more information, contact your BB representative or Ted Stacey or Ken Franz in our New Orleans office.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-6

June 20 , 2006

EVEN MORE TIME

Individuals hardest hit by Hurricane Katrina will now have until October 16, 2006 to file their 2004 and 2005 individual income tax. This new extension applies to affected taxpayers in 31 Louisiana parishes, 49 Mississippi counties and 11 Alabama counties who previously had until August 28th to file.

The extension applies to the following tax returns:

  • 2004 individual income tax returns, originally due on April 15, 2005, for which taxpayers obtained an extension of time to file until Oct. 15, 2005, and for which the previous grant of disaster relief postponed the due date to Aug. 28, 2006.
  • 2005 individual income tax returns, originally due on April 15, 2006, for which the previous grant of disaster relief postponed the due date to Aug. 28, 2006.

The additional extension of time does not apply to any other types of returns or any other time-sensitive acts (such as making certain elections under the Internal Revenue Code). Thus, for example, corporate returns that qualify for the previous Katrina extension are still due August 28, 2006.

The IRS says that it also cannot extend the due date for amounts due on 2004 individual income tax returns. Any payments on these returns will be subject to interest on penalty if made after August 28th, although the IRS will consider waiving the penalty if the failure to make the payment by August 28th is due to reasonable cause and not willful neglect.

The IRS announcement does not indicate whether the due date for 2006 estimated tax payments have also been extended to October 16, 2006. Until further guidance is issued, taxpayers should presume that these payments are also still due August 28th.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-5

June 5 , 2006

Tax Increase Prevention and Reconciliation Act

In May, the President signed the Tax Increase Prevention and Reconciliation Act. Among its provisions are the following:

  • The 15% maximum rate on dividends and long-term capital gains has been extended through 2010.
  • The exemption amount that is subtracted from alternative minimum taxable income before determining the alternative minimum tax has been increased. In addition, certain nonrefundable personal credits, such as the dependent care credit, the Hope and Lifetime Learning credits, and the new residential and nonbusiness energy credits, can be offset against alternative minimum tax. These changes will reduce the number of taxpayers paying AMT, but only in 2006, as these are one-year provisions.
  • The expensing of depreciable business assets under section 179 of the Internal Revenue Code has been extended through 2009 (however, the additional section 179 deduction available to businesses in the Katrina disaster area has not been similarly extended).
  • The so-called "kiddie tax" that requires minors' incomes be taxed at their parents marginal rate now applies to children under the age of 18 (it formerly applied only to years before the child turned 14). This change is effective beginning in 2006 and means some minors' income taxes could be materially higher.
  • Taxpayers with modified adjusted gross incomes of greater than $100,000 cannot currently convert their regular IRAs to Roth IRAs. Beginning in 2010, this restriction will not apply.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-4

April 13 , 2006

April 17th

As you probably know, if you live in certain Louisiana parishes or Mississippi or Alabama counties, (or did live there on August 29, 2005), you have until August 28, 2006 to file your outstanding tax returns and pay any tax due. The extended due date also applies to non-individual returns for entities located in these areas.

The August 28th due date automatically applies to taxpayers in Cameron, Jefferson, Orleans, Plaquemines, St. Bernard, St. Charles and St. Tammany parishes in Louisiana or in Hancock, Harrison and Jackson counties in Mississippi. If you live in other identified Louisiana parishes and Mississippi and Alabama counties and were impacted by the storm, you can qualify for the extension by identifying yourself as impacted by writing "Hurricane Katrina" in red ink at the top of your federal tax return or form. For a list of parishes and counties so eligible, and for more information concerning the types of returns affected, go to our website, www.bourgeoisbennett.com, and click "Hurricane Katrina Information" and then "IRS Postpones Taxpayer Deadlines".

UPDATE 8/18/06: For the latest information concerning extended deadlines for tax returns, go go to our website, www.bourgeoisbennett.com, and click "Hurricane Katrina Information" and then "Extended Deadlines for Tax Return."

Here are some points to keep in mind if you qualify for the August 28th due date:

  • You do not need to file any form by this Monday (the normal due date for individual returns since April 15th falls on a Saturday this year). August 28th is now the original due date for your return. If you are unable to complete your return by August 28, you can request an extension of time to file your return at that time.
  • You do not need to pay any tax by Monday either. Any tax you owe on your 2005 return and your first and second quarter 2006 estimated tax payments are not due until August 28.
  • Both Louisiana and Mississippi are honoring the extended due date. Therefore, you need not file anything for those states at this time. However, not all states recognize the August 28th date. If you file a return in another state, you need to check with that state to see if you need to file an extension request now.
  • Don't wait until late August to work on your return. Remember, it will soon be storm season again.
    If you do not qualify for the August 28th deadline, you need to file your return or request an extension by Monday.

BB recommends: To avoid any interest and penalty, you will need to pay any taxes you owe by August 28, even if you request an extension to file at that time. That would include what you owe on your 2005 return and your first and second quarter 2006 estimated tax payments (with your third quarter estimate due two weeks later). So you need to plan your finances ahead so you don't get caught short.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-2

February 7, 2006

The Gulf Opportunity Zone Act of 2005

The Gulf Opportunity Zone Act of 2005 (the GO Zone Act) includes numerous tax benefits for businesses operating in the Hurricane Katrina core disaster area. In addition, it extends many of the benefits found in the Katrina Emergency Tax Relief Act to victims of Hurricane Rita and Hurricane Wilma.

Among the business tax benefits in the GO Zone act are the following:

  • A depreciation deduction of 50% of the cost of qualified property placed in service after August 28, 2005, including qualifying real property.
  • An increase in the amount of qualifying new business property that can be expensed under section 179.
  • The ability to expense up to 50% of business-related demolition costs paid or incurred after August 28, 2005.
  • A lengthened carry back period of five years for any net operating loss attributable to certain business deductions related to the storm

The act also includes expanded Hope and Lifetime Learning credits for students attending college in the Katrina core area.

A summary of these and other provisions found in the Gulf Opportunity Zone Act can be found on our webpage (www.bourgeoisbennett.com). Just click on "Hurricane Katrina Information" on our home page. Alternatively, you can contact Janice Chaffin (janicec@bb-cpa.com or 504.831.4949) and she will send you a copy.

For more tax information from Bourgeois Bennett professionals, watch Greater New Orleans: Road to Recovery on WLAE-TV Channel 32. Weekdays 12:30pm or 7:00pm.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

eBulletin 2006-1

January 11, 2006

Estate and Gift Tax Changes

Effective January 1, 2006, the Federal estate tax exemption equivalent and the generation-skipping transfer tax exemption increased from $1,500,000 to $2,000,000. Both amounts are scheduled to increase to $3,500,000 in 2009. The estate tax exemption equivalent is the amount of your estate (after considering prior taxable gifts made during your lifetime) that is estate tax-free.

Note that the gift tax lifetime exemption did not increase and remains at $1,000,000.

The gift tax annual exclusion increased from $11,000 to $12,000 per donee in 2006. Married couples electing to split gifts can give $24,000 per donee.

The gift tax annual exclusion also increases to $12,000 per donee for Louisiana gift tax purposes. However, Louisiana's lifetime exemption remains $30,000.

For further information about these limits or for any assistance in the area of estate or gift taxes, call your BB professional or contact Marcie duQuesnay in our New Orleans office (marcied@bb-cpa.com)

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer

Please forward our eBulletin to a friend who you think would find the information helpful. Anyone can register to receive eBulletin by clicking our website link: www.bb-cpa.com

Disclaimer: This eBulletin contains general information and cannot substitute for Individual consultation. You should obtain professional advice before making financial business or tax decisions.

 

Previous eBulletins are available here.