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 2008-10
October 16, 2008

New Social Security Numbers Announced

The Social Security Administration has announced that benefits paid to recipients will rise 5.8% in 2009. 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:

2009 - $106,800
2008 - $102,000

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:

2009 - $14,160 per year ($1,180 per month)
2008 - $13,560 per year ($1,130 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:

2009 - $37,680 per year ($3,140 per month) 2008 - $36,120 per year ($3,010 per month)

Full retirement age is 65 years, 8 months for those born in 1941, 65 years, 10 months for those born in 1942, and 66 years for those born in 1943 through 1954.

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 5.8% increase - $1,090 After 5.8% increase - $1,153

Aged couple, both receiving benefits: Before 5.8% increase - $1,773 After 5.8% increase - $1,876

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

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

eBulletin 2008-9
October 7, 2008

The Emergency Economic Stabilization Act of 2008 – Tax Provisions

The Emergency Economic Stabilization Act of 2008 signed by the President last week includes important tax provisions. Both the energy bill and the tax extenders bill were folding into it before passage. Here are some of the more notable tax provisions. Please understand that we are still reviewing the new act. Therefore, you should consult with your BB representative or your own tax advisor for more information before acting.

  • IRA Distributions to Charity – The legislation allows taxpayers age 70 ½ and older to have their IRAs distribute up to $100,000 to qualifying charities both in 2008 and 2009. These distributions can qualify as the taxpayer’s required minimum distribution. The distribution is not taxable to the taxpayer, but neither is the charitable donation deductible.
  • Alternative Minimum Tax – Despite rumors to the contrary, Congress did not eliminate the alternative minimum tax (AMT). However, it did increase the AMT exemption amounts for 2008 (e.g., to $69,950 for married couples filing joint returns). The exemption reduces the amount of alternative minimum taxable income subject to the tax. While change will mean that many middle class taxpayers will not have to pay AMT in 2008, it will not provide as much relief to higher income taxpayers since the exemption phases out as your income increases.
  • Extenders – Certain tax benefits that expired December 31, 2007 have now been extended through 2009. These include

    • The state and local sales tax deduction, which allows you to deduct sales tax paid if this amount is greater than your state income tax deduction.

    • The higher education tuition deduction

    • The teachers’ classroom expense deduction of $250.

    • The special 15-year depreciable life for qualifying restaurant improvements and leasehold improvements

  • Non-Itemizers - The Housing Assistance Tax Act allows taxpayers who do not itemize to deduct up to $500 in real property taxes in 2008 ($1,000 on joint returns). The new act extends this benefit through 2009.

  • Research Tax Credit – The tax credit for research and development activities has been extended to amounts paid or incurred in 2008 and 2009.

  • Work Opportunity Tax Credit – Taxpayers hiring employees in the core Katrina disaster area were able to claim a work opportunity tax credit for qualifying employees hired through August 27, 2007. The new act extends this credit an additional two years, for employees hired through August 27, 2009. (Note that businesses which have already filed their 2007 returns claiming the credit can now amend those returns to add the additional qualifying hires.)

  • Disaster Relief – A few years ago, Congress provided a number of tax benefits for victims of Hurricanes Katrina and Rita. These benefits have now been extended to victims of all federally declared disasters generally effective for disasters occurring in taxable years beginning after December 31, 2007 and occurring before January 1, 2010, including

    • The elimination of the 10% of adjusted gross income floor on deduction of casualty losses. Thus, victims of Hurricanes Gustav and Ike will not have to reduce their casualty losses by 10% of their adjusted gross income.

    • The ability of disaster victims to deduct qualifying casualty losses even if they do not itemize

    • The ability of businesses to deduct certain disaster-related expenditures, such as for removal of debris, demolition of property or repairs.

    • An extended carryback period for disaster-related net operating losses

    • The availability of 50% bonus depreciation for expenditures to rehabilitate property damaged by or to replace property destroyed or condemned as a result of a federally declared disaster.

  • Broker Reporting – Stock brokers will have to report the basis of publicly- traded securities when they report the sales of such stock to the IRS, effective for stock acquired on or after January 1, 2011 and for mutual funds acquired on or after January 1, 2012.

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

eBulletin 2008-8
September 8, 2008

Relief for Those in the Hurricane Gustav Disaster Area

The IRS and the State of Louisiana have extended the time to file tax returns and make certain tax payments for taxpayers living in the Hurricane Gustav disaster area.

IRS

  1. What Has Been Extended:

    Tax returns, tax payments and other time-sensitive acts otherwise due between September 1, 2008 and January 5, 2009 now are due January 5, 2009. This would include third quarter estimated tax payments due September 15, 2008, 2007 corporate returns due September 15, 2008, and 2007 individual returns due October 15, 2008. Other types of returns and payments would also qualify.

  2. The IRS will waive the failure to deposit penalties for employment and excise deposits due on or after Sept. 1, 2008 and on or before Sept. 16, 2008 as long as the deposits are made by Sept. 16, 2008.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098 or 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause.

Taxpayers Affected:

The extension applies to taxpayers residing in, or having a business in, the following parishes: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Cameron, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, Rapides, Sabine, St. Bernard, St. Charles, St. James, St. John the Baptist, St. Landry, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Vernon, West Baton Rouge and West Feliciana. Additional parishes will be included if they are added to the FEMA disaster area.

Taxpayers not in the covered disaster area, but whose books, records, or tax professionals' offices are in the covered disaster area, also qualify for the extension. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area are eligible for relief.

What to Do:

The IRS says that it can identify taxpayers located in the covered disaster area and it will apply automatic filing and payment relief. Affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.

Casualty Losses:

If you suffer a casualty loss from Hurricane Gustav, you can elect to claim the loss on your 2007 or 2008 tax return. However, barring legislation, casualty losses claimed by individuals must exceed the total of $100 plus 10% of your adjusted gross income to be deductible.

Affected taxpayers claiming the disaster loss on their 2007 return should put the Disaster Designation "Louisiana/Hurricane Gustav" at the top of the form so that the IRS can expedite the processing of the refund.

Free Return Copies and Transcripts:

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the Disaster Designation "Louisiana/Hurricane Gustav" in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

 

Louisiana

Louisiana will recognize the January 5, 2009 extensions granted by the IRS for income-related taxes, which include the individual income tax, corporate income and franchise taxes, and estimated tax payments. In addition, employee withholdings due on or after September 1, 2008 and on or before September 16, 2008 will not be subject to penalty as long as these returns and payments are received by September 16, 2008.

Affected taxpayers whose businesses, homes or tax professionals are located in the disaster area should write “Hurricane Gustav” in black ink on the top or their returns.

BB Recommends: The extension is not an excuse to procrastinate, especially if you are overpaid or you are eligible for the economic stimulus payment. If you don’t file your return in time for the IRS to mail your stimulus check by December 31, you’ll have to wait until you file your 2008 return to get the benefit of the payment. In addition, you won’t be able to file electronically after October 15th. If you have any questions, contact your BB professional or call Ted Stacey or Ken Franz in our New Orleans office.

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

eBulletin 2008-7
July 23, 2008

Annual Sales Tax Holiday

Louisiana will hold its annual sales tax holiday on August 1st and 2nd. During this time the first $2,500 of the purchase price of most individual items of tangible personal property for non-business use will be exempt from the state sales tax.

The 2008 holiday will be conducted from 12:01 a.m. on Friday, August 1, through 12 midnight on Saturday, August 2, 2008. It applies to all consumer purchases of tangible personal property, other than vehicles subject to license and title and meals furnished for consumption on the premises where purchased, including to-go orders. The purchase must be for personal use. Purchases for use in a trade or business don’t qualify.

The sales tax exemption does not apply to purchases of taxable services and transactions for the lease or rental of tangible personal property. For example, the exclusion will not apply to such items as a hotel room, repairs to tangible personal property, laundry and cleaning services, or vehicle parking.

The following activities will be eligible during the two days of each annual holiday for the sales tax exemption:

  • buying and accepting delivery of tangible personal property;
  • placing tangible personal property on layaway;
  • making final payment on tangible personal property previously placed on layaway; or
  • ordering tangible personal property for immediate delivery, even if delivery must be delayed, provided that the customer has not requested delayed shipment.

Purchases during the holiday with “rain checks” issued before the two-day holiday are eligible for exemption, but purchases after the holiday with “rain checks” issued during the holiday are not eligible for exemption.

You will not subsequently have to pay the sales tax if you have to exchange the item purchased during the holiday as long as you are only changing the size or color of the item or correcting a defect. However, a subsequent exchange for a dissimilar item will be taxable.

Items that are normally sold as a unit, such as dining tables and chairs, cannot be individually priced for the purpose of creating a separate eligibility cap for each individual item.

For more information, go to the Department of Revenue’s website, www.revenue.louisiana.gov.

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

eBulletin 2008-6
June 17, 2008

Federal Minimum Wage Increase

Just a reminder that the Federal minimum wage will increase to $6.55 per hour beginning July 24, 2008. The Federal minimum wage is currently $5.85.

The minimum wage will increase again to $7.25 per hour on July 24, 2009.

Go to http://www.dol.gov/esa/minwage/america.htm for information about applicable state minimum wage laws.

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

eBulletin 2008-5
June 23, 2008

IRS Increases the Standard Mileage Rate

Recognizing the steep climb in gasoline prices, the IRS has increased the standard mileage rate for the business use of an automobile to 58.5 cents per mile effective July 1, 2008. The standard mileage rate for medical use of an automobile and for moving expenses will increase to 27 cents per mile, also effective July 1, 2008.

The business standard mileage rate in effect through June 30, 2008 is 50.5 cents per mile. The standard mileage rate for medical and moving use is 19 cents per mile through June 30, 2008.

The standard mileage rate for charitable use of an automobile remains at 14 cents per mile. This rate is set by law and cannot be changed by the IRS.

Businesses can reimburse their employees’ business use of their personal vehicles up to the same rates without having to report the reimbursement to the IRS as long as the reimbursements are pursuant to a plan under which employees are required to account for that business use on a timely basis.

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

eBulletin 2008-4
March 28, 2008

Louisiana State Tax Holiday

On May 24th and 25th of this year, Louisiana will hold a sales tax holiday on sales of hurricane preparedness items. During this two-day period, the first $1,500 of the sales price of qualifying merchandise is sales tax free.

The Louisiana Department of Revenue has now issued guidance on this holiday (Revenue Information Bulletin No. 08-013. Excerpts from this RIB follow.

Items eligible for this sales tax holiday are the following: each portable self- powered light source; portable self-powered radio, two-way radio, or weather band radio; tarpaulin or other flexible waterproof sheeting; any ground anchor system or tie-down kit; any gas or diesel fuel tank; any package of AAA-cell, AA- cell, C-cell, D-cell, 6-volt, or 9-volt batteries, excluding automobile and boat batteries; any cell phone battery and any cell phone charger; any non-electric food storage cooler; any portable generator used to provide light or communications or preserve food in the event of a power outage; any "storm shutter device", as defined in the Act; any carbon monoxide detector; and any blue ice product.

The sales tax holiday does not extend to hurricane-preparedness items or supplies purchased at any airport, public lodging establishment or hotel, convenience store, or entertainment complex.

A customer will be eligible for the sales tax exemption if during the two days of each annual holiday:

  • He/she buys and accepts delivery of eligible hurricane-preparedness items or supplies;
  • He/she places eligible items or supplies on layaway;
  • He/she makes final payment on and withdraws eligible items or supplies previously placed on layaway; or
  • He/she orders an eligible item for immediate delivery, even if delivery must be delayed, provided that the customer has not requested delayed shipment.

Purchases of eligible items or supplies during the holiday with “rain checks” issued before the holiday are eligible for exemption, but purchases after the holiday with “rain checks” issued during the holiday are not eligible for exemption.

The post-holiday exchange of merchandise to effectuate changes in size, color, or correction of defects does not create a tax liability, but exchanges after the holiday for dissimilar items will be considered the purchase of new property on which the sales tax will be payable.

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

eBulletin 2008-2
February 15, 2008

Stimulus Legislation Rebate Information

The IRS has created a new webpage about the economic stimulus payments created by the recent legislation (see eBulletin 2008-1). This webpage can be found at

http://www.irs.gov/irs/article/0..id=177937.00.html.

You can also find this webpage by going to the IRS homepage (www.irs.gov) and clicking “Rebate Questions?”. The new webpage includes a link to a frequently asked questions (FAQ) section and other useful information.

A taxpayer must file a 2007 income tax return to qualify for the rebate.

Low income taxpayers, including people whose income consists almost entirely of Social Security payments, are normally are not required to file tax returns. However, under the new law, many of these same low-income workers, recipients of Social Security, certain veterans’ benefits and certain Railroad Retirement benefits will qualify for a rebate. They, too, must file 2007 income tax returns to receive the rebate. The website includes special instructions for these taxpayers.

BB Recommends: The IRS has indicated that it may begin mailing checks in May. However, you will not get a rebate, even if you otherwise qualify, until you file your 2007 return. This is not a year for qualifying taxpayers to delay preparation of their returns. This is also a year to consider direct deposit of any federal refund. The IRS will then direct deposit your rebate payment as well.

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

eBulletin 2008-1
February 8, 2008

Congress Passes New Stimulus Legislation

Congress has passed an economic stimulus bill designed to put additional cash in qualifying taxpayers’ pockets. The legislation actually creates a new credit to be claimed on your 2008 return. However, qualifying taxpayers will receive this credit in advance, most over the next few months.

New Credit on Your 2008 Tax Return - Basically, if you qualify, you will be able to claim a new credit on your 2008 tax return, due in April 2009. The credit will be as high as $600 ($1,200 for a joint return). While the credit will normally be no more than your net income tax liability, qualifying taxpayers will be eligible for a minimum credit of no lower than $300 ($600 in the case of a joint return). Qualifying taxpayers include taxpayers who have earned income, Social Security benefits and veterans benefits of at least $3,000 in 2008. This latter provision means, for example, that older taxpayers with just Social Security income will qualify for the credit, even if they do not pay any income tax in 2008.

The amount of the credit will be increased by $300 for each qualifying child.

The amount of the credit is phased out at a rate of 5% of your adjusted gross income above $75,000 ($150,000 for joint returns). (Adjusted gross income is the amount at the bottom of page 1 on your return). Thus, higher income taxpayers will not be eligible for the credit (or the rebate to be discussed below).

Nonresident aliens, estates or trusts, and dependents are not eligible for the credit. Further, taxpayers and eligible children must have valid Social Security numbers. A taxpayer with a taxpayer identification number (ITIN) will not qualify.

Rebate Checks - Most taxpayers eligible for the credit will receive it in the form of an advance payment from the IRS, to be issued beginning as early as this May. The IRS will, however, compute your rebate check based on your 2007 individual tax return. Otherwise, the rebate will be computed in the same way as the 2008 credit.

If you receive a rebate check that is less than the amount of the credit you ultimately compute when you prepare your 2008 tax return, you will be able to claim the remaining credit when you file that return. If you receive a rebate check that is more than the amount of the credit you compute on your 2008 return, you will be able to keep the difference; you are not required to return the excess rebate.

BB Recommends: Even if you qualify for a rebate, you will not receive it until you file your 2007 income tax return. Thus, putting your return on extension will delay the timing of your rebate. Qualifying taxpayers should file their 2007 returns as soon as feasible.

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.

 

Previous eBulletins have been archived by year and are available here:

2007 • 2006 • 2005