HOLIDAY PARTIES ARE COMING

As you may know the life of many people in my family was impacted by a drunk driver that killed my daughter in law and seriously injured my son. I received this video from a friend. It is very graphic and touching. I think that it should be played at every bar and party as a strong reminder of how driving impaired can really not only kill but also ruin lives.

Click below to view:
http://www.youtube.com/watch_popup?v=Z2mf8DtWWd8

DON'T LET THIS HAPPEN TO YOU

I hope everyone had a great Thanksgiving weekend. I had an experience that I wanted to share with you. For Thanksgiving my wife Maggie, my 13 year old son, Ryan and I went to Kansas City. We went to watch them turn on the lights at the Plaza.

I always enjoy looking at the different salons and spas. I like to notice their in-store advertising, the appearance, the products they sell, product placement and the overall look of the business. One spa really caught my attention which was located right on a corner- a prime location. When I walked by the first time, I noticed that they had posted that they were open until 10:00pm every evening. I was impressed with this as they are apparently double booking.

The next time I walked by, I came from another direction and looked through the corner window. What a mess! This was an office or maybe the call center. The desk was haphazard with a 32oz convenience store cup, a stack of mail and bills with papers and magazines lying on the window shelf. The computer screen was on and if you looked closely, you could see the schedule of appointments- needless to say, very unprofessional.

This experience made me come back and look at my accounting office. Sometimes you need to step back and look at yourself from a client’s prospective.

LAME DUCK SESSION HAS A LOT ON IT'S PLATE

Congress convened this past week as time is running out on the current Congress and as many tax issues were left hanging earlier in the year. This session takes place in the wake of the historic Congressional elections that recently took place, but the newly elected members will not be sworn in until January 3, 2011 as a part of the 112th Congress. That means the members of the 111th Congress remain in control and will be the ones called on to make some of these difficult decisions.

In the meantime, Congress will adjourn for the Thanksgiving holiday and is expected to begin consideration of many of these proposals upon its return on November 29th.

The difficult issues include:

Extension of the Expiring Bush Tax Cuts

If Congress fails to act by January 1, 2011, many Internal Revenue Code provisions expire, and return to what they were in 2001. A few of the affected items include:

1. Increasing all income tax rates, dividend tax rates, capital gains tax rates, eliminating marriage penalty relief in all brackets
2. Increased Federal withholding taxes. Should Congress fail to extend the Bush tax cuts the higher tax rates would normally require the IRS to issue new withholding tables for employers.
3. Reinstatement of itemized deduction limits
4. Reinstatement of personal exemption phase-out
5. Reduction in child tax credits
6. Reductions in IRA contribution limits

Reinstating the Estate Tax

If Congress does not act, the estate tax is automatically reinstated but at the rates and exemption levels that were in the law in 2001. The rates that existed in 2001 included a top estate tax rate of 55%, and a personal exemption level of $1 million, significantly lower than the $3.5 million exemption that was in effect in 2009 and the maximum rate of 45%.

Expiring Provisions and Extenders

Expect that votes in the House and Senate will take place but also expect the early votes to be more for politics than substance. Success on extending these issues and enacting a bill the President will sign is uncertain as of this date. Following is a partial list of expiring provisions and extenders that either expired at the end of last year or will expire at the end of this year. In some cases the credit or deduction is reduced.

1. Alternative Minimum Tax Indexing- currently not indexed for 2010
2. Education Tax Credits
3. Employment Tax Credits
4. Deduction for State and local Sales taxes in lieu of property taxes
5. Energy tax credits
6. Bonus depreciation rules

Extension of Unemployment Benefits

Congress must act to extend unemployment benefits for the long term unemployed, meaning those who have been unemployed for 99 weeks. Congress must act on this by December 1, 2010 as that is the date that benefits begin to run out under current law.

Enacting a Federal Budget

Congress has yet to enact any of the appropriations legislation necessary to allow for the continued funding of the federal government. The usual deadline for this is September 30 of the year, but Congress was unable to act and so deferred this deadline until December 3, 2010. Failure to either enact the appropriations bills or extend the continuing resolution would have a severe impact on every activity of the federal government.

Other Critical Issues for Congress

1099 Burdens

In the past year Congress enacted legislation that requires the IRS to impose a significant expansion of the rules to determine when a business owner must provide a 1099 to a business, incorporated or not, when providing goods and or services to a business. This included requiring providing 1099s to corporations for the first time, and for owners of rental property to provide a 1099 for each service provider or repair service. Recently legislation has been introduced to repeal this requirement but it is unclear whether the revenue would have to be raised somewhere else.

Extending the Medicare Reimbursement Rates (Doc Fix)

The Health Care act enacted by Congress earlier in the year was unable to agree on a way to extend the Medicare reimbursement rates for seniors and it was extended through November 30. A permanent solution for this may not take place until next year.

HIGHER WITHHOLDING COMING JANUARY 1?

The IRS has to publish the 2011 withholding rates so that employers know how much to withhold for payrolls starting in 2011. The problem is what will Congress do in the "lame duck" session? If Congress does nothing and tax rates go up, employers will have to start withholding higher rates.

Bloomberg.com reports, "Employers in the U.S. are starting to warn their workers to prepare for slimmer paychecks if Congress fails to vote on an extension of Bush-era tax cuts." The article notes that "lawmakers won’t start debating whether to extend the cuts, which expire Dec. 31, until after the Nov. 2 elections" -- and that regardless of what takes place, the IRS "will probably have to assume the cuts will expire and direct employers to increase payroll deductions starting Jan. 1." Bloomberg also reports that "allowing the tax cuts to expire, even temporarily, would deal a blow to disposable income and could curtail the consumer spending that accounts for about 70 percent of the economy," according to economists.

http://www.bloomberg.com/news/2010-10-27/tax-debate-delay-has-employees-in-u-s-preparing-for-smaller-take-home-pay.html

GOVERNMENT MAKES A $22,250,000.00 MISTAKE

As part of the Obama administration’s stimulus plan, Social Security mistakenly sent 89,000 checks for $250 each to people who were either dead or in jail. About half the checks have been returned, but most of the prisoners will get to keep theirs. Source The Washington Post

"A government program is the nearest thing to eternal life we'll ever see on this earth."

Ronald Reagan

HAPPY THANKSGIVING TO YOU

May your stuffing be tasty
May your turkey plump,
May your potatoes and gravy
Have never a lump.
May your yams be delicious
And your pies take the prize,
And may your Thanksgiving dinner
Stay off your thighs!

From our office to yours, we wish you a blessed Thanksgiving!
Kopsa Otte Staff

UPDATE ON TONY

For those of you who are interested on how my son, Tony, is doing click on the link below:

http://www.omaha.com/article/20101121/NEWS01/711219923/-1#drunken-drivers-wasted-lives

IS THERE GOING TO BE A 1% TRANSATION TAX?

Question: I heard that the government is going to impose a 1% transaction tax. Is this true?

Response: There are a lot of proposals to reduce the deficit. There has been a bill introduced in Congress, but the chances of being passed are slim. See the information in Snopes.

http://www.snopes.com/politics/taxes/debtfree.asp


Larry Kopsa CPA

NO 2011 WITHHOLDING RATES UNTIL DECEMBER

IRS has stated during its Nov. 10 payroll industry conference call that it is unlikely that any 2011 withholding tables will be issued this month. The percentage method withholding tables are usually issued in November to give payroll professionals sufficient time to get the tables into their computer systems before the new rates go into effect in January.

However, this year the tables will not be issued until Congress decides whether to adjust the tax rates.

WILL REDUCING TAX RATES ACTUALLY INCREASE GOVERNMENT REVENUE

If you have been following my blog, you know that I am a fan of decreasing taxes. By working with clients, I know that as tax rates go up they lose the incentive to invest. Here is an example of what I have witnessed during my career.

A few weeks ago I was talking to a client. He told me that he was working really hard (70 to 80 hours per week) all summer to create a new line for his business. If this goes the way he wants, in the next year he would have to build or rent a new warehouse and hire another 6 people. As we worked through the numbers, it looked like there was potential for another $40,000 in annual revenue.

Later in our conversation we started talking about the uncertainty of tax rates. He said "You know if tax rates went to 70% (Federal, State and Social Security), I would not have sacrificed my time or the financial sacrifices that I went through this summer." See what I am talking about?

Here is a very good article from the National Review that better summarizes my thoughts along with historical examples.

http://www.nationalreview.com/articles/250954/brass-oldies-thomas-sowell

NO ESTATE TAX IN 2010 - BUT YOU STILL MIGHT NEED TO FILE WITH THE IRS

Even though there was no estate tax in 2010, many estates still have to file an estate tax return. Those estates with non cash assets exceeding $1.3 million must file Form 8939 with the IRS. The reason for this is that the IRS wants to know how the executor allocated the basis to heirs. In addition the heirs will need to know the basis of the inherited assets so that when the inherited property is sold they can calculate their gain or loss. In addition, if the property is business property, the heirs can take depreciation if there is a basis step up.

On property that is not given a basis step up, the basis of the decedent is the basis for the heir.

In 2010 executors can increase the basis of estate assets by $1.3 million plus an extra $3 million for assets that go to a surviving spouse. The filing of the Form 8939 is due by April 18, 2011, although the Service may extend the deadline because the agency has not yet issued any public guidance on the allocation rules.

HERE ARE MY THOUGHTS ON THE TAX RAMIFICATIONS OF THE ELECTION

It's finally official. The Republicans have taken over the House of Representatives and clawed away much of the Democrats' edge in the Senate. As I gaze into my crystal ball, here are my latest thoughts on what we can expect from the new Congress. But don’t take this to the bank… remember I was the guy that said the Congress would never allow the estate tax to lapse in 2010. Boy was I wrong. Here are my thoughts:

• Most tax accountants have been skeptical that Congress would get their act together and extend the 2001 and 2003 Bush tax cuts (even just for those earning under $250,000) in the lame duck session of Congress convening on November 13. But White House Press Secretary Robert Gibbs announced just today that the administration is open to extending the cuts for all. http://www.cnbc.com/id/40007621

• Word on the street suggests we may see a one-year extension for everyone, then fight it all out again with the new Congress in 2011. However, the Republicans may wait until the new Congress convenes in January to address the issue. In that case, clients can expect to see less take-home pay as the IRS adjusts withholding tables to reflect the new, higher rates.

• If Congress reaches the consensus necessary to resolve the Bush tax cuts question, they'll also manage to "patch" the AMT to avoid soaking millions of unsuspecting Americans. We have been doing several pre tax appointments and so far, if they do not do the patch, we only had one client that was not paying the additional Alternative Minimum Tax. It could get ugly.

• The new Republican House makes it unlikely that we'll see the estate tax roar back with a vengeance like it's scheduled to on January 1. But Congress isn't going to come up with a compromise imposing it retroactively for 2010, either. At this point, the smart money is betting on a compromise with a unified credit in the neighborhood of $3.5-5.0 million and rate of 45%.

• Republican leaders insist they plan to repeal the Legislation that Washington refers to as Healthcare Reform. But even L. Ron Hubbard can't imagine an alternate universe that gives them the votes they need to overcome a Senate Democratic filibuster or presidential veto. However, prospects are good that they can cherry-pick some of their least-favorite provisions — specifically; the requirement that all business file 1099s for all purchases over $600.

Some clients are breathing sighs of relief that the Republican victory will keep taxes low. But that view ignores the reality that deficits are still going up — and taxes will ultimately have to follow. This week's elections may have postponed that day of reckoning, but they haven't eliminated it. Don’t bury your heads in the sand. Recognize this economic inevitability and realize that continued gridlock means uncertainty — and even mere uncertainty not only makes it hard to tax plan but impacts the economy.

JUST BECAUSE YOU ARE DEAD DOESN'T MEAN THAT THE GOVERNMENT WON'T SEND YOU A CHECK

Last Sunday was Halloween and for some reason we had an exorbitant number of kids dressed up as zombies. It felt like the night of the living dead, which for some reason made me think about taxes and the federal government. You see the federal government does not apparently believe in death. For some reason they keep sending money to dead people. Maybe that's why we had so many zombies at our door begging for candy. Here is proof that the government does not believe that people die.

Remember those $250 stimulus checks? An investigation found that $18 million of those checks were sent to 71,688 deceased individuals. While some percentage of those checks were mailed out because SSA had not been informed that the taxpayers had died, an alarming number of the beneficiaries were actually accurately reported as deceased. In fact, in 2008, SSA paid deceased beneficiaries a whopping $40.3 million in benefits even after being notified of those deaths.

The beleaguered Department of Housing and Urban Development paid out more than $15.2 million in to households in 2008 to program households containing at least one deceased tenant. This included $7 million sent to single-member households whose only “family” was a deceased individual.

Scary, huh? The report goes on to cite examples of poor oversight and waste in other programs, including Medicare and Medicaid.

You can find the report on Senator Coburns oversight link below.

http://coburn.senate.gov/public/?p=OversightAction

THE IRS STILL WON'T ANSWER QUESTIONS ABOUT THE NEW 1099 RULES

The IRS remains unclear about 1099 reporting implementation. The Internal Revenue Service is still avoiding questions about how it will implement the controversial 1099 reporting rule, a provision of the health care reform law that requires a business to file a 1099 when a vendor is paid more than $600. IRS Commissioner Douglas Shulman has declined to provide information on the rule after requests for clarity, says Rep. Sam Graves, R-Mo. See the article and comments from The Hill.

http://r.smartbrief.com/resp/zpzgvscgyzecybBoajaoyAalxeEw?format=standard