HOUSE PLANS VOTE ON TAX CUT EXTENSION

House Republicans said they plan to schedule a vote on extending the Bush tax cuts before August. 

In a legislative agenda released Friday by House Majority Leader Eric Cantor, R-Va., he wrote, “Before we leave for August, I expect to schedule a vote on legislation preventing the largest tax increase in history,” according to Reuters.

House Minority Leader Nancy Pelosi, D-Calif., said last Wednesday in a letter to House Speaker John Boehner, R-Ohio, that she wants to schedule a vote on extending the tax cuts for those who earn less than $1 million and use the extra tax revenue from those earning over $1 million to pay down the deficit.

“Without further delay, the Majority Leadership should schedule a vote on extension of the middle income tax cuts, as early as next week, to increase certainty for millions of American taxpayers and for the economy,” she wrote. “We must ask the very wealthiest Americans to pay their fair share. Democrats believe that tax cuts for those earning over a million dollars a year should expire and that we should use the resulting revenues to pay down the deficit… It is unacceptable to hold tax cuts for the middle class hostage to extending multi-billion dollar tax breaks for millionaires, Big Oil, special interests, and corporations that ship jobs overseas.”

The Obama administration position is that the Bush-era tax rates should only be extended for those who earn $250,000 a year or less.

Congress is not expected to settle the matter until after the November election, during a lame-duck session. But there have increasingly been calls for them to settle the fate of the expiring tax cuts in time to provide more certainty for next year. IRS Commissioner Doug Shulman and other IRS officials have urged Congress to decide on the tax rates early enough to avoid a delay in the forms and schedules for next tax season.

QUICKBOOKS 2009 DISCONTINUATION

We just received the following note from QuickBooks. If you are using QuickBooks 2009 take note, they are discontinuing the payroll service take notice.

NOTIFICATION FROM QUICKBOOKS:

We know that your clients rely on QuickBooks and we want to be sure that we keep you informed of any changes that will affect your clients. Since early March, we have informed our payroll customers that as of May 31, 2012, payroll service for QuickBooks 2009 would be discontinued.

In order to provide customers with additional time to upgrade their QuickBooks software, we have extended the date of the payroll service discontinuation to June 30, 2012.

After that date, QuickBooks 2009 will no longer automatically calculate correct payroll taxes or provide payroll tax forms. Payroll subscriptions for customers with QuickBooks 2009 will be inactivated on July 1, 2012.

We are encouraging customers to upgrade their QuickBooks software as soon as possible to minimize disruption to their businesses.

FINAL EMPLOYEE PAYCHECK

Q: How quickly must an employee’s final paycheck be issued if they are terminated or quit? I had an employee that quit and said that I had to give him a paycheck that day.

A: Nebraska law requires that final wages be paid on the next regular pay day or within two weeks of the termination, whichever is sooner. This law applies regardless of whether an employee is terminated or voluntarily quits.



Note, this is Nebraska law. Other state laws may vary.

TAX COURT CASE REMINDS US OF THE IMORTANCE OF GOOD VEHICLE RECORDS

In order for mileage to be deductible you must have good "contemporaneous" records of your mileage. 

A couple who used their vehicles in their sole proprietorships had logbooks but they were riddled with mistakes, questionable entries and other irregularities.  The Tax Court was unable to rely on them and as a result, the Court upheld IRS’ disallowance of all mileage expenses for the vehicles, even though they were used partially for business (Moore, TC Summ. Op. 2012-16). They lost their deduction.

If you would like a listing of records that you need to make sure that you are following the IRS guidelines let us know and we will send you the information.  Contact Amanda at ahaumont@kopsaotte.com

NEW IRS RULE - SELF EMPLOYED NOW CAN DEDUCT SPOUSE INSURNACE

Self-employed taxpayers can deduct their health insurance. Not as a business expense but as a other deduction which is on page one of the tax return. In defining what is deductible you are allowed to include Medicare Part B and De premiums.

The IRS has just revised their thinking on the deduction for spouses of self employed taxpayers. Publication 535 this year says that Medicare premiums have to be paid in the name of the self-employed person to qualify for the deduction. IRS has informally said that the revision was made to make it clear that a spouse’s Part B and D premiums don’t count if the spouse isn’t self-employed. Strangely this is just in the publication but not in an official guidance.

GAS PRICES RISING

Q. With gas prices rising, will IRS raise the standard mileage rate at midyear?

A. Actually gas prices have decreased lately so I doubt if we will see any changes. If we do see increases in the future it might be a possibility. Most analysts see prices staying low especially with an election coming up.

When the price of gasoline spiked in the first half of 2008 and 2011, the Service boosted the standard mileage rate by 8 cents per mile and 4.5 cents per mile, respectively, effective for the final six months of those years.

We will keep you posted.

CHART OF DAYS TO PAY FEDERAL TAXES

Click on picture to see larger.

THE MORAL CASE FOR THE FREE MARKET

In an article published by the Manhattan Institute, James R. Otteson -- joint professor of philosophy and economics, and chair of the Philosophy Department at Yeshiva University in New York -- makes the moral case for capitalism. 

Otteson writes that since 1800, America's population has increased 58-fold, its life expectancy has doubled, and our GDP per capita has increased almost 36-fold.  "Such growth is unprecedented in the history of humankind," he notes.  What explains it? "The main thing that changed between 200 years ago and the previous 100,000 years of human history was the introduction and embrace of so-called capitalist institutions — particularly, private property and markets."  Yet, despite our progress and improved quality of life, some "remain suspicious of capitalism," declaring that it "fails to meet moral muster."

But capitalism is the most moral choice, especially compared to socialism or Marxism, Otteson writes.  "Capitalism gives us incentives to trade and associate with people outside our local community," and "creates opportunities to share with — as well as learn from — people not only from next door but from around the world."  In a free market, "even if we do not all get rich at the same rate, we all still get richer." 

Capitalism attacks poverty, according to Otteson, and poverty "is a far larger factor in human misery than is inequality."  Most importantly, "capitalism assumes that each of us is a free moral agent, capable of leading his own life ... not begging leave or permission before he acts, not subject to correction from his superiors: a citizen, not a subject."  Otteson concludes that the free market system promotes what Adam Smith called the "obvious and simple system of natural liberty." 

See the full article by clicking here

ILLEGAL IMMIGRANTS RECEIVED BILLIONS FROM THE IRS

Q: Does the IRS pay billions in tax refunds to workers who are in the U.S. illegally?

A: Yes. The Treasury Department’s Inspector General determined that $4.2 billion was paid in 2010, up from less than $1 billion in 2005. Leading Democrats are resisting a bill that would stop future payments.

This is a rare case of an Internet rumor with some substance to it. In fact, it’s shaping up as a major dogfight in Congress. At issue here are the federal child tax credits that can be claimed by persons with dependent children under age 17. Some Democrats are already defending these child tax credit payments that have gone to those without a valid Social Security number, accusing Republicans who want to end them of a heartless attack on children.

Several different versions of this viral email all cite a recent investigative story by an Indianapolis television station, but WTHR-TV is far from the first to notice. The Washington Post and others reported on this last year when the Treasury Department’s inspector general for tax administration issued a report on July 7, 2011. The title of the report summed up the IG’s finding: Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits.

The credits currently amount to $1,000 per child, and they are “refundable,” meaning that parents may receive refunds even when they do not owe any tax.

The IG report stated that more than 2.3 million persons who did not have Social Security numbers valid for working in the U.S. got an average of roughly $1,800 each in 2010 in child tax credit refunds. That included 9,000 illegal immigrants who each got a total of $10,000 or more by retroactively claiming credits for tax years prior to 2010.

This from www.factcheck.org

WORKING TO PAY STATE AND LOCAL TAXES

UNEMPLOYMENT BENEFITS

Q:I was laid off last year and fortunately I received unemployment benefits.That really helps as I look for work.I received a 1099 form in the mail.Do I really have to pay tax on this?

A: I am sorry to say but,unemployment benefits are considered taxable income. You will need to include this 1099 when you file your tax returns.

TAX QUESTION ON EDUCATION CREDIT AND CLAIMING CHILD

Q: Hey how are you doing sir? I was wondering if you could help me out with some doubts I have about a college form I got, a tuition statement. Not sure how I can put it on my taxes. Also, I have a two-year old whom her mom claimed so I am wondering if I can claim her on my taxes or just write down the child support I paid for the year? Can I just print the form from irs.gov to file and send it to them?

 A: The tuition form most likely tells how much tuition you paid that qualifies for the education tax credit.  Here are resources from www.irs.gov pub 970 on the tax credits for education:  American Opportunity Credit

As for your other question- Since the mother claimed the child then you are not eligible to claim.  I am presuming that the mother has custody.  If you had custody for over 6 months let me know and I will comment further.

Sorry, but child support is not deductible. 

 Good luck!

OBAMA CARE MISCALCULATION

One of the most heavily promoted piece of Obama Care turns out to be a dismal failure. The White House endlessly trumped that more than 4 million small business might benefit from the health insurance tax credit. The promise was that because you would get a tax credit for offering health insurance to their employees businesses would provide insurance as a fringe benefit.

In actuality this did not happen. Instead of 4 million small businesses only 300,000 filed for the credit and the average was only $1,200. Far less to make offering insurance to employees.

I have yet to find a client that will spend, for example, $10,000 to save $1,200.

The Supreme Court will heard arguments on Obama Care in March. We are watching closely and will keep you posted.

CALCULATING MILEAGE RATES

Q:  Somebody told me that the mileage rate for 2011 was 51 cents per mile and then my college son who took a tax class last semester said it was 55 cents.  Who is right?  Am I getting my monies worth for all the tuition I am paying?

A:  I don’t know what grade your son received in the tax class.  I teach an income tax at our local college one semester a year.  I teach so I can say that I am a “professor emeritus,” whatever that means.  Anyway, if he would have taken my class I would be disappointed because he is wrong.

Here is the deal.  If you used an auto for business travel last year and claim the standard mileage deduction, be sure to pay attention to when you took the trips. High gasoline prices in 2011 prompted the IRS to increase the deduction rate at midyear.

The mileage rate for business use of a vehicle was 51 cents per mile from Jan. 1, 2011, through June 30, 2011. On July 1, 2011, the rate increased to 55.5 cents a mile.

This type of tax deduction change is why good tax record keeping is so important.

AMERICANS PAYING MORE IN TAXES THAN FOR FOOD, CLOTHING, AND SHELTER

In 2012, Americans will pay approximately $4.041 trillion in taxes, which is $152 billion, or 3.9%, more than they will spend on housing, food, and clothing combined, according to our new study by Adjunct Scholar Kevin Duncan. In addition, an increasing proportion of government benefits now go to pay for those same basic expenses of low-income Americans.

Examining the trends of tax collections and expenditures on housing, food, and clothing for the past several decades, the study shows that an ever-increasing amount of taxpayer money has gone into government programs that subsidize or pay for essential household goods. Cash and voucher benefits now pay for over a third of basic household expenses, up from less than 1% in 1929 and less than 20% in the early 1970s.

NEW YORK CITY

I spent a few days last week in New York City speaking at a conference. I spoke for two days and then I visited with some of our clients that are in that area. My wife, Maggie, went along with me so we did have a day to do some shopping and visit art galleries on Times Square.

Staying in a hotel in New York is always an experience because space is so expensive. My room was 17' x 11. This included the bathroom, shower and then the bed. No closets only two drawers. At the same time this is a brand-new motel or hotel and a unique experience because of all the technology that was involved.

One of my favorite books and a requirement for everyone that works in my office is Raving Fans. One of the principles that creates a ‘Raving Fan’ is to do what you do very well but don't try to do everything. The hotel was a very good example of this. Everything they did, they did with class and it definitely had a WOW factor. At the same time there were a lot of things they didn't do, which was okay also.

If you've never been to New York I suggest that you put it on your bucket list. There's no place like it. On a weeknight at 11 PM to be walking down Eighth Street or Seventh Street or Times Square and to be shoulder to shoulder with people is amazing. Central Park- the theaters - the shopping - no place like in the world!

IN THE NEWS

I was honored to be asked to be a part of this month's Salon Today's Money Puzzle article. Salon Today asked a group of experts that examine every angle of your business to help you find, grow and save more money.

Please check it out: CLICK HERE

100% BONUS DEPRECIATION

Q.  What are the odds for reinstating 100% bonus depreciation?

A.  The chances are getting lower as the year goes on. Some in Congress wanted to tie this provision to the extension of the two-percentage-point reduction in the employees’ share of Social Security tax, but it was stripped from the final package. On the good side I would imagine that other provisions that lapsed after 2011will be reinstated retroactively in a lame-duck session, including direct payouts from IRAs to charity, higher AMT exemptions and the write-off for state sales taxes.  Who knows what they will do in Washington.

LARRY THE CABLE GUY

1. Cows
2. The Constitution
3. The Ten Commandments

COWS: Is it just me, or does anyone else find it amazing that during the mad cow epidemic our government could track a single cow, born in Canada almost three years ago,right to the stall where she slept in the state of Washington? And, they tracked her calves to their stalls. But they are unable to locate 11 million illegal aliens wandering around our country. Maybe we should give each of them a cow.

THE CONSTITUTION:
They keep talking about drafting a Constitution for Iraq. Why don't we just give them ours? It was written by a lot of really smart guys, it has worked for over 200 years, and we're not using it anymore.

THE 10 COMMANDMENTS:
The real reason that we can't have the Ten Commandments posted in a courthouse is this: you cannot post 'Thou Shalt Not Steal,' 'Thou Shalt Not Commit Adultery,' and 'Thou Shall Not Lie' in a building full of lawyers, judges and politicians, it creates a hostile work environment.

GET 'ER DONE!