The South Bay Tax Report
May 31, 2011
Memorial Day marks the beginning of the summer, and the weather here in Hermosa Beach has been summer-like.
What better time to think about taxes??
Remember, we provide this email tax update every month to provide you information that might be helpful in your tax and financial planning world.
You can "unsubscribe" to this newsletter at any time, following the instructions at the bottom of the newsletter, but we hope you find it interesting reading each month.
The National Taxpayer Advocate, Nina Olson, recently discussed the complexity of Federal tax law. She indicated that in -
2001, the United States Tax Code contained 1.4 million words,
2007, the Code had increased in size to 2.1 million words, and
2010, the Code was 3.8 million words
(and not one of those words was "simple").
California Sales Tax Rate drops July 1st
Q - If I work after I start receiving Social Security retirement benefits, will I still need to pay Social Security and Medicare tax on my earnings?
A - Yes. Any time you work in a job that is covered by Social Security even if you are already receiving benefits - you and your employer must pay the Social Security and Medicare taxes on your earnings.
California State Use Tax Requirement
Many California businesses that do not currently hold a seller's permit must register with the California State Board of Equalization (the "BOE") and report and pay, by April 15th, any use tax due from purchases made in the preceding year.
Use tax applies to purchases from out-of-state vendors that are not required to collect tax on their sales.
If you purchased property that would have been subject to sales tax if purchased in a local store, it is likely subject to use tax.
The BOE has been sending letters to taxpayers, informing them of the new registration requirement. You may receive one of those letters, and if so, contact us so we can help you with your registration requirement.
Reports of Foreign Bank Accounts
We can't remind you often enough about this - US taxpayers are required to report their worldwide income; that is, income from both US and foreign sources. In addition, taxpayers who have an interest in, or signature or other authority over, a financial account in a foreign country are required to file Form TD F 90-22.1, Report of Foreign Bank account and Financial Accounts ("FBAR") if the total value of all such financial accounts exceeds $10,000 at any time during the calendar year. The FBAR is not filed with your tax return. Instead, it is filed with the Department of Treasury in Detroit, Michigan, no later than June 30 of the year following the calendar year reported.
Failure to report income in foreign bank accounts or to file the FBAR carries serious consequences, including large monetary penalties and, in some cases, criminal penalties.
If you have foreign bank accounts and are unsure whether you are required to file the FBAR, we would be happy to review your portfolio and advise you.
President Signs Repeal of Expanded 1099 Requirements
In mid-April, President Obama signed into law the "Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011." You've got to love what they name these bills in Congress!
In any event, the repeal means that 1099 reporting rules continue unchanged and requirements for landlords and others to issue 1099s have been voided.
Many of you request that we provide copies of tax returns we file for you to banks, loan brokers or other financial organizations. Please note that, due to Federal privacy guidelines, we are not allowed to provide information to 3rd parties without a formal authorization with AN ORIGINAL signature. Therefore, we usually honor your requests by providing the tax return copies to you directly so that you can forward the information on to the 3rd party directly. Note also that we do not charge a fee for providing electronic copies of your tax returns, but it often takes at least one business day before you will receive a link to a secure portal which will provide you with the information you have requested.
Beware of Phony E-mail from "IRS"
The Internal Revenue Service indicates that they have received numerous reports of emails sent to individuals, telling them that they are due a refund. The message directs people to a fake IRS web site that asks for personal data.
Note that the IRS will NEVER contact you via e-mail and you should ignore these emails.
Effective July 1, 2011, the combined statewide sales and use tax rate here in California will decrease from 8.25% to 7.25%. The temporary 1% increase was implemented in April 2009 and expires on June 30, 2011.
Remember that district taxes are still applicable, so the tax rates in most areas of California will be greater than 7.25%.
2011 Standard Mileage Rates Announced The Internal Revenue Service announced that - beginning January 1, 2011 - the following standard mileage rates will apply:51 cents per mile for business miles driven19 cents per mile for medical or moving purposes and
14 cents per mile driven in service of charitable organizations California conforms to these rates.
Your Rights as a Taxpayer
You probably don't think of the phrase "taxpayer rights" in conjunction with the Internal Revenue Service, but income tax obligations are not just a one-way street. The IRS spells out your rights, and it is charged with reminding you of them during any interaction.
You have the right to privacy; unless authorized by law, the IRS will not disclose your personal and financial information.
You have the right to representation; always contact us if you receive a notice or other contact from the IRS.
You have the right to ask for help in resolving disputes. The Taxpayer Advocate Service is available at (877) 777-4778 and can often assist in resolving disputes with the IRS.
You have the right to appeal.
Make sure the IRS does not violate your rights as a taxpayer.
FAQs Regarding Your Social Security Statement
Q - Are my benefits figured on my last five years of earnings?
A - No. Retirement benefit calculations are based on your average earnings during a lifetime of work under the Social Security system. For most current and future retirees, the Social Security Administration will average your highest 35 years of earnings. |