The South Bay Tax Report
September 30, 2011
Wayland & Vukadinovich LLP
Named as the 2011 South Bay's
Best Tax Preparer
by The Daily Breeze
Social Security
Social Security was established in 1935 to alleviate poverty among the elderly during the Great Depression. It was created as a self-financing program that would collect payroll taxes from workers which would immediately be paid out in benefits.
You become eligible for Social Security by working in a Social Security-covered job for at least ten years. To be more specific, you need 40 credits. One credit is earned when you earn a certain minimum dollar amount; in 2011, the minimum amount to earn one credit is $1,120. Up to 4 credits can be accumulated each year, so if you earn at least $4,480 in 2011, you will earn four credits. If you earn four credits each year for 10 years, you accumulate the 40 credits necessary to be fully insured and achieve basis eligibility.
Are you Job Hunting?
Make sure you keep records supporting expenses you incur during your job search - expenses such as meals, entertainment, travel, office supplies, education or any other expenses ordinary and necessary in the job search process might be deductible. You can also deduct automobile mileage (at 55.5 cents per mile) for miles driven to job search related meetings.
Note that expenses for work clothing (except uniforms), briefcases, dry cleaning bills, haircuts, cosmetics and cosmetic surgery are rarely deductible.
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California's Proposition 60 and
Proposition 90
California's voter-approved Proposition 60 allows a homeowner, age 55 or older, to transfer their property tax basis from their current personal residence after its sale to a replacement home if the replacement home is within the same county, is of equal or lesser value and is purchased - or constructed - within two years of the original property's sale.
Proposition 90 allows the transfer of basis from one county to another; however, the county to which you are moving must have authorized the transfers and few California counties have done so since the law was passed.
Make sure you understand the rules relating to these valuable transfers if you intend to sell your personal residence and "buy down."
Property Tax Appeals
The real estate market has likely played havoc with many of our property tax assessments. Remember, if you believe your assessment is in excess of the fair market value of your property, you can file an assessment appeal.
For assessment appeals, most counties have a filing period that begins July 2nd and ends either September 15th or November 30th depending on whether the county assessor mails notices by August 1st.
For a less formal request for decline in value reassessment (which is a great way to go...), the filing periods begin once new assessed values are made public which is usually around the first week of July.
Note that the assessment appeal application is submitted to the County's Assessment Appeals Board, which is made up of hearing officers typically appointed by the County's Board of Supervisors. The decline-in-value reviews are submitted directly to the County's Assessor's office.
Planning for the New 3.8% Medicare Tax on Unearned Income
Effective 2013, the Health Care and Education Reconciliation Act of 2010 will subject SOME individuals to a 3.8% Medicare contribution tax on unearned income. This new tax will apply to single taxpayers with a modified adjusted gross income in excess of $200,000 and married taxpayers with a modified adjusted gross income in excess of $250,000.
Net investment income includes interest (but not tax-exempt interest income), dividends, annuities, royalties, and rents. It also includes income from a passive activity. Net gain attributable to the disposition of property other than property held in an active trade or business is subject to this tax.
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. 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.
IRS Launches the IRS2Go App for iPhone and Android
There's an app for everything - even your taxes! The IRS recently unveiled IRS2Go, its first smartphone application that lets taxpayers check on their status of their tax refund and obtain helpful tax information.
Apple users can download the free application by visiting the Apple App Store. Android users can vist the Android Marketplace to download the free IRS2Go app.
The phone app is a first step, says the IRS. They will look for additional ways to expand and refine their use of smartphones and other new technologies to help meet the needs of taxpayers.
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