Tax Tips Newsletter
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June 2007 - Vol 2, Issue 4
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Just a reminder that your estimated tax payment voucher #2 is due on June 15.

We have started working on returns that were extended earlier in the year. If your tax information is in the office I am aiming at getting your information out before I leave on vacation.

The office will be closed on July 4th to celebrate Independence Day. I will be on vacation between July 4th and July 17th. Because of staff vacations, the office will be completely closed on July 16th and 17th. If you know that you will have an issue that needs to be resolved before I leave, please contact me immediately so I can get to work on it. As usual, I have arranged to have CPA friends of mine available for any emergencies that may arise while I am gone.

Golden Egg
President Bush signed the Small Business and Work Opportunity Tax Act on May 25, 2007. This law is part of a larger bill that provides funds for the troops and increases the federal minimum wage over a two-year period to $7.25.

To help offset the cost of the increased minimum wage, the law provides a number of tax breaks for businesses. Some individual taxpayers may find their tax bills are increased by the revenue raising portions of the law..

Here's a brief overview of the tax changes:

* The limit for the Section 179 election to expense business equipment purchases is immediately increased from $112,000 to $125,000, with the phase-out amount increased from $450,000 to $500,000.

* The Work Opportunity Tax Credit for hiring certain disadvantaged workers was set to expire at the end of 2007. The new law extends the credit through August 31, 2011, and broadens the credit to include more veteran groups.

* The FICA tip credit will continue to be based on the old $5.15 minimum wage even though the minimum wage increases to $7.25 an hour.

* Married couples who jointly operate an unincorporated business and who file a joint return may elect not to report their income as a partnership. Instead of filing a partnership return, they can each report their income on Schedule C of Form 1040.

* The age limit for the "kiddie tax," the taxing of a child's unearned income above a certain amount at the parents' higher rate, is increased from age 18 to 19. For full-time students, the kiddie tax will apply until age 24. This change is effective for tax years beginning after May 25, 2007 - which for most taxpayers means the change will become effective in 2008.

Among other provisions in the law are tax incentives to help taxpayers recovering from Hurricane Katrina and some S corporation changes. If you would like to review how these recent changes might affect your business and personal tax planning, give me a call. .
Seaside bliss
When the warm summer days arrive, you may be tempted to forget about serious things like taxes. But that could lead to a higher 2007 tax bill. Here are just a few summertime tax-saving ideas to consider.

* If you and your spouse work, consider sending your children to a summer day camp. The cost may qualify for the child care tax credit.

* If spring cleaning left you with outgrown clothing and household items you no longer use, donate them to charity. Don't forget the new rules, however. Only items in good used condition qualify for a tax deduction and there are recordkeeping requirements if your donation exceeds $500.

* Consider hiring your children to help out in your business this summer. You can deduct their wages if they are reasonable for the work performed. If your business is unincorporated, there's no social security tax to pay on wages paid to your children who are under age 18.

* Summer is a good time to do business entertaining. Keep records of the cost, the date, who was entertained, and what the business purpose was. Your deduction is limited to 50% of the cost.

By all means, enjoy your summer. But don't forget taxes. Give me a call for tax-cutters suited to your specific situation.
Financial Navigation
The Tax Tip of the Week this week is a review of tax to- do's for the month of June. Those include reviewing your estimated tax payments in the event you have changed your tax situation for 2007. Also, a reminder that the depreciation period for leasehold improvements is 15 years for the rest of 2007. After that it will return to 39 years. The last tip is to remember the hybird vehicle credit for 2007.

The Business Tip of the Month are tips for finding the best employees.

The Financial Tip of the Month asks the question "Are paying mortgage points a good thing for the borrower"? You need to read the article to find out the answer.

The Fraud Alert for this month deals with the work at home scams. If it sounds too good to be true, it probably is.

Photos © Bigstockphotos.com

Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979
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