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Tax Tips Newsletter
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February 2008 - Vol 3, Issue 2
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For those of you who are waiting for 1099s to come in from your broker, apparently many of those are going to be issued late. If that is the only piece of information you are waiting for, please forward your tax information to me now and forward the 1099s when they become available.

If you are a California employer with more than 50 employees, you must file an Environmental Fee return with the State Board of Equalization on or before February 28, 2008. This is a new return and is mandatory if you have over 50 employees. For more information, go to this link to the form or click here for a link to the state board website for more information

Windfall
Yesterday both the House and the Senate passed H.R. 5140, the Economic Stimulus Act of 2008, which the President is expected to sign.

Here are the key parts of the bill:

1. Tax rebate checks would go to approximately 117 million Americans, based on income tax paid in 2007. Individuals could qualify for rebates of up to $600, and couples for rebates up to $1,200. A minimum of $300 per individual and $600 for couples would go to those with at least $3,000 of earned income. Eligible taxpayers would also get a child tax credit of $300 per child, with no limit on number of children. Rebates would phase out for taxpayers with adjusted gross incomes over $75,000 for individual filers and $150,000 for couples.

2. Businesses could expense up to $250,000 of qualifying Section 179 equipment purchases. That's almost double the current 2008 allowance of $128,000.

3. A 50% bonus depreciation would be available to businesses for the purchase of qualifying new equipment purchases.

The IRS expects that it will begin sending out checks in May, so they will not be a part of your tax refund, if you are expecting one. It will take the IRS until mid-summer to complete sending out the checks.
House
Congress often rushes to pass legislation just before adjourning for a holiday or recessing for the year, and 2007 was no exception. One of these last-minute bills was the "Mortgage Forgiveness Debt Relief Act of 2007," which President Bush signed into law on December 20.

The law includes three major tax breaks for homeowners: 1. Under prior law, the forgiveness of mortgage debt by a lender generally resulted in taxable income to the taxpayer. The new law allows homeowners to exclude up to $2 million of certain forgiven mortgage debt from federal taxable income. The exclusion is available for 2007, 2008, and 2009 and applies to foreclosures and renegotiations of qualified mortgages on primary residences. The amount of debt forgiven reduces the tax basis in the home.

2. The 2007 deduction allowed for qualifying mortgage insurance premiums is extended for three more years - 2008 through 2010.

3. Under prior law a surviving spouse could use the full $500,000 gain exclusion on the sale of a principal residence only if he or she sold the home in the year a joint return could be filed. Now for sales after 2007, a surviving spouse who qualifies for the full exclusion may claim it for sales occurring within two years of the other spouse's death.

If you would like details on provisions that affect you, please call my office.
Golden Egg
The Tax Tip this week deals has some additional information regarding the mortgage foreclosure relief.

The Business Tip of the Month has some tips for building strong customer relationships.

The Financial Tip of the Month is asks the question, "Should you direct deposit your tax refund into your IRA"? (The answer is NO. Read the article to find out why).

The Fraud Alert has tips on taxicab scams. I would like to add one suggestion to the list in the article. Always ask how much it is to go somewhere before you get in the cab.

Photos © Bigstockphotos.com, istockphoto.com, Janet Gelfman

Sincerely,
Linda Heineman
Linda L. Heineman, CPA, CITP

phone: 626-577-0979
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