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Tax Tips Newsletter
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January 2009 - Vol 4, Issue 1
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Greetings!
Linda Head Short 0608

Tax season is underway. Please get your tax information into us as soon as possible.

Brokerage firms have been given until February 15, 2009 to issue 1099s. If you have not received your 1099 yet, please wait until it arrives before sending in your information.

If you are a California resident, there are some changes that you need to be aware of. First of all, many state offices will be closed on the 1st and 3rd Fridays of the month. Also, the State Controller has announced that tax refunds will be delayed. The state is not required to pay interest on delayed refunds. However there is a limited amount of time that the state can delay the payments without incurring interest costs.

There are new rules for taxpayers that make a single estimated tax or extension payment of over $20,000 or have a tax liability greater than $80,000 beginning on or after January 1, 2009. Those taxpayers MUST make payments by electronic transfer. Not only that but once a taxpayer qualifies they must make all future payments by electronic transfer.

This is the direction that all payments will be headed so I if you regularly have to make estimated tax payments, I encourage you to enroll and pay them electronically. For the Franchise Tax Board that is done through their Web Pay service at http://www.ftb.ca.gov. For Federal payments you can pay at http://www.eftps.gov.

Windfall
If you or someone in your family is 70½ or older (or will be this year), here's important news: A recent law waives the requirement that a 2009 withdrawal must be taken from your retirement accounts. This includes 401(k) plans, 403(b) plans, certain 457(b) plans, and IRAs.

Normally, those 70½ or older must take a minimum required amount from their retirement accounts every year or face a 50% penalty tax on the amount required to be withdrawn but not taken. The required amount is calculated based on the owner's life expectancy and the retirement account balance as of December 31 of the previous year.

Retirees generally suffered huge losses in their retirement accounts in 2008, thanks to the crisis in the financial markets. Without the relief provided in the recent law, retirees would have to take a 2009 distribution from an already depleted account, leaving even less in the account to recover once the economic situation improves.

Unfortunately, the relief applies only to 2009 required distributions; it does not apply to required minimum distributions for 2008, so those who delayed a 2008 RMD until April 1, 2009, must still take that distribution.

If you need additional information or assistance, please contact my office.
Mom with 2 kids
There's very little good news in today's economic situation. The market value of homes, stocks, and just about everything else has declined.

The one silver lining may be that now is a great time to make gifts to your heirs. At today's depressed values, you can give more without paying gift tax than you could when values were higher. Giving stock, real estate, even an interest in the family business, can move these assets out of your estate. Gifting is also a way to shift income and future appreciation to your heirs.

Consider also taking advantage of the 2009 increase in the amount you can give annually to another individual. The 2008 limit of $12,000 increased to $13,000 for 2009. These annual gifts are not taxable, nor do they reduce your total estate tax exemption as larger gifts do. .

Capitalizing on the decline in asset values by gifting is only one planning strategy you should consider if your estate is large enough to be subject to taxes. Remember that the estate tax, with its current exemption of $3.5 million and top tax rate of 45%, is scheduled to disappear in 2010, only to reappear in 2011 at higher rates and a lower exemption amount. Clearly estate planning still makes tax sense. Contact us for more information and guidance in this area.
Golden Egg
The Tax Tip this week has to do with tax breaks if your are located in a particular geographic area referred to as a zone. These areas are targeted for various tax incentives.br>
The Business Tip of the Month deals with giving good customer service.

The Financial Tip of the Month deals with performing an annual review of your financial future.

The Fraud Alert has to do with Ponzi schemes. The Madoff Ponzi scheme was pretty ruthless in who it took advantage of. There are several telltale signs that are common.

Photos © Bigstockphotos.com, istockphoto.com

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

phone: 626-577-0979
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