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Tax Tips Newsletter
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June 2010 - Vol 5, Issue 5
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Greetings!
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Summer is here. It's a great time to focus on getting your financial house in order. Get your financial software brought up to date, get those receipts sorted, clean out the house and donate it to charity. There is a link to the left of this article to the Salvation Army website that has great information regarding the value of donated items. I can also send you a sheet with suggested values for items.

I will be contacting all of my business entity client that are on extension so we can get your returns done in plenty of time to meet the September 15, 2010 deadline.

The office will be closed on Monday, July 5th to observe the Independence Day holiday.

Seaside bliss
It's summertime and lazy days beckon. However, there's one activity you should fit into your schedule: reducing your 2010 income taxes.

The good news is that you have plenty of tax-saving opportunities. Here are some suggestions:

* LET THE KIDS HAVE FUN. That cool day of art instruction at the local museum or the karate camp your child's been asking about might qualify for a tax break. When you pay dependent care expenses so you and your spouse can work, you may be able to claim a credit of up to 35% of the cost. The maximum childcare credit for one child is $1,050 ($2,100 for two or more children). Overnight camps don't qualify, and the child generally must be a dependent under age 13. Remember to ask for the day camp's tax identification number.

* COMBINE BUSINESS AND VACATION TRAVEL. Travel expenses are deductible if the travel is undertaken primarily for business purposes; thus you may wish to combine attendance at an out-of-town business conference with a visit to family or friends. The expenses attributable to the personal part of the trip, though, remain nondeductible. When doing any business traveling, make a distinction in your records between expenses for lodging and transportation and those for meals and entertainment. The latter are subject to a 50% deduction limitation.

* IF YOU ARE GOING TO BE OUT OF TOWN for a while, consider renting out your home while you're gone. The IRS allows you to receive up to 14 days of rental income per year completely tax-free. In fact, you don't even have to report the income on your return.

* IF YOUR IDEAL VACATION is getting out on the waterways or hitting the highways in an RV, you may be able to take advantage of another tax break. Did you know that the cost of financing the purchase of a boat or RV may be deductible? In order to qualify, the boat or RV must have cooking facilities, sleeping accommodations, and a bathroom.

* WHAT IF YOU DON'T TAKE VACATIONS? Hiring your children to work in your business during the summer can mean a deduction for the wages you pay them, plus a social security payroll tax savings for an unincorporated business.

For other planning ideas, contact me.
Tax Deadline
Before taking its week-long Memorial Day recess, Congress tried to complete legislation that would have extended tax breaks that had expired at the end of 2009. However, concern over the cost of the bill slowed the process down in the House. Finally on May 28, the House passed the "American Jobs and Closing Tax Loopholes Act." The Senate expects to take up the bill when it returns to Washington after the Memorial Day recess on June 7.

The Senate may amend the bill, which then would have to go back to the House for approval. The version of the bill as passed by the House would extend the following tax breaks generally through 2010:

* The optional itemized deduction for state and local sales taxes.

* A modified deduction for qualified higher education expenses.

* The additional standard deduction for property taxes paid by those who don't itemize.

* The business research and development credit.

* 15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements.

Among the tax increases in the law are provisions changing the tax treatment of carried interest for partnerships and addressing the use of S corporations, LLCs, or LLPs by certain service professionals to avoid payroll taxes on their earnings.

What the final bill contains could affect you and your business. As you do your midyear tax and business planning, contact me to review the effect of this and other 2010 legislation on your situation.
Flag & Eagle
The Tax Tip of the Week: The Tax Tip that will end on Saturday, June 18 deals with payroll taxes. Note that next year the IRS is discontinuing Form 8109 and all deposits will have to be made electronically. To enroll in EFTPS, go to eftps.gov If you are reading this after June 18, please do check out this Tax Tip.

The Business Tip of the Month discusses two financing options for all size business.

The Financial Tip of the Month poses some questions to ask for those thinking about when to retire from their current job.

The Fraud Alert gives cautionary advice for those job searching on the internet.

Photos © Bigstockphotos.com, istockphoto.com, Felix Orona

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

phone: 626-577-0979
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