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Tax Tips Newsletter
Serving you since 1993
November 2010 - Vol 5, Issue 10
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Watch for my new website which should be up and running shortly. In addition to the tax links that I have had for some time I'm adding some new features that I think you will really enjoy. I hope that I will be able to tell you all about those next month.

For California taxpayers, if you made a tax payment in excess of $20,000 during the current or previous year or your tax liability for the previous year was $80,000 or more, you must pay your taxes electronically beginning January 1, 2011. This rule was passed last year, but the Franchise Tax Board postponed mandatory payment until 2011.

The Franchise Tax Board is also starting a program that will allow you to access your account electronically. This is true for both individuals and businesses. You may also allow me to access your account, but I will need a signed form giving me permission. For more information on any of these, visit the Franchise Tax Board website.

The office will be closed on Thanksgiving Day and the following day. I hope that you have a wonderful holiday!

Doctor
If you use funds you've set aside in a tax-advantaged health account to buy over-the-counter medications, you need to be aware of a change scheduled for next year.

Starting in 2011, over-the-counter medications, such as aspirin, flu medications, and allergy pills, cannot be purchased with funds from health savings accounts (HSAs), Archer medical savings accounts (MSAs), health flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs).

Exceptions to this new rule: insulin, certain medical devices and supplies, and over-the-counter drugs for which you have a doctor's prescription.

With this coming change in mind, you might want to stock up on over-the-counter medications before December 31, 2010.

The 2010 health care reform law included a requirement that employers report the value of health coverage they provide to employees, beginning with W-2 forms for 2011.

The IRS has announced that it will make this reporting optional for 2011 W-2 forms in order to give employers additional time to adjust payroll systems and procedures.

The IRS also reminded taxpayers that the amount reported is not taxable income to the employee; the reporting is for informational purposes only.
Mom with 2 kids
The tax code allows you to give away up to $13,000 each year to as many people as you want, without triggering gift tax. If you and your spouse "split" your gifts, you can double this $13,000 annual gift-tax exclusion and give $26,000 per recipient.

If you're thinking of sharing your wealth, here are some important gift-giving considerations.

* All gifts during the year, including birthday and holiday presents, count toward the $13,000 (or $26,000) annual gift tax exclusion. For example, say you give a $500 birthday present to your grandchild. You may give another $12,500 to that grandchild during the year without triggering the need for a gift tax return.

* A gift made by check isn't complete until the recipient actually deposits or cashes the check. Plan accordingly when making year-end gifts, especially if you want such gifts to be counted toward this year's gift tax exclusion.

* For a gift to be valid, you must part with ownership. Pay special attention to gifts of stock in the family business or gifts of your personal residence.

* Three types of gifts are exempt from the $13,000 limit. You can make unlimited gifts for tuition expenses or medical expenses on behalf of any person, provided you make the payments directly to the educational institution or health care provider. You can also make unlimited gifts to your spouse.

If you would like to discuss the benefits of making tax-free gifts, please contact my office. There's still time to make 2010 tax-free gifts.
Cornucopia
The Tax Tip of the Week gives you some tax strategies that investors should consider as we come to the end of the year. Do you have stocks to sell, write off, or donate?

The Business Tip of the Month. Are you marketing your business using the current social media sites? It's important to make full use of all that is available out there in this high tech era.

The Financial Tip of the Month. Do you know how to protect yourself against harassing debt collectors? Also, read up on some little known facts about these debt companies.

The Fraud Alert: Check out how to protect yourself against credit card fraud. Read up on the many ways our credit cards can be used fraudulently.

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

Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979
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