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Tax Tips Newsletter
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November 2011 - Vol 6, Issue 11
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The Franchise Tax Board has announced that for years beginning in 2011 they will use a lookup table to compute use tax for taxpayers. Use tax is sales tax that you would have paid on internet purchases or out of state purchases. For several years the State Board of Equalization has collected use tax from taxpayers as a line item on their state individual income tax returns. In order to make this process easier, they have now decided to use a lookup table. If you do not want to use the lookup table, your only option is to keep track of those sales and give me copies of the invoices with your income tax information.

One of the articles I am publishing this month is in regard to the IRS Voluntary Workier Reclassification program. If you are considering entering into this program, you need to know that the California Employment Development Department is not conforming to this. Please contact me if you are considering entering the IRS program.

Don't forget to "friend" me on Facebook. I'm listed as Linda L. Heineman, CPA. I hope you have a Happy Thanksgiving!

Business people collaborating
For years businesses and the IRS have disagreed over the proper classification of certain workers, with the IRS wanting to treat workers as employees while businesses prefer to treat them as independent contractors.

The IRS has just launched a new program labeled the "Voluntary Worker Classification Settlement Program" which encourages eligible employers to reclassify as employees those workers previously treated as independent contractors.

The program will give eligible employers substantial relief from federal payroll taxes they may have owed for past periods. They'll be required to pay just over 1% of wages paid to the reclassified workers for the past year, and they must agree to treat those workers as employees going forward.

If you need more information, give me a call.
Tax Deadline
There's not much time left to lower your 2011 tax bill. Some actions you might consider before year-end:

* Prepay college tuition you'll owe for the first semester of 2012. This year you can deduct up to $4,000 for higher education expenses. Income limits apply.

* Max out your retirement plan contributions. You can set aside $5,000 in an IRA ($6,000 if you're 50 or older), $11,500 in a SIMPLE ($14,000 if you're 50 or older), or $16,500 in a 401(k) plan ($22,000 if you're 50 or older).

* Planning to buy a new car? Buy before year-end if you're going to choose to deduct sales taxes instead of local and state income taxes.

* Install energy-saving improvements in your home (such as insulation, doors, and windows), and you might qualify for a tax credit of up to $500.

* Estimate your tax liability for 2011. If necessary, adjust your final quarterly voucher or your withholding to avoid underpayment penalties.

* Establish a pension plan for your small business. You may qualify for a tax credit of up to $500 in each of the plan's first three years.

* Buy equipment needed in your business to qualify for 100% bonus depreciation or up to $500,000 of first-year expensing.

Contact my office to review these and other tax-savings moves you should consider before year-end.
Cornucopia
The Tax Tip of the Week has to do with recordkeeping for what the IRS considers "listed property". Those are things like autos that are used in your business and need to have some sort of substantiation for their business use.

Business Tip of the Month. If you have a retail business then you have to deal with shoplifting. Read up on ways you can prevent, or keep to a minimum, shoplifting in your establishment.

Financial Tip of the Month. That old saying of "failure to plan, plan to fail" hits hard as we get closer to retirement. Here are some goods tips to consider as you look at what you will need when you retire.

Fraud Alert. We've all heard those ads that tell you they can help reduce your IRS debt significantly at a small cost to you. Most likely, these are scams as the IRS will settle with an "Offer in Compromise" program but only a small percentage of cases are settled this way. If you owe the IRS contact me before doing anything.

(This is not a link - yet)


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Sincerely,
Linda Heineman
Linda L. Heineman, CPA

phone: 626-577-0979