| February 2012 Tax Newsletter |
Greetings!
It's that time of the year again. Everyone is gathering their W-2s and 1099s with the hope that Uncle Sam will be kind this year. While we may not have control over Uncle Sam's kindness, we can help you navigate the daunting task of completing your tax returns and developing an effective strategy for the following years. As always, please reach out to us with any questions and let us take the fear out of this time of the year.
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Changes in Use Tax Reporting
How many times have you heard or said the following. "I love Amazon, no sales tax." Well, it is true that Amazon does not collect from you or pay sales tax to California. You as a consumer have an obligation to pay the tax. California knows this is an area of heavy abuse.
Beginning in 2011, California is trying to make it easy for you by allowing the use of a lookup table to pay that obligation for use tax for single nonbusiness purchases of $1,000 or less on your FTB return. Why is this great you may ask?
* You don't have to keep all your receipts for those items of less than $1,000 each.
* The tax is based off your AGI. If you are a moderate to heavy online shopper at places that do not collect sales tax, you will most likely be paying less than you would if you kept all your receipts.
* It is a safe harbor payment and starts the three year statute of limitations on the open years the BOE can come and collect use tax from you.
Have more questions, contact us or see our web site.
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New Guidance Regarding Property Tax Deductions
Property taxes are and will continue to be deductible for both federal and state income tax purposes. Beginning for tax year 2012, California will require that both the parcel number and property address are reported in order to take the property tax deduction. California has implemented this new reporting requirement because California property tax bills tend to
often include large special assessments, and these special assessments are not deductible. In general, the amount of the allowable deduction is the "ad valorem" tax, or the amount based on the assessed value of the property.
California knows that taxpayers often claim a deduction for the total amount of tax paid based on their total property tax bill, rather than reducing the amount paid for any special
assessments.
What this means for California taxpayers is that they will now need to review their property tax bill (or
provide it to their tax preparer) to determine the amounts that are nondeductible. In many cases, taxpayers can expect to see a lower tax deduction which may increase their tax liability.
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