Differences between California and Federal Law
In general, for taxable years beginning on or after January 1, 2010, California law conforms to the Internal Revenue Code (IRC) as of January 1, 2009. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, go to ftb.ca.gov and search for conformity. Additional information can be found in FTB Pub. 1001, Supplemental Guidelines to California Adjustments, the instructions for California Schedule CA (540 or 540NR), and the Business Entity tax booklets.
2011 Tax Law Changes/What’s New
Tax Decrease – Beginning on January 1, 2011, the tax rate decreased by 0.25%.
Dependent Exemptions Credits – Beginning on January 1, 2011, the dependent exemption credit increased from $99 to $315 per dependent.
Child and Dependent Care Expenses Credit – For taxable years beginning on or after January 1, 2011, the child and dependent care expense credit is nonrefundable.
Use Tax Table – For taxable years beginning on or after January 1, 2011, you may be eligible to use the Estimated Use Tax Table to estimate and report the use tax due on individual non-business items you purchased for less than $1,000 each.
Voluntary Contributions – For taxable years beginning on or after January 1, 2011, you may contribute to the following new funds:
• Municipal Shelter Spay-Neuter Fund
• ALS/Lou Gehrig’s Disease Research Fund
• Child Victims of Human Trafficking Fund
Community Development Financial Institutions Investment Credit – The Community Development Financial Institutions Investment Credit has been extended for taxable years beginning on or after January 1, 2012, and before January 1, 2017.
Mortgage Forgiveness Debt Relief Extended – California law conforms, with modifications, to federal mortgage forgiveness debt relief for discharges occurring on or after January 1, 2009 thru 2012. Federal law limits the amount of qualified principal residence indebtedness to $2,000,000 ($1,000,000 for married filing separate). See federal Publication 544, Sales and Other Disposition of Assets, and federal Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonment, for more information. California law limits the amount of qualified principal residence indebtedness to $800,000 ($400,000 for married/RDP filing separate) and debt relief to $500,000 ($250,000 for married/RDP filing separate).
New Home/First-Time Buyer Credit – To claim the New Home/First‑Time Buyer Credit of 2010 you must have received a Certificate of Allocation from the FTB. The credits were available if you purchased a qualified principal residence on or after May 1, 2010, and on or before December 31, 2010. Additionally, the New Home Credit is available if you purchase a qualified principal residence on or after January 1, 2011, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010. For more information, go to ftb.ca.gov and search for home credit or get FTB Pub. 3549, New Home/First-Time Buyer Credit.
As always, if you have any questions, please call me at (209) 329-1255.
Saturday, January 28, 2012
Friday, January 27, 2012
State Requesting Delinquent Tax Returns
Do you know of anyone who has not filed their taxes the last few years? While most people are working on their 2011 state tax returns, the Franchise Tax Board (FTB) today announced that it is contacting more than 900,000 people who did not file a 2010 state income tax return.
FTB finds nonfilers by using more than 400 million income records it receives each year from third parties such as the IRS, banks, employers, state departments, and other sources. In addition, FTB uses occupational licenses and mortgage interest payment information to detect others who may also have a requirement to file a state tax return. FTB then contacts those who earned California income, but did not file a return for the 2010 filing year.
Last year, FTB collected more than $574 million through these efforts.
If you know someone who has not yet filed their Federal or State returns for prior years, please have them contact me immediately and I can get them filed quickly!
FTB finds nonfilers by using more than 400 million income records it receives each year from third parties such as the IRS, banks, employers, state departments, and other sources. In addition, FTB uses occupational licenses and mortgage interest payment information to detect others who may also have a requirement to file a state tax return. FTB then contacts those who earned California income, but did not file a return for the 2010 filing year.
Last year, FTB collected more than $574 million through these efforts.
If you know someone who has not yet filed their Federal or State returns for prior years, please have them contact me immediately and I can get them filed quickly!
Saturday, January 21, 2012
Refer a Friend and Save 10%!
Know of anyone that needs assistance with their taxes? Refer them and receive a 10% discount off our already low fees this year! We provide professional, courteous service and expert knowledge. As an Enrolled Agent, I have earned the privilege of practicing before the Internal Revenue Service. Like attorneys and CPAs, I have unrestricted practice with all taxpayers including individuals, corporations and partnerships, as well as the ability to represent in any US tax office.
Remember, evening and weekend appointments are available for your convenience.
Remember, evening and weekend appointments are available for your convenience.
Friday, January 13, 2012
2012 IRS E-Filing Refund Cycle Chart
Today is the beginning of the IRS E-filing season! To check on your refund status, go to:
https://sa1.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp
To check out the Direct Deposit and Paper Check Refund Cycle, go to:
http://www.irs.gov/pub/irs-pdf/p2043.pdf
If you have any questions, please call me.
https://sa1.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp
To check out the Direct Deposit and Paper Check Refund Cycle, go to:
http://www.irs.gov/pub/irs-pdf/p2043.pdf
If you have any questions, please call me.
2011 Tax Law Changes: Part 2
Here is Part 2 to last week's update on the 2011 Tax Law Changes....
No Changes to Tax Rates
The new tax law averted an increase in the tax brackets. Low income taxpayers still benefit from the 10% bracket. High-income tax payers will remain in the 35% bracket. The marriage tax penalty, where married couples pay more than they would if each person filed a single return, will NOT return until 2013. Since most families require two incomes, this would have penalized a large number of American families.
Payroll Tax Cut
The temporary tax rate extension passed in December 2010 included a new provision for 2011. All wage earners will see a temporary reduction in the payroll tax from 6.2% to 4.2%. This applies on up to the first $106,800 of W-2 or Self Employment income earned by each individual. For example, if you earn $106,800 per year this translates into a $2,136 savings. If you earn $50,000 per year, this translates into a $1,000 savings.
Personal Exemption Phaseouts Delayed
According to the tax law each person covered by a return entitles the tax payer to reduce their taxable income by $3,750. This remains the case for 2011 and 2012. However, starting in 2013, the personal exemption phaseout returns. Under this rule, the amount you can claim starts decreasing around $166,000 and goes to zero by $291,000. This effectively serves as a stealth tax hike on middle and higher income taxpayers.
Itemized Deduction Limits Delayed
The so-called "Pease" limits on itemized deductions have been repealed for 2011 and 2012. If you itemize your deductions, the amount you can deduct would have been phased out above a certain income amount ($169,750 for all returns). The reduction in the value of the itemized deduction can be up to 80% depending on your income level. This tax hike tends to punish people who pay large amounts of state taxes, live in high cost-of-living areas, and even people who donate large sums to charity. Fortunately, this scheme will not return until 2013.
The Return of the Estate Tax
In 2010 the estate tax was repealed entirely, meaning any wealth you accumulated during your life could be passed tax-free to your heirs. But that goes away in 2011, when the 35% tax on assets returns, with a $5,000,000 exemption ($10,000,000 for married couples). This insidious tax, often called the "Death Tax" is the most unfair and unjust tax on the books. It taxes people on wealth that they accumulated through their lifetime and on money they paid taxes on already. The Heritage Foundation assembled and excellent article on the Estate Tax and its implications called The Economic Case Against the Death Tax. Estate taxes will rise again in 2013.
Bonus Depreciation
For 2011 only, bonus depreciation is increased to 100% for purchases of certain qualifying property. Bonus depreciation will return to 50% in 2012.
1099 Reporting Requirements
Starting in 2011, any business that does more than $600 in business with any vendor will be required to submit a 1099 form. This massive increase in paperwork will increase the cost of every small and large business and will likely increase prices on the goods and services that these businesses provide. For example, if a business purchases a $1,000 computer from Amazon, that business will be required to file a 1099 with the IRS, something not previously required for vendors organized as corporations.
Mortgage Insurance Premiums
As of January 1, 2012, taxpayers will no longer be allowed to deduct mortgage insurance premiums from their tax returns. In 2010, homeowners making less than $100,000 who were paying insurance premiums on mortgages established after December 31, 2006 were able to take this deduction. This provision was set to expire in 2011, but the temporary tax cut law extended it to 2013.
Student Loan Interest Deduction
The Student Loan Interest Deduction has been extended for two more years. Starting in 2013, income limits for individuals or married couples drop and taxpayers can only deduct interest from the first 5 years of their student loans.
Medicine Cabinet Taxes
The recent Healthcare law imposes a new rule in 2011 that Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs) cannot be used for non-prescription medicine. This is in effect a tax increase on anyone with such an account. Also, an annual tax on brand name pharmaceutical manufactures will increase the cost of brand name drugs (even though this tax isn't paid directly by individuals).
Tanning Tax (a.k.a "The Snooki Tax")
The Tanning Tax of 10% that just began in July continues next year.
Despite the length of this list of tax changes, there are many other less significant changes on the horizon. Always consult an accountant or tax professional regarding your specific circumstances.
No Changes to Tax Rates
The new tax law averted an increase in the tax brackets. Low income taxpayers still benefit from the 10% bracket. High-income tax payers will remain in the 35% bracket. The marriage tax penalty, where married couples pay more than they would if each person filed a single return, will NOT return until 2013. Since most families require two incomes, this would have penalized a large number of American families.
Payroll Tax Cut
The temporary tax rate extension passed in December 2010 included a new provision for 2011. All wage earners will see a temporary reduction in the payroll tax from 6.2% to 4.2%. This applies on up to the first $106,800 of W-2 or Self Employment income earned by each individual. For example, if you earn $106,800 per year this translates into a $2,136 savings. If you earn $50,000 per year, this translates into a $1,000 savings.
Personal Exemption Phaseouts Delayed
According to the tax law each person covered by a return entitles the tax payer to reduce their taxable income by $3,750. This remains the case for 2011 and 2012. However, starting in 2013, the personal exemption phaseout returns. Under this rule, the amount you can claim starts decreasing around $166,000 and goes to zero by $291,000. This effectively serves as a stealth tax hike on middle and higher income taxpayers.
Itemized Deduction Limits Delayed
The so-called "Pease" limits on itemized deductions have been repealed for 2011 and 2012. If you itemize your deductions, the amount you can deduct would have been phased out above a certain income amount ($169,750 for all returns). The reduction in the value of the itemized deduction can be up to 80% depending on your income level. This tax hike tends to punish people who pay large amounts of state taxes, live in high cost-of-living areas, and even people who donate large sums to charity. Fortunately, this scheme will not return until 2013.
The Return of the Estate Tax
In 2010 the estate tax was repealed entirely, meaning any wealth you accumulated during your life could be passed tax-free to your heirs. But that goes away in 2011, when the 35% tax on assets returns, with a $5,000,000 exemption ($10,000,000 for married couples). This insidious tax, often called the "Death Tax" is the most unfair and unjust tax on the books. It taxes people on wealth that they accumulated through their lifetime and on money they paid taxes on already. The Heritage Foundation assembled and excellent article on the Estate Tax and its implications called The Economic Case Against the Death Tax. Estate taxes will rise again in 2013.
Bonus Depreciation
For 2011 only, bonus depreciation is increased to 100% for purchases of certain qualifying property. Bonus depreciation will return to 50% in 2012.
1099 Reporting Requirements
Starting in 2011, any business that does more than $600 in business with any vendor will be required to submit a 1099 form. This massive increase in paperwork will increase the cost of every small and large business and will likely increase prices on the goods and services that these businesses provide. For example, if a business purchases a $1,000 computer from Amazon, that business will be required to file a 1099 with the IRS, something not previously required for vendors organized as corporations.
Mortgage Insurance Premiums
As of January 1, 2012, taxpayers will no longer be allowed to deduct mortgage insurance premiums from their tax returns. In 2010, homeowners making less than $100,000 who were paying insurance premiums on mortgages established after December 31, 2006 were able to take this deduction. This provision was set to expire in 2011, but the temporary tax cut law extended it to 2013.
Student Loan Interest Deduction
The Student Loan Interest Deduction has been extended for two more years. Starting in 2013, income limits for individuals or married couples drop and taxpayers can only deduct interest from the first 5 years of their student loans.
Medicine Cabinet Taxes
The recent Healthcare law imposes a new rule in 2011 that Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs) cannot be used for non-prescription medicine. This is in effect a tax increase on anyone with such an account. Also, an annual tax on brand name pharmaceutical manufactures will increase the cost of brand name drugs (even though this tax isn't paid directly by individuals).
Tanning Tax (a.k.a "The Snooki Tax")
The Tanning Tax of 10% that just began in July continues next year.
Despite the length of this list of tax changes, there are many other less significant changes on the horizon. Always consult an accountant or tax professional regarding your specific circumstances.
Saturday, January 7, 2012
2011 Tax Law Changes: Part 1
Happy New Year! I truly hope you had a very Merry Christmas and a joyous New Year celebration! I hope that all of your wishes and dreams come true in 2012!
Tax season is ready to begin on January 9, 2012. There are several new tax laws in place and a few changes for the 2011 tax filing year.
Laundry List of 2011 Tax Law Changes - Part 1
Tax Credits:
Child Tax Credit The child tax credit was going to drop from $1,000 per child to $500; however, that drop is delayed until 2013. The credit is still refundable for certain filers.
Payroll Tax Credit (Making Work Pay)
The partial credit of 6.2% for payroll taxes that low income earners pay is eliminated. This will increase the tax liability of low-income single payers by $400, and joint filers by $800. The payroll tax cut mentioned above will take the place of this credit.
Earned Income Tax Credit (EITC) The economic stimulus act provided for a 45% increase of the EITC credit for families with three or more children, and higher income limits for qualifying for the credit. This provision is extended for 2011 and 2012. It is set to expire in 2013.
College Tuition Tax Credit
The economic stimulus act (“American Recovery and Reinvestment Act of 2009”) tax credit is renewed and now expires in 2013.
Energy Savings CreditThe 2011 credit of 30% (up to $1,500) for energy efficiency improvements to principal residences expires. In its place is a 10% credit (up to $500). There are additional limitations specific items such as furnaces, water heaters, and windows.
Other Changes:
College Savings Plans With the expiration of the Bush tax cuts, in 2011, 529 Plans can no longer be used to pay for a computer or broadband access.
Stable Investment Taxes
The capital gains tax rate will remain 0% for earners in the 15% income tax bracket or lower. Capital gains taxs on other earners remains 15%. Income from dividends is taxed at capital gains rates.
This is just an overview of the latest changes. Please check back for 2011 Tax Law Changes Part 2. If you have any questions, please feel free to call me at (209) 329-1255.
Tax season is ready to begin on January 9, 2012. There are several new tax laws in place and a few changes for the 2011 tax filing year.
Laundry List of 2011 Tax Law Changes - Part 1
Tax Credits:
Child Tax Credit The child tax credit was going to drop from $1,000 per child to $500; however, that drop is delayed until 2013. The credit is still refundable for certain filers.
Payroll Tax Credit (Making Work Pay)
The partial credit of 6.2% for payroll taxes that low income earners pay is eliminated. This will increase the tax liability of low-income single payers by $400, and joint filers by $800. The payroll tax cut mentioned above will take the place of this credit.
Earned Income Tax Credit (EITC) The economic stimulus act provided for a 45% increase of the EITC credit for families with three or more children, and higher income limits for qualifying for the credit. This provision is extended for 2011 and 2012. It is set to expire in 2013.
College Tuition Tax Credit
The economic stimulus act (“American Recovery and Reinvestment Act of 2009”) tax credit is renewed and now expires in 2013.
Energy Savings CreditThe 2011 credit of 30% (up to $1,500) for energy efficiency improvements to principal residences expires. In its place is a 10% credit (up to $500). There are additional limitations specific items such as furnaces, water heaters, and windows.
Other Changes:
College Savings Plans With the expiration of the Bush tax cuts, in 2011, 529 Plans can no longer be used to pay for a computer or broadband access.
Stable Investment Taxes
The capital gains tax rate will remain 0% for earners in the 15% income tax bracket or lower. Capital gains taxs on other earners remains 15%. Income from dividends is taxed at capital gains rates.
This is just an overview of the latest changes. Please check back for 2011 Tax Law Changes Part 2. If you have any questions, please feel free to call me at (209) 329-1255.
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