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The Bottom Line Wallings Accounting Tax Service

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					          The Bottom Line
                        Newsletter – October 2008

                        Robin J. Walling, EA
               dba Walling’s Accounting & Tax Service
                 309 Maxey Street * Walterboro, SC 29488
                 Phone: 843-538-8786 * Fax: 843-538-4722
                        Mobile phone: 843-893-8065
                       E-mail: robinj@lowcountry.com
                    Website: www.wallingsaccounting.com


                              Sales Tax Holiday

Note: The General Assembly established the following two additional sales tax
holidays during the 2008 legislative session:

      (1) Second Amendment Sales Tax Holiday: This two-day sales tax holiday
      applies to purchases of handguns, rifles and shotguns and will take place
      every year on the Friday and Saturday after Thanksgiving. This year the
      Second Amendment Sales Tax Holiday will take place on November 28th and
      29th .
      (2) Energy Star Sales Tax Holiday: This month-long sales tax holiday applies
      to purchases of certain energy efficient dishwashers, clothes washers, air
      conditioners, ceiling fans, fluorescent light bulbs, dehumidifiers,
      programmable thermostats, refrigerators, doors, and windows purchased for
      noncommercial home or personal use and that have a sales price of
      $2,500.00 or less per product. This exemption does not apply to purchases
      of energy efficient products purchased for trade, business, or resale. The
      Energy Star Sales Tax Holiday will take place every October beginning in
      2009, provided revenue growth forecasts for state government meet or
      exceed certain levels.

While the Department will be publishing information concerning these two new
sales tax holidays at a later date, interested persons may review the legislation
enacting these sales and use tax exemptions (Senate Bill 1143 of 2008) at the
General Assembly website at http://www.scstatehouse.net/index.html.
           The deadline for establishing a SIMPLE IRA for the
                          Year 2008 is October 1.


There are many other types of retirement plans (the SIMPLE IRA seems to
be the most “popular” because it’s easy to set up and maintain). This plan
also allows maximum contributions for employees up to $10,500 (2008).
Additional contributions (up to a total of $13,000) can be made by
participants over the age of 50. Self-employed persons have the same limits
as above, as well as the company “match”.

Traditional IRA amount for 2008 is $5,000 (additional contributions, up
to $1,000 can be made by participants over the age of 50). This has to be
funded no later than April 15, 2009.

Your current investment advisor or banker can assist you with setting up a
plan that fits your needs. We do a lot of work with David Williamson of New
York Life, and highly recommend him. If you would like his assistance, please
call him at 843.549.9576.

Please call our office if you have any questions, or need assistance in setting
up a retirement plan. I cannot emphasize enough how important it is to save
money for retirement. This is also an inexpensive way (approximately 1% to
3% of their salaries) to show your employees that you care about their
future too!



                                Tax Planning

Tax Planning Time for 2008 is almost here. Our annual Tax Planning Letter
will be posted on our website by October 1, 2008. PLEASE check out our
website for all of the latest tax updates and suggestions.



                               Money Matters

Facing a reset on a variable rate mortgage? Good payers can cut deals. Banks
are eager to keep their best customers from going to competitors, and some
are willing to waive a scheduled increase. It’s worth asking your lender.
                                Filing Season

A new line on the 1040 will spark confusion among many filers next year. It
involves the 2008 tax rebate… payments folks received of up to $1200 for
couples and $600 for singles, plus $300 for each dependent child under age
17. Low-income Social Security beneficiaries and others were eligible for a
$300 check.

The line is only for filers who now deserve more that what they received.
The rebates were based on recipients’ 2007 tax data and didn’t reflect
events in ’08 that could boost the amount, such as a newborn baby, a drop in
income for filers who made too much and get a full rebate and a person who
is no longer a dependent.

But filers must use a complex 29-line worksheet to figure the right amount
of the credit. (Technically, folks will claim any extra rebated as a 2008 tax
credit.) And they’ll have to scour their records for the IRS notice that
explains their rebate. All this is bound to cause filing headaches in 2009 for
taxpayers and their preparers.

                               Business Taxes

If you are planning on taking bonus depreciation under federal rules…
Don’t count on being able to claim it on your state income tax return. So far,
only Kansas and Oregon have said they will conform to federal law, which lets
firms deduct 50% of the cost of new equipment put in use in 2008. Three
more… Alabama, Florida and Rhode Island have announced that they won’t
allow the tax deduction to be taken on state returns. The last time the
break was permitted, in 2003 & 2004, only 15 states OK’d the full write-off.

                                    News

There will be increases in failure-to-file penalties affecting individuals,
partnerships and S firms. And a doubling of the penalties for firms that
don’t file W’2 or 1099’s.

            Sometimes we are so busy adding up our troubles
                That we forget to count our blessings…
                   Coming Soon: Fast 941 corrections.

The IRS will release a new series of forms in January 2009 known as the
94X series – the 941X, 943X, 944X and 945X.

The Goal: Make it easier to correct employment tax errors.

The New Forms: The “X” forms will be used to correct the corresponding
forms – form 941X to correct the 941; 943X to correct the 943, etc. Each
X form will have lines and numbers that correspond to the form being
corrected.

The New Process: You discover an underpayment on a prior 941. You
download a 941X, Adjusted Employer’s Quarterly Federal Tax Return or
Claim for Refund, make the correction and file it.

The New Payment Process: You pay the amount you owe when you file and
the 941X instead of waiting to pay when you file your next quarterly 941.

The New Timing: Employers can file the correction whey they discover the
error instead of waiting until the end of the quarter.

When the X series is released, the IRS says the 941c will be obsolete. The
new forms will be on the IRS Website in January to correct errors found
after Dec. 31, 2008.

                             Retirement Plans

If you’re short on cash and tempted to take an early IRA or plan payout…
Think twice. Most hardship payouts aren’t exempt from the 10% penalty on
pre-59 1/2 payouts, as a recent Tax Court case shows. An army wife used
funds from her account to pay unreimbursed moving costs for her family
when her spouse was transferred to a base in another state. She argued the
penalty shouldn’t apply because family finances were tight. While the Court
was sympathetic to her plight, the law does not provide a waiver for
hardship (Carder, TC Summ. Op. 2008-02).

Reservists get a break on early withdrawals, however. If they are called to
active duty for at least 180 days or an indefinite period, the penalty is
waved.
                                  Bad News

It’s bad news for folks who decide to buy SUV’s for their businesses.
Congress is likely to close a loophole that lets buyers expense $25,000 of
the cost of SUV’s with loaded weights between 6,000 and 14,000 pounds.
Only vehicles that weigh more than 14,000 pounds will qualify for full
expensing after 2009.

But truck buyers are in luck. When lawmakers approve the SUV curb, they
will also expand expensing to heavy pickup trucks that have cargo beds just
five feet long. Currently, only trucks with beds at least six feet long qualify.

                              The New Tax Law

Planning to convert your vacation home into a primary residence?

The newest tightening may not bite you too badly if you owned the house for
many years before converting it: The portion of the profit that’s subject to
tax is based on the ratio of the time after 2008 when the house was a
second home or a rental to the total time you owned it. So if you have owned
a vacation home for 18 years and make it your main residence in 2011 for two
years before selling it, only 10% of the gain is taxed. The rest qualifies for
the exclusion of up to $500,000. Homes owned for a short time prior to a
post-2008 conversion fare the worst taxwise.

You can completely avoid the tax hit by converting before January 1, 2009.
The tightening doesn’t apply if you make a primary home a vacation home.
You can still exclude up to $500,000 of profit on the sale of house if you
owned it and used it as your principal residence for two years in the five
years before the sale.

                      Self-Employeds and Small Firms

Audits will increase for taxpayers with an AGI over $200,000, an IRS
official said at a conference of tax lawyers in Chicago.
Pass-through entities-e.g., S corps and partnerships will receive greater
scrutiny because the IRS believes the most abuse is in these entities,
especially those that issue a K-1 with no wages paid. The IRS believes
many firms treat wages and salaries as distributions to avoid employment
taxes.     Audits     of   small    C    corps    will   increase modestly.
Due Dates (you may want to print this for your use)



October

___    15th   Payroll Tax Deposits
___    20th   Sales/Hospitality Tax
___    31st   Quarterly Reports
___    31st   IFTA Reports
___    31st   Halloween

November

___    15th   Payroll Tax Deposits
___    20th   Sales/Hospitality Tax
___    27th   Thanksgiving
___    28th   & 29th Sales Tax Holiday (Firearms)
       Do not forget to change your cash register if
       this holiday applies to your business.


December

___    15th   Payroll Tax Deposits
___    20th   Sales/Tax Hospitality Tax
___    25th   Christmas
___    31st   End of the year!

				
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