BITS & PIECES OF TAX NEWS AND OTHER ITEMS of INTEREST ADA TAX PROFESSIONALS 9140 Ustick Road Boise ID 83704 377-4303 January 2008 January 2007 TAX NEWS You have probably seen the headlines – Some audit? You might want to pull out your camera refunds will be delayed. Congress dragged their and take photos of your donations before giving heels regarding the AMT exclusion creating a them away, especially if you are taking a large problem for IRS in setting up their computers to deduction. process tax returns. We anticipate that only a Kiddie Tax This refers to children’s investment very small number of our clients will be affected. income over $1700 taxed at the parent’s higher Home foreclosures are becoming more a reality rate. For years it has applied to children under for Americans. If you find yourself in this age 14, now those under 18 who do not support situation you may have taxable income due to themselves, and in 2008 age 24. debt foregiveness. Recent legislation and old In an important development for recently- rules covering specific situations will eliminate widowed spouses, a new law extends the period most taxes due to foreclosures. of time during which a surviving spouse may use Get a new mortgage in 2007 to acquire your the joint-return filers’ $500,000 home sale gain home or make major improvements? Are you exclusion before being treated as a single being charged for mortgage insurance on this individual entitled only to a $250,000. This law new mortgage? It may be deductible. takes effect starting with sales on or after January 1, 2008. IRS is requiring that your noncash charitable contributions be in good or better condition to qualify as a deduction. The question not yet answered: How to prove this in the event of an FOR BUSINESSES Businesses and Rentals: The Business mileage rate for 2008 is 50.5 cents per mile. For 2007 it is 48.5 cents per mile. Keep good records or you miss out on the valuable deduction. Corporate reminders: 1) The filing deadline for corporate returns is March 15. 2) Are you having official director and shareholder meetings? Important decisions need to be recorded in the minutes. This helps protect your corporate shell. Check out our website at adataxpros.com for helpful links to federal and local government sites and to read our current and past newsletters. Also, our Questionnaires and Appointment Checklists can be downloaded from our website. In addition, you will be able to check on the status of your tax refund. OTHER ITEMS OF INTEREST We now have 3 methods for you to pay us for our Ada Tax Professionals = Teamwork. During our services. Cash, check or debit. We experimented off season you may have had the opportunity to with debit last year and decided that despite the speak with someone other than the person who extra cost to us we want to give you that extra usually handles your return. We try to take care of convenience. your needs immediately rather than having you wait for our return to the office. We do hope this Extensions - We have been charging a $50 has been a positive experience for you. We also deposit to immediately compensate us for the help each other throughout the year analyzing extra handling. This created an unacceptable your different issues. As some of us start cutting administrative expense. Soooo we are changing back on our work schedules it will take even more our policy. We will charge a fee at the time we do of a team effort. If at any time we don’t handle the extension. The fee will depend on the amount your situation properly, please share your of time we need to prepare the extension plus any concerns with your preparer. estimates calculated. Most of you who file extensions can expect a $20 - $30 fee. SO – YOU RECEIVED A NOTICE FROM IRS or perhaps the State Don’t panic! We are finding both entities don’t always read the attachments or added forms. They may just need more information. Of course, there are always other reasons to receive a notice. Bring it in or otherwise get a copy of the notice to us to review. In most cases there is a simple cure. RECYCLING TIP….. Idaho Green Expo – May 17 and 18 Boise Centre on the Grove. FREE It promises to be comprehensive and practical!! See the website – www.idahogreenexpo.org Most of our clients are doing a wonderful next step? Are you shopping the job of documenting and taking advantage of thriftstores? You will be amazed at the the deductions and credits available for quality and prices which can be found. donating their castoffs. Have you taken the LOOKING FOR A WAY TO IMPROVE YOUR SPEAKING SKILLS? Give Toastmasters a try. The club structure (over 11,000 clubs worldwide with nearly 30 in the Treasure Valley) provides a supportive environment with a proven format. To find a location that fits your needs check out www.toastmaster.org Elke belongs to the Lunchrappers Club which meets at the Boise Plaza, 1111 Jefferson (entrance on Bannock) from 12:05 – 1:05 pm Thursdays. They are having a special guest day January 24 on the 1st floor. All are welcome. GIVING GIFTS TO FAMILY MEMBERS OR FRIENDS Often the question arises: “How much money can I give my child without them paying taxes?” Here is some information to help answer that question. 1. The recipient, i.e., the child, does not pay taxes on gifts given to them. 2. The giver may need to file a gift tax return, but is rarely liable for a gift tax. The amount given and reported will go against a gift tax and estate tax exclusion. 3. When do you need to file a gift tax return? Whenever you give someone more than the annual exclusion in cash and/or value. For 2007 and 2008 it is $12,000 for any one person. Example: You gave the following gifts in 2007. You give each of your children and grandchildren $10,000 at Christmas. Additionally you gave your son your car which had a fair market value of $6,000, birthday gifts to each of the grandchildren of $100 cash, and $15,000 to your daughter as a loan for a down payment on her house. You do not draw up a note and assume you will never see the money again. You need to file a gift tax return and report the gifts to the son ($16,000) and daughter ($25,000.) The gifts of $10,100 to the grandchildren are under the exclusion amount and do not need to be reported. 4. When giving property instead of money be sure to provide the recipient with the basis you have in it. Should they sell the property in the future they need to know this information. Basis generally is the price you paid. Common examples: stock, real estate, antiques. 5. The gift tax filing requirement applies to each taxpayer. Therefore, you and your spouse can both give $12,000 per person without reporting the transaction. SPOTLIGHT … ON ADA TAX PROFESSIONALS On October 11 our employees and spouses joined almost 500 people celebrating integrity in business at the Better Business Bureau’s “Integrity Counts” awards banquet. In a stiff competition we were proud to receive Honorable Mention. Thank you to all of you who helped us. Community Tax Education – One of the “Integrity Counts” award” winners was Life’s Kitchen. We were impressed with their efforts to teach young adults marketable skills and life skills. Miri and Amy will be presenting their participants with a basic income tax class. Participants in SHIP’s program will also benefit from an education session. We welcome Jenn Ciszewski!! She brings with her a couple of years of tax preparation experience which we will capitalize on to continue bringing you the best accurate service possible. BEGINNING JANUARY 28, WE WILL BE OPEN FROM 8:30-6:30 M-TH, 8:30-6:00 FRI, & 10:00-2:00 SAT. PREPARING FOR YOUR RETIREMENT: THE BEST GIFT YOU CAN GIVE YOUR CHILDREN Setting aside adequate funds for retirement can keep you independent longer. Building the retirement nest egg can minimize the burden placed on your children - financially, physically and often emotionally. Let’s look at some of the retirement plans to which you could contribute. If you are low income you can even get a credit to help fund your contribution. Employer offered plans: If your employer offers a tax deferred plan, i.e., 401(k) or 403 (b), take advantage of the tax savings. If your employer matches your contributions, make a point to contribute enough to maximize the amount of free money you can receive. IRAs: Traditional (tax deferred) and/or Roth (earnings tax free) are available to most taxpayers. Self Employed: SEPS, SIMPLES, SE 401(k)s, and KEOGHs are all possibilities with different rules. The sooner you start taking advantage of these retirement opportunities the more financially secure you will be later. ACTIVE IN YOUR CHURCH OR A NONPROFIT? Although these organizations generally have tax exempt status, it is for income tax. Here are some tax related and informational reporting requirements to be aware of: Taxes Employment: As employers, nonprofits are subject to the same rules as for profits. Churches have special rules especially for their ordained clergy. Sales: These organizations must pay sales tax on the goods they buy for their own use and collect sales tax on their sales. Unrelated Business Income: Income collected outside the purpose of the nonprofit is taxed. Informational Reporting Fm 1099 Misc should be issued to individuals and partnerships who are paid to perform services for the organization or from whom property is rented. Fm 990 must generally be filed by nonprofits with more than $25,000 of gross income. The main purpose for the reporting is to make sure the tax exempt purpose of the organization is being served and that nobody in control is benefiting unreasonably. USTICK ROAD WIDENING ---FINISHED! The barrels are gone. The cones are gone. Construction is gone from our doorstep – Hooray! The road is beautiful. It has 4 lanes with a turn lane. Our parking lot is to the east of our building with plenty of room. Although temporarily just gravel it is definitely an improvement from our former situation.