Friday, June 26, 2009

Home office deduction may be easing
Law Proposed to Ease Home Office Tax Deduction
Washington, D.C.
(June 25, 2009)
Proposed legislation would make it easier for small businesses to qualify for the home office tax deduction.

The bipartisan bill, introduced in both the House and Senate, would direct the Treasury Secretary to create an optional, easy-to-use standard deduction to encourage greater use of the home office tax incentive. In addition to instituting an optional home office tax deduction, the “Home Office Tax Deduction Simplification and Improvement Act of 2009” would require the IRS to streamline its reporting requirements to clearly identify the portion of the deduction devoted to real estate taxes, mortgage interest and depreciation in order to further reduce the burden on the taxpayer.

Under current law, a home office tax deduction can be claimed by qualified individuals who use a portion of their home as a principal place of business or as a space to meet with patients or clients. Recent research from the U.S. Small Business Administration indicates that roughly 53 percent of America’s small businesses are home-based, but few home businesses actually take advantage of the tax incentive because of the complex, rigid reporting requirements.

The bill, introduced by Senators Olympia J. Snowe, R-Maine, and Kent Conrad, D-N.D., along with Rep. Charles A. Gonzalez, D-Texas, would also update the Tax Code to ease the burden of proof in claiming the deduction. Specifically, it would allow the home office deduction to be taken if taxpayers use part of their home to meet or deal with clients regardless of whether the clients are physically present. The bill would also allow for de minimis use of business space for personal activities so that taxpayers would not lose the ability to claim the deduction if they make a personal call or pay a bill online.

“With a morass of paperwork attributable to the home office deduction, the time-consuming process of navigating the tangled web of rules and regulations makes it unsurprising that so many small-business owners forego the home office deduction,” said Snowe, who is ranking member of the Senate Committee on Small Business and Entrepreneurship. “By simplifying this vital tax incentive, our bill will give small firms much-needed relief from burdensome tax rules, which, in turn, will allow them to focus their efforts on developing new, cutting-edge 21st century products and services and creating new jobs.”

The Snowe-Conrad-Gonzalez initiative has already attracted strong support from the National Federation of Independent Business, the IRS National Taxpayer Advocate Service, and the SBA’s Office of Advocacy.

Wednesday, June 24, 2009

No sweat workouts
Article on commercial real properties facing financial problems and how they may avoid tax on loan restructuring.

CA tax changes

Here is an article summarizing changes to CA tax law that are effective in 2009 and 2011,
Changes Effective in 2009
Sales and Use Tax Rate Increased
Vehicle License Fee Increase
Individual Income Tax Rates Increased
Dependent Credit Reduced by $210
New Home Purchase Tax Credit
Small-Business Hiring Tax Credit

Changes Effective in 2011
Economic Nexus Defined
Definition of “Gross Receipts” Codified
Expanded Sales Factor “Finnigan” Again
Sourcing for Sales
Motion Picture Tax Credits

2009 1040 draft
IRS Updates 1040 for 2009
Washington, D.C.
(June 23, 2009)
By WebCPA Staff

The IRS has posted a preview of the 1040 for 2009, along with the latest rules for electronically filing the returns.

The IRS warns that the 1040 posted on the site is only a draft form, or an advance proof copy that is subject to change and approval by the Office of Management and Budget. The draft of the 1040 for 2009 can be found at The IRS is also accepting comments on the draft form.

In addition, the IRS has recently posted updated schemas and business rules for Forms 1040 and 4868, with links to information and technical guidance for software developers and transmitters for the Modernized e-File versions of the forms. The page can be found at,,id=209615,00.html.

Saturday, June 20, 2009

Change your CA withholding Now
Act now to avoid ugly tax surprise, California warns
By Claudia Buck
Published: Friday, Jun. 19, 2009 - 12:00 am | Page 8B

Don't get stuck with a bigger tax bill next year. It could happen, given changes in California's tax laws that could cost the average married couple with two kids an extra $670 next April 15.

To avoid that unpleasant surprise, the state Franchise Tax Board is reminding taxpayers to adjust the withholding rates on their paychecks now.

"Our concern is that if people don't adjust their withholding, they may be in for a big surprise next April when their 2009 tax bill is due," said Brenda Voet, spokeswoman for the state tax board. "People who may have been expecting a $500 refund, for instance, may instead owe money."

The tax changes, adopted by the Legislature in February as part of the state's efforts to close its budget gap, added 0.25 percent to California's personal income tax rates and reduced the tax credit by $210 for each dependent claimed on a tax form.

In other words, your tax rate is higher and you can't deduct as much for each child or dependent. (Last year, for instance, a married couple with two kids claimed $99 in personal exemption credits for each spouse and $309 for each child; starting this year, the exemption for each child/dependent drops to $99, same as for the adults.)

The new rates are effective back to January, but employers did not receive the state's new withholding tables until April.

"By the time employers could get their computers set up with the necessary changes to withholding schedules, the new withholding may not have happened until May, even June," said Voet.

That means your withholding may have been too low for the first four to six months of this year to accommodate the increased tax rate. In addition, taxpayers who claim exemption credits for dependents may need to change the number of allowances they claim.

Those who make quarterly tax payments may want to increase the amounts to avoid getting caught short April 15.

For more details, go to the FTB's Web site, (search under "Individuals" and "Plan for next year"), or call (800) 852-5711. You can also calculate your withholding rates using Form DE 4 at the Employment Development Department's site,

See an accompanying graphic at

Friday, June 19, 2009

California Proposed New Tax for 2009-2010

From Spidell Publishing,
California budget conferees approve new taxes (06-19-09)

Democrats on the California budget conference committee on June 16, 2009, approved a package of revenue raisers and program cuts to stave off the increasing deficit. Some of the tax provisions include:
▸ Increasing the personal income tax withholdings by 10% beginning January 1, 2010;
▸ Changing estimated tax payments again to accelerate revenue. Beginning in 2010, taxpayers would be required to pay:
• 1st quarter 30%
• 2nd quarter 40%
• 3rd quarter 0%
• 4th quarter 30%
▸ Imposing 3% independent contractor withholding, beginning January 1, 2010;
▸ Requiring 7% backup withholding on interest, dividends, and other income in conformity with the federal backup withholding rules;
▸ Increasing tobacco tax by $1.50 per pack beginning October 1, 2009;
▸ Imposing a new 9.9% oil severance tax beginning October 1, 2009;
▸ Repealing two corporation tax breaks passed in September 2008 before they take effect: NOL carrybacks and credit sharing among affiliated corporations;
▸ Extending sales tax requirement to certain out-of-state sellers, such as Amazon, that pay commissions to California firms;
▸ Allowing the state to suspend occupational and professional licenses for delinquent taxpayers;
▸ Suspending the Homeowners' and Renters' Assistance Program; and
▸ Enhancing collections by requiring banks and other financial institutions to match their account records with the FTB's delinquency account records.

The Legislature is likely to take up the budget package early next week, and all these provisions are subject to change. However, Governor Schwarzenegger said he would veto any revenue proposals beyond those he had already included in his budget plan, which include a homeowner fee for fire fighting and acceleration of withholding and estimated tax payments. The Governor is also opposed to withholding on independent contractors.

NOTE: The 3% independent withholding will create a lot of unnessary paperwork for businesses. The IRS still only requires quarterly estimated taxes to be paid evenly throughout the year, i.e., at 25% each time. All this acceleration does is to borrow money from the future.

Friday, June 5, 2009

$820K tax lien on Kerry's campaign
The IRS has filed a tax lien of $819,848 on the 2004 presidential campaign of Sen. John Kerry, D-Mass., but his office claims the debt has long been paid.

The IRS filed the lien earlier this year after a long-running dispute over payroll taxes, according to the Washington Times, although Kerry’s office said that the IRS mishandled W-2 payroll tax forms that had been submitted back in 2005.

A Kerry spokesperson told the Associated Press that the lien was the result of a clerical error. However, the IRS tax lien said, “We have made a demand for payment of this liability, but it remains unpaid.”

Kerry’s office said that staff has been checking periodically with the IRS to find out why the tax lien has not yet been resolved.

For a copy of the tax lien, see

For more read