April 2010

Thanks! "I can no other answer make, but, thanks, and thanks." -- William Shakespeare
We will celebrate the Thursday, April 15 completion of the filing season with our traditional holiday by closing the accounting office on the following day, Friday, April 16. The computer center will be open that Friday. We will honor our staff with an appreciation luncheon at noon on Friday, April 23, and we will be closed (including the computer center) that afternoon. We are indebted to our staff for their excellent performance and to our clients for the opportunities of working for them. To both staff and clients – Thank you!
A MAJOR CHANGE IN "PAYROLL" TAXES
The recently passed Patient Protection Act imposes an additional Medicare tax on higher income taxpayers by: Imposing an additional Medicare tax at .9 percent on earned income in excess of $200,000 for single individuals and in excess of $250,000 for couples filing jointly (a new "marriage penalty") and Imposing a Medicare tax of 3.8 percent on the net investment income of single individuals with adjusted gross incomes above $200,000 and married couples with adjusted gross incomes above $250,000.           According to the Wall Street Journal, this new tax is imposed to pay the cost of extending the benefits allowed to Nebraska in the "corn husker kickback" to the other forty-nine states.		Net investment income subject to the new Medicare tax includes interest, dividends, royalties, rents, gains from disposing of property, and income earned from a trade or business that is a passive activity. Trusts and estates as well as individuals are liable for this additional tax. Distributions from almost all qualified retirement plans including pension plans, profit sharing plans, 401(k) plans, individual retirement accounts, 457(b) plans (Rabbi trusts), and tax-exempt organization employee deferred annuities or 403(b) plans are not subject to this tax.             The new top bracket tax applies only after the 2012 elections and is effective January 1, 2013. However, the $200,000 and the $250,000 thresholds are not indexed for inflation and, like the alternative minimum tax, will over time, with inflation, cause middle-income taxpayers to become subject to the tax.
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Changing to Electronic Filing
As many of you understand, we have, for the past few years, been required to prepare almost all of our clients' Louisiana individual income tax returns for electronic filing. A completed income tax return from us includes the usual full taxpayer copy of the Louisiana return. However, instead of a paper copy to be signed and mailed to Louisiana, our clients, with few exceptions, receive a one-page form (LA 8453) for signatures and return to us authorizing us to submit the return to the Louisiana Department of Revenue. We are not allowed to submit 2009 returns (due May 17, 2010) to the Department of Revenue without this written authorization.             Those with a Louisiana tax balance due for 2009 will also receive  a voucher  and envelope  for mailing with a		check to the Department of Revenue.  Taxpayers may, of course, wait until the due date to submit their check. To ensure timely filing, however, we ask our clients to please return the signed authorization form (LA 8453) to us as soon as they have reviewed the return, but no later than April 30, 2010 and please not wait until mailing the check.             Beginning next filing season for 2010 individual income tax returns, we will be required to prepare both federal and Louisiana individual returns for electronic filing.             Please let us know if you have any questions about filing your income tax returns.
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WHEN THE IRS CALLS        Internal Revenue Service agents often telephone taxpayers selected for examination prior to sending a written notice to the taxpayer of the examination of the tax return. We also know of instances in which IRS agents have appeared at taxpayers’ residences without prior notice. We encourage you to refuse to discuss your tax return or your business with any caller who professes to be an IRS agent. You have no way of knowing that you are, in fact, talking to an agent. In addition, an inadvertent offhand remark that an agent misinterprets could later cost considerable time and effort (and money) to overcome.        If an IRS agent appears without notice at your residence or place of business or if you receive a call from someone claiming to be an IRS agent who says that your return has been selected for examination, we suggest that you ask to be notified in writing and do not give the person any information. After receiving written notice, you should, of course, make every effort to cooperate. If you are to be represented in an examination, we urge you to call your representative immediately to allow him or her to schedule the appointment and handle all contact with the agent.        We encourage our tax clients, if contacted by the IRS, to contact us and to send us a copy of any written notice or request for information. Agents sometimes request information to which they are not entitled, and we might be able to help spare you some problems in the examination.        Remember that the Internal Revenue Service is entitled to only that information necessary to correctly determine your tax. That in itself might involve many gray areas, and a chance remark or the misinterpretation of a casual phone conversation could damage your position. _________________________________________________________
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