New tax laws - Part 1

Now that we're in a new year, inevitably, there are tax law changes.  Some of the changes to expect (however, that's not to say that Congress won't make changes or pass new laws before the year is up):

Some allowances that have expired are:
1.  Write offs for state sales taxes

2.  College tuition

3.  That $250 allowed deduction that teachers and educators who were not reimbursed for out-of-pocket expenses for supplies

4.  The break that allowed people 70-1/2 and older to donate up to $100K per year from their IRA's to charity

Don't get too upset yet as these are likely to be reinstated retro to Jan. 1 but it is suspected that it may take awhile to do so.

Some others that went away are:

The $500 energy efficiency credit for home improvement items like biomass stoves, storm windows, and water heaters may not be back.  The good news is that the solar credits are still ok.

Some good news, though is that Congress has extended the 2% cut on the employee portion withheld for Social Security tax on  paychecks for the first two months of this year.  Self employeds also benefit the same way.  Medicare is not part of this break.  This being an election year, the period may be extended.  Stay tuned........

Higher Standard Mileage Allowance

In case you missed the news, the IRS standard mileage has increased (as of July 1, 2011) to 55.5 cents per mile.  From the beginning of the year until June 30, the amount was 51 cents per mile (I think that is the few times I can remember where it was actually an even amount).  Maybe to be humorous, whoever decided the rate likes to use "half cents".  Anyway, the timing of the increase was fairly sweet as it came just as the price of gas was decreasing so it can be profitable (?) for those that do a lot of driving between jobs.  Just remember that regular commuting is not allowed as a deducting mileage.  Also, unless the price of gas takes a hike, the mileage allowance as of the first of next year may be reduced from the current rate.

Beware the draft

No, I'm not talking about being conscripted into the military for active duty, I'm referring to a form of demand payment similar to cashing a check.  Recently, a client of mine was victim of a scam that pretty much goes unnoticed until a check of the bank balance is made.  Supposedly, the perpetrator "tests the waters" by creating a phony document, usually of little value having somehow illicitly collected bank information on their target.  In this case, the bank statement was received and as usual, the CFO verified all checks that had cleared the bank (they show up as images both front and back on the bank statement) and noticed what looked like a check as it had the payee name, bank routing number and account number.  But something just didn't look quite right as the sequence and the font were not the same as the others.  Now the client company policy requires a signature on all checks so there was definitely something very wrong.  Naturally, the bank was contacted and inquiries were made.  Turns out this strange check was a DRAFT.  A draft functions much like a check but does not necessarily need a signature to be presented for payment.  The person negotiating the draft need only claim that there was authorization for payment (which in this case there was not).  The unsupecting victim (my client) ends up having their account charged for this type of fraud.  A further query to this bank showed that there is really no way to prevent this kind of thing from happening again unless the company is willing to take a more active role in being proactive.  There are many variations of this type of criminal activity, but the best way to stop it is to be vigilant and check your bank activity regularly and be dilligent in doing bank reconciliations monthly.

Memorial Day

No insightful tips today but a hope that everybody has either planned, is planning or has already paid some sort of tribute to our fallen heroes today. 

Tax planning

Ok, well now that tax season is over, I'm sure there are those who would rather think about having a root canal before even entertaining the thought of dealing with taxes again.  Truth is, taxes shouldn't have to be thought of during the second week in April but should be considered throughout the year.  One of the best ways to prevent "sticker shock" is to do an estimate each quarter of where you are in terms of potential tax liability.  This is most important for those who are self-employed and are not on the payroll.  I know that much of the information that goes into the tax return preparation doesn't usually come until the first of the following year but much of that information comes in on monthly statements.  The beauty of tax planning is it doesn't have to be exact but should be close.  It really isn't that hard.  A good idea is to be sure you have somebody who is well versed in the process, however.  Good luck.

Tax filing deadline

Those of you who are stressing out about missing the usual April 15 deadline to file taxes, you have a few extra days this year.  The deadline for filing 2010 tax returns is April 18 which falls on a Monday so all of you who are loathe to take up the task, you can devote the weekend of April 16-17 to it.