This is a link that does attempt to keep up with tax changes and headlines as it is not possible for me to list all:  http://www.taxalmanac.com/index.php/Current_events 
It is important to review which changes might apply to you, your friends or family.  With all the current changes, it may be difficult to keep up with and understand all of the laws that apply to you.  Doing some tax planning before the end of the year will help you know what to expect and what you have to do to qualify for new laws.  I am happy to assist with this process.

These are some of the more helpful and surprising tax changes that could help many clients and prospects. 

1.  Those who have not owned a principal residence in the US for at least 3 years and were under contract to purchase a home by April 30, 2010, might qualify for up to $8000 of refundable credit on your 2009 tax return.  You also have to get the closing done by June 30.  This does need to be your main home for 3 years or it will have to be paid back.  

Even bigger news is that anyone that changed to a different principle residence has a chance to qualify for $6500 of credit by being under contract to purchase new main home by April 30.  This applies to many more people and if you have lived in your current home for 5 consecutive years, you would have a chance to benefit from this.  You can even rent your current home and don't have to sell it right now.  You do have to finish the closing on the purchase of the home by June 30.

If you went under contract to purchase a home by the end of April 2010, you should finish your 2009 return and file after the purchase date.  Then you can file for the credit with the rest of your 2009 return.  If you already filed 2009, then you can amend it to claim this credit.  We can help you through this process and it may not be as expensive in fees as you think.  You do have to file returns with this credit on paper (the IRS is not allowing e-filing).  You just get a good copy of the signatures and the settlement sheet or HUD form from the closing documents.  There may be other documentation required, so check with a tax advisor that has done these credits and knows what is needed.

I will assist you to see if your purchase qualifies for the credit at no charge and have reasonable prices to finish your 2009 return or amend your 2009 return to get this large credit for you.  If you only have wage income to verify your previously filed tax return, bring a copy of your W-2 and the amendment might be able to be done for as little as $250.

These credits are a large benefit that should be considered if you plan to move anyway or for other family, if you don't qualify.   It is generating new interest in the real estate markets this year to get this big break.  It does phase out for taxable income over $125,000 (or $225,000 on joint returns), so it may take some tax planning if you are close to these limits.

2.  Taxpayers that buy a new car in 2009 will likely have another deduction to take on their tax return.  You don't have to itemize other deductions to claim the sales and excise taxes paid.  This is new change that may be easily missed.  Be sure the information gets to your tax preparer.   It will include many people that usually don't have any kind of extra deductions.  The gross weight has to be under 8,500 pounds, but motor homes also get this sales tax deduction.  There is an income phaseout beginning at $125,000 or $250,000 for married filing jointly.

3.  The Education credits are improved with a replacement of the former Hope Credit with the American Opportunity Tax Credit.  More will qualify and for more years.  Part of it is also refundable and it can mean some interesting tax planning for working students and their parents.  It is better to review parents' and kids' tax returns together so that tax-saving opportunities are not missed.  The new credit now applies to the first 4 years of college and is $2000 for the first part of the tuition and required eligible expenses; plus 25% of the next $2000 for up to $2500 credit.  The Lifetime Learning Credit remains in the law.

4.  Energy efficiency improvement credits are back and better for 2009.  This is for taxpayer homes for insulation, windows, doors, roofs, air conditioners, water heaters or boilers, furnaces, electric heat-pump water heaters or advanced main air-circulating fans.  They were not avaiable in 2008 as this credit was suspended for that one year.  The amounts are still limited, but now increased to 30% and up to $5,000 of what you spend in 2009 and 2010 for a maximum credit of $1500.  The $500 lifetime cap is now gone, so it doesn't matter if you took that in earlier years.  You may now qualify for more credits.  Energy credits still exist for solar, geothermal and wind.  It also exists for fuel cell property expenses with a $500 credit maximum.  Plug-in electric car $2,500 credits are also available for a limited time.  It is best that you research online and make sure your item qualifies.  This is a link that could be helpful to you:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_index#s11 

5.  The Mortgage Forgiveness and Debt Relief Act does not tax cancellation of debt income on mortgage debt used to acquire a principal residence.  So if your lender makes a deal with you to keep you in your home, this may help you.  If you get such a deal accomplished, you will only have to reduce the cost basis of your home by the amount of debt discharged.  Since gains from the sale of principal residences are often tax free if  $250,000 ($500,000 joint) or less, reduction of cost basis is a consequence that may not cost you any tax.  So the exclusion of income is a very good benefit for those in the situation of being unable to make their full mortgage payments.   

Many home owners that have suffered a hardship but still have the means to make a lower house payment may be able to write a hardship letter and get the process of requesting loan modification started with their lender.  This does not have to be an expensive exercise nor does it require foreclosure to work.  It might help a home owner avoid foreclosure on their home.  It is best to start with a lender who has a mortgage on the property.  Ask them for "loan modification qualifications" and speak with the loss mitigation department.  You should be frank, but there is no need to threaten foreclosure.  The lender may send you a packet of information and forms if they think it will work for you.  For assistance with a hardship letter, you could start some research on the subject with:  http://loanworkout.org/2007/10/example-harship-letter/ but you could search to find others that may be closer to your exact situation.  These kinds of workouts usually take a lot of persistance with lenders who are getting a lot of requests in our challenging economy.

6.  Another law change can save taxes for those that must take a "Required Minimum Distribution" known as a RMD.  You may have this if you are a retiree or are a beneficiary of an IRA or other retirement account.  There usually is a very expensive penalty for not complying with these mandatory distributions.  But now there is no requirement to distribute from these accounts for 2009 only.  This will generate some very interesting tax planning possibilities for those that rely on these distributions for a large portion of their income.  Even if it is a smaller amount, you will have some other options and may qualify for additional tax benefits if you elect to not receive it in 2009.  This rule applies to many over age 70.  But it also applies to employees taking distributions over their lifetime and to the heirs of accounts of deceased taxpayers. Financial institutions may not inform taxpayers of this possible tax benefit.  So you can help find those who may benefit so that they can take appropriate action.

7.  Standard mileage rates for business use were raised to 58.5 cents per mile on July 1, 2008, from 50.5 cents per mile for the first part of 2008.  For 2009, they go back down to 55 cents per mile.  It is important to do some good record keeping of mileage when you have a vehicle used for both business and personal use.  These records can be used to claim and support a deduction when your vehicle is used for your business or on your job and your employer does not pay the full allowance.  Actual expenses can also be utilized when higher than the standard mileage deduction.  Other mileage rates apply for medical, charitable use, or for moving expenses.  You will find these at http://www.irs.gov/formspubs/article/0,,id=178004,00.html. 

8.  Businesses that buy vehicles in 2009 will qualify for larger depreciation limits if they deduct actual costs for the life of the vehicle.  This may generate some interest in buying needed business vehicles especially at the end of the year for current year tax savings.  Vehicles need to be actually placed in service and used for your business to utilize this.

10.  Taxpayers with 529 tuition education plans can now distribute money tax-free to pay for computers and internet technology.

11.  Many fixed income or retired individuals should now have received a $250 check if they qualified for it.  Workers qualify for a $400 "making work pay" 2009 credit that employers are reducing the tax withholding for.  There is a new tax-free limit of $2400 for unemployment benefits in 2009.  There are many changes that will cause a lot of questions and confusion this year.  Do your taxes right with a tax professional and extend the filing of the paperwork whenever it cannot be completed properly by April 15.  Please check the link at the top of this section for many more changes.

Individuals really don't need to file your income tax returns by April 15 and if there is no additional tax due, there is no penalty for delaying the filing of the return.  An extension form then helps you save late filing penalties should you actually owe tax when you finish the returns.  Please note that you shouldn't forget the state return.  Colorado now has a 5% immediate penalty if the tax is not paid by April 15.  Other states are also raising revenue, so don't let them get more penalty $ from you.  Estimate your taxes closely and get it paid on time.

It is better to make sure you have all of your deductions and have everything needed to your preparer.  You may be able to save money that way by waiting until you are certain you have found everything that you need to save taxes.  You can get the paperwork filed over the next 6 months and I always need some summer work anyway.  You may be able to save on preparation fees with a summer discount.

This year it is especially true since there are some new forms and tax law changes to be aware of.  Some are just planning to purchase a home and will be able to take a 2009 credit even though they are purchasing the home in 2010.  You can extend and do the return once and do it all instead of amending the tax return.

I recommend that my clients know about how much taxes might be due by the next April so they can plan for it and even start sending in some money or at least setting it aside.

How much tax do you owe next April 15?  What is your income tax for the year?  How much have you already paid in?  If you don't know how much,  it is better to plan for it now rather than wait until almost April 15.  Why have big surprises?  I can serve new clients better by starting them before the year is over so that I can review their prior tax returns, help them determine their potential tax liability that might be due, setup their last tax return and give them a better checklist of what is needed for the next returns.  Clients will get more attention and service by not waiting until filing season is in full swing, but asking good tax questions before year end so that your best option can be well thought out.

Planning for year end is progressing well.  We send out the personalized checklist of what to send to me for income taxes around the end of the year.  The tax software for 2009 is already loaded and most federal forms are ready to go.  If you need to plan how much your tax is for extra income, want to reduce your income tax withholding, or have completed property sales or other changes that affect your taxes, I can get those in the software right now and I always love to find ways to reduce the heavy workload from mid-February to April.  We can use some estimates now and then finalize them later so that you have a very good idea of how the tax will come out.

If you have provided me an e-mail address, this personalized tax checklist of what to send me can come to you by e-mail upon request.  This will allow you to print just the pages that you use or you can even e-mail me the data.  This enables better and a more immediate response to your needs.  Just let me know and send me your e-mail address (if I don't have it already).  I will print these checklists of what to send me and mail them to most of my clients before January 1st (at least that is the plan).  But if you are doing something new and want a form specifically for that it is quite easy to e-mail you a form to cover that new need.

You may have seen news about rolling back the Bush tax cuts.  What you need to know about this topic is that tax rates will go back up in 2011 and this will mean some tax increases in that year unless Congress acts futher.  Note that a roll back sounds much better than we are increasing your tax rates.  Most taxpayers will experience 5-10% increases in income taxes if their income is the same as in 2009 or 2010.  It is likely that there will be a payroll tax table adjustment in January 2011 also and so employees may have more withheld from their wages starting that month.

I want my clients to stay in touch, so I am always ready to hear from you.  Remember, don't get down on your numbers, move them onward and upward with Sheldon@TheResponsiveCPA.com!

ROTH IRA's are a great reason to do some planning now in 2009.  Beginning in 2010 all IRA's and many other retirement accounts can be converted to a ROTH IRA.  There is no $100,000 income limit after 2009.  You need to visit with your financial advisors about whether this is a good short-term or long-term plan for you and your family.  Do it right and you will be glad you did this planning.  ROTH IRA's can give you the very best capital gain rate of all, ZERO, if the assets are held until age 59 1/2 and you have had a ROTH account for at least 5 years.

You can contibute new amounts to a ROTH or traditional IRA each year if you have earned income, but there are limits each year.  On the other hand, a conversion to a ROTH can move large balances out of a traditional IRA and into a ROTH IRA account.  You pay current income tax on any money in the traditional IRA just as if it were all distributed in that year.

A conversion to a ROTH IRA costs you income tax now, but may save you and your family much future income tax.  If your income may be lower in 2010, then may be an even better time to consider the ROTH.  Please note that it doesn't have to be an all or nothing decision.  It likely is a good decision to have some traditional and some ROTH.  ROTH's are beneficial for a couple of reasons.  Once you have held a ROTH account for 5 years and you are 59 1/2 or a first-time homebuyer, the contributions and earnings can come back to you tax-free!  This is even if you are earning a good income pre-retirement.  But the ROTH is even better if held long-term.  Young workers should start putting money in a ROTH account as soon as they have enough funds to cover their needs and appropriate emergency funds saved.  It is a good way to save for a down payment on a home.

In addition to a ROTH IRA, it can be a good thing to have some amounts in a traditional IRA account to save and defer income tax now.  The distributions for the traditional IRA can be spread out during your primary retirement years with the goal of minimizing the taxes, but give you some taxable income when your tax rate might be lower.  This taxable income might help you offset other deductions and exemptions that you may have in retirement.  With planning the taxes on the traditional IRA distributions can be controlled and kept low and yet the traditional IRA saved you income tax in earlier years.  It is best to have a financial advisor that will do some multiple year calculations that understands your investment balances, earnings potential and the way you want your future to unfold.

Can I self-direct investments in my IRA or other retirement or health plan into non-traditional investments like real estate or other businesses of my choosing?

In short, it is possible.  You do have to choose a non-traditional custodian of those funds that will invest in other allowed investments beyond the normal universe.  You can't invest retirement plan assets in prohibited items in the tax law, but that list is quite specific and short.  So you need to choose a custodian that has a good legal team that designed its program well and check their program out with other legal and tax advisors.  There are now several non-traditional custodians of IRA funds available to choose from.  Once you choose one, you can then invest in ways that you previously thought was impossible to do with your IRA funds.

So if you really want to get a part of your IRA funds out of the traditional financial assets like bonds and equities, then I suggest that you start talking with your circle of advisors or forming a circle of advisors that will advise you wisely and support you in your decision.

In general, you can't invest in items that would benefit you or your family in some way like a personal residence, your own business, or collectibles.  So seek good advice and find out the facts on some creative possibilities.

The IRS is doing more small business audits.  It will be common for them to do some checking on corporations (especially S corps) and their owner compensation.  At a minimum, you should start some small salary for any owner that does any work for the corporation as soon as practical even if there is very little net income or even a loss.  Having no compensation on the officer salary line on the 1120-S is not likely to be a good strategy.  Every owner that is doing some work for the business is to be paid some wages at a fair market rate.  You can start with a small number before you have $20,000 in profits, but it is usually best to make the salary at least $7,000 and file the forms to avoid some of the potential risk of penalties.  A good rule of thumb is to have the officer/owner salaries exceed the other profit distributions to themselves.  It is usually best to go ahead and increase those salaries at least a little each year.  But it really comes down to facts of the skill and critical role of the owners, as well as how much time and effort is put into the corporate business.  This link is about this topic and good reading if you are in this situation.  http://www.nysscpa.org/cpajournal/2006/506/essentials/p46.htm.  

It is a good time to decide on the final owner wages for the year by December, so that all of the payroll reports can be completed right away in December or early in January.  This avoids delays to getting tax forms timely filed, taxes paid and minimizes penalties.  It can even help us start on your income taxes sooner.  The fourth quarter of the year is the best time to follow through completely, consider paying in additional income tax withholding so that income tax penalties can be minimized if more income taxes are or will be owed.  Please give our office a call if you need additional assistance or to discuss the facts in your particular situation.  It is good to plan and know the tax you could owe.

My recommendation is for businesses to find a good payroll service that concentrates on this line of work.  This helps the business get the best possible service on this critical component.  Payroll needs to be done right and timely in order to minimize penalties for late filing or late payment, which are all too common.   Avoiding these employer penalties can make the payroll service fees a worthwhile expenditure for your business.  The new corporation owner should plan on this as part of the incorporation and begining of business.  My office does help with minor payroll questions or correspondence and will prepare some amended or late filed forms when needed.  A payroll service that does payroll full-time, though, can do a lot better job to make sure you keep in compliance and don't miss any important dates on the calendar.

Benefit plans chosen wisely for the business owner and employees can save substantial taxes.  You just need to choose the right plan document that will save you the most in taxes with the least change in current cash flow.  This helps the self-employed person that works with their spouse in a big way, but can also help those who hire unrelated employees.  It helps legitimize your deductions and gives you good documentation if any government authority checks on your employee benefit plans or other tax deductions.

Below is a link offering you a way to get information on these benefit plans and how to implement them.  It is critical that you put the plans in place to offer these tax saving benefits to those who work for you.  Section 105 Health Reimbursement Accounts are a good place to start for the self-employed who do have their spouse help them on a regular basis.  It can easily save you a lot in taxes (many regularly save thousands per year) by putting amounts you will spend anyway under one of these plans.  Taxpayers often get little or no tax savings on medical expenses without the plan documents, but do get full business deductions with all of the resulting tax savings once the plan is in place and expenses documented. 

The following website will help you find the right kind of plan so you can design it the way that you need for your family and employees who work in your business.  It is automated and helps you design a plan the way you want that complies with the laws and IRS regulations.  You can also outsource administering these plans right on the website or use the software to keep track of your employees useage of the plans.  It is a way to help my business clients continue to move their numbers onward and upward!  Try this link today ...

http://www.flexaffiliates.com/plan/Sheldon/index.php 

How long must these records clog up my house and my storage?  It is an important question as many are  concerned about identity theft and security of their records as well as potential lawsuit and legal issues.  It is more than a good idea to put your records on a written schedule of when to shred or destroy them, if ever.   Written retention policies are now often mandatory and used in legal cases.  Some items do need to be kept permanently and I will attempt to answer this question below.   For more thorough answers, legal advice is recommended.  You can search the internet under "record retention guidelines" or other search terms to find some additional guidance or samples that might be more specific or a better guide than my general description below. 

A good link that I found is:  http://www.cpadirect.net/cpadirectmarketing/When_Can_I_Throw_Documents_Out.pdf 

The IRS explanation is at:  http://www.irs.gov/businesses/small/article/0,,id=98551,00.html 

What should you keep permanently?  Tax return copies and worksheets (electronic or paper versions) and correspondence that proves the government entity received the return.  This helps to prove that you filed returns if the government loses their records or a mistake was made by the government employee that put the information in their system.  Deeds, mortgages, bills of sale and records on anything you currently own will document the tax basis and keep you from paying additional tax if you did not have them.  This can include construction records, home improvements, and leasehold improvements.  Retain cancelled checks on important payments for taxes, assets and important contractual payments, even leases.  Keep correspondence on legal and important matters as well as retirement, pension and union agreements for a business.  Business financial statements, year-end trial balance records or general ledger ending balances (an annual electronic backup of these records, especially if not printed) should be kept. 

Keep permanently any audit reports from government authorities as well as tax related correspondence.  Insurance policies, employee benefit plans and business training manuals when you have hired others are important to keep.  Property appraisals should be retained.  Corporate minute books, business licenses, contracts, insurance records, accident reports, claims and policies are another set of records to keep.  Corporations also need to retain their shareholder records and transactions.  If you make special tax elections like LIFO inventory, you may need to keep some details permanently.  Patents and trademarks are items that you may also need later.

Many other records should be kept 7 years including general cancelled checks (remember to keep important ones like real estate transactions or other assets you still own); bank statements; statements indicating tax withheld (like W-2); sales, invoicing and purchasing records for business (including rental property) transactions; business payroll records and taxes; notes receivable ledgers and schedules after payoff; general ledger transaction detail, accounts receivable, payable, inventory schedules and reports; as well as settled cases for accident reports and claims.  These are items that you really may need if someone or the government attempts to prove fraud against you.  Some records are needed for this long after you file your tax return.  So if you did not file a particular tax year timely, you should extend the time for keeping those records for 7 years after you file.

There are other records that you need for 4 years or less that are really just generally needed, if at all, for your burden of proof against another party.  These include bank reconciliations, general or routine correspondence, deposit slips, employment applications and expired insurance policies.

Some items can be kept for shorter periods of time.  For important legal items it can be beneficial to have legal quidance as sometimes there are legal advantages to following your written guidelines.  Some immaterial items that do not save you any tax deductions might also qualify for earlier destruction.  Otherwise, it is usually better to error on the side of caution and retain until at least your next regular time for destruction per your policy.   

Employers really do need to have their policies in writing for a wide range of issues including acceptable use of e-mail in the business.  There are "business-critical" e-mails that should be retained and separated from "non-essential messages" that can be purged from the system.  You need to go to the trouble to define an "e-mail business record" for your business.  Additional research and legal advice is recommended if this applies to you.

This list is not meant to be all inclusive or legal advice, but to give you some helpful general categories of time so that you can begin to separate out your records and destroy the items that are not needed for any future reason.

Everyone needs to be setting goals for what their next step in life will be.  Business owners need some long-term planning to successfully exit their business.  You may want to transfer a business to your family, a key employee or another party.  It all takes a plan and potentially several advisors to make it a success.  I’ve been getting to know some advisors that can help you and would be glad to talk with you about your next stage!

It has a long link and is sometimes difficult to search and find, but those who want to do more business in Colorado should start here as it will help you get started, answer many questions for you and help you frame your questions to other advisors.

http://www.colorado.gov/cs/Satellite?c=Page&childpagename=OEDIT%2FOEDITLayout&cid=1154721645662&p=1154721645662&pagename=OEDITWrapper 

The next link will also get you right into the IRS business section so that you may be able to find an answer to your question on taxes.

http://www.irs.gov/businesses/small/index.html 

I am also going to try to get better at blogging this year with more frequent updates with useful information.  I'm going to put it on my schedule and make it a priority.

For those that are trying to build their business with some online marketing, I would suggest LinkedIn for a way that may help you make some very important contacts.  Go to http://www.linkedin.com/ to get started.  Start making connections there and search for people you know that could help you make the connections that you need to make.  Join Groups, start discussions on your particular business topics, get noticed and draw others to your business.  Let's help each other succeed!