November 2007

November 2007

Dear Clients and Friends: 

In order to achieve this distinction we had to demonstrate our business practices were in compliance or beyond, in the areas of energy conservation, water conservation, pollution prevention and solid waste reduction and recycling.

Green businesses promoting environmentally responsible practices help to make our working environments safer and healthier, our communities greener, and contribute to the sustainability of our planet.

We encourage our clients and business associates to ‘Go Green” and are happy to share our secrets to success with you.

For more information about the Bay Area Green Business Program please go to www.greenbiz.ca.gov.

For more on the color green, check out our new web site!

 

Two new services that are available on our web site include the ability to pay your invoice on-line through PayPal (you don’t need an account), and a client portal through which you can access your tax returns and exchange files with us from anywhere at anytime.  We are still working out the details on the client portal and will let you know as we phase in the services.

 

Check it out at www.morrecpa.com and let us know what you think!

 
 

 

 

The end of 2007 is approaching 

It is time to think about year end planning and call us if you need help.  

Will you be in Alternative Minimum Tax this year and not next year (or vice-versa)?  If so, the timing of your second installment of your property tax and payment of your fourth-quarter state tax voucher is critical.  Both of these deductions are not allowed for Alternative Tax.

Consider charitable contributions by year end.  Are you required to take minimum withdrawals from your IRA? If so, you can satisfy all or part of that minimum required withdrawal with a direct transfer to charity.

Do you have realized gains and unrealized losses?  Perhaps you should realize some losses to offset gains plus $3,000.  This is particularly true if the gains are short term.

Do you have a Cafeteria plan at work where you have deferred income to pay for out-of-pocket medical expenses?  You may only have until December 31 to use or lose this money (depending on the plan provisions).  

 

 

If you need more deductions, consider paying your January 2008 mortgage payment by December 20 (so the lender includes it in the year end statement).  

Are you in business for yourself?  The expensing of new capital assets is $112,000 for 2007 (except for cars, light trucks and SUVs).  Also, if you are on the cash basis for income tax reporting, consider postponing income or accelerating deductions. Note that you cannot deduct prepaid rent. How about hiring your kids, upgrading your pension plan or setting up a Health Savings Account?  Also note if you buy new equipment with a credit card it is deductible when charged not when the credit card is paid.

But, beware: the law in 2007 allows for expensing the business portion of an SUV of up to $25,000 if 100% business use, provided the vehicle weights more than 6,000 pounds.  Rumor has it that this will be changed to 14,000 pounds as of January 1, 2008, so you better buy it now.

 

 

Registered Domestic Partners  

Under California law, Registered Domestic Partners must file a joint state income tax return for 2007 as if they were married. Registered Domestic Partners are those registered with the Secretary of State, not those registered with a local municipality, county or employer. To be a Registered Domestic Partnership, one of you must be at least 62 years old or you must be a same sex couple.  You must also agree to have your partnership governed by the California Superior Court and file appropriate paperwork with the Secretary of State.  

There are many opportunities and pitfalls to this new requirement that Registered Domestic Partners file a joint return. This new law does not change the federal rules.  Under federal law, Registered Domestic Partners are single taxpayers. Those tax related pitfalls and opportunities would include:  

Having more of your social security included in adjusted gross income (affecting phase outs)

1. Being in a higher or lower tax bracket  
2. Being unable to file as head of household
3. Being unable to deduct alimony payments should your partnership be dissolved  
4. Unintentionally (or upon dissolution of the partnership) making taxable gifts of community property  

If you have a Registered Domestic Partnership, we recommend you review your income and estate plans.  Call us to begin this planning process.  If you aren’t quite ready to begin the planning process please call us and let us know that you are a registered domestic partner so that we can update our records.

 

IRS sending spam emails?

Have you received an email from the IRS informing you of a potential refund? I do not know of anyone who has ever gotten an email from the real IRS.  If you are entitled to a refund, you will receive a letter or check, not an email.  If for some reason the email was from the IRS, it would be from www.irs.gov, not from the IRS@SBCGlobal.net or something similar.  Upon receipt of such a notice, send it to phishing@irs.gov, and then delete it.

 

 

 

Medicare Drug Coverage  

If you are struggling with the decision about what to do, the AARP has a comprehensive booklet issued in November 2005 about the Medicare Drug Coverage – “All Your Questions Answered."  We have copies and would be happy to send you one.  

How rich are you?

Based on 2005 tax returns, the top 5% of all returns reported an adjusted gross income of $145,300.  The top 10% of all filers reported adjusted gross income of at least $103,900.

That top 10% group reported less than one half of all of the adjusted gross income reported on all returns.  That is if you added the adjusted gross income from the top 10% group and the adjusted gross income reported by the remaining 90% of filers, almost one half of the total is reported by the top group and a little over one half by the lower 90%.  However, the top 10% group paid 70% of all of the income tax and the lower 90% paid 30%.

To take that thought a bit further, the bottom 50% of filers (again based on adjusted gross income) paid only 3% of the total income tax for 2005.

 

 

 

If your child does work around the house (baby sitting, lawn mowing, etc.) you can pay your child a salary for those tasks.  If you limit the salary to $4,000, your child would owe no income tax on the funds and would qualify for the maximum ROTH IRA contribution.  This salary is not deductible by you (since it is not a business expense) and it requires no payroll forms to be filed.  However, although your child would owe no taxes, he or she would still be required to file an income tax return.  The child must be under 21 years of age and should have little or no other income.   

A $4,000 ROTH IRA contribution for a ten year old (with no further contributions to the account) would be $70, 000 at age 60 if it grows at 6% per year (it would be $175,000 at 8% per year).  

You can pay your child a smaller salary.  The amount of the ROTH IRA contribution is limited to the salary paid.  

Please call us if you have any questions about tax, financial planning or accounting issues.

More Changes on the Horizon

This year we changed our annual client party from the busy holiday season to a post tax season event. We will be hosting a spring Picnic BBQ at Rickey’s/Inn Marin (just across the highway from Hamilton ).  

Mark your calendars for Thursday, May 1, 2008 from 5:30 pm to 8:30 pm.  For those of you coming from out of town, Inn Marin has offered us a discount on their lovely rooms as well.   We are very excited about this change.  Invitations will go out around mid-March.

 

 

 

 

 

 

Morre & Company, LLP Certified Public Accountants
Six Hamilton Landing, Suite 220
Novato, CA, 94949
Phone: (415)382-5600 Toll Free: (888) 414-7104
Your Partners in Financial Success!