Michael Gray, CPA's Tax and Business Insight

May 5, 2010

© 2010 by Michael C. Gray

ISSN 1539-395X

A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!

Route to _______   _______   _______   _______   _______

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Dawn Siemer, Eleanor Gray, and Janet Gray at Eleanor's 88th birthday party.
My mother, Eleanor Gray, celebrates her 88th birthday with my daughter, Dawn Siemer, and my wife, Janet.

Surprise! The year is one-third over.

How are things going? Are you working on the goals you set last January, or are they forgotten? As you might guess, tax return preparers live in a parallel universe from February through April. It’s nice to be back. Let us know how we can be of service in helping you, your business, your family have a successful year.

Congratulations graduates! And, good luck with a challenging job market.

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Happy Memorial Day!

Monday, May 31 is Memorial Day, the "unofficial" start of summer. Beach parties! Picnics! Barbecues! Have a fun and safe holiday, and remember to honor those who gave their lives for our country.

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Do you need help with finishing extended income tax returns, preparing amended income tax returns, or tax audits?

Now that April 15 has passed, it’s time to focus on finishing extended income tax returns. Some of our readers have found errors in or are uncomfortable with tax returns that they prepared using tax software or were prepared by other tax return preparation companies. We can provide a second opinion. Others have received notices for tax audits and sometimes can’t get the help they need from their tax return preparer. We can help with all of these. To make an appointment, call Dawn Siemer Mondays, Wednesdays or Fridays at 408-918-3162 from 9 a.m. to 5:30 p.m.

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May family celebration.

My daughter, Holly Baker, and her husband Dan will be celebrating their eleventh anniversary on May 15. Congratulations Dan and Holly! And thanks for our two grandsons!

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Silicon Valley Tax Professionals Save The Date!

Michael Gray, CPA will be giving a seminar, The Federal Tax Return Preparer Disclosure and Use Rules (IRC Section 7216) – A Threat To Your Practice and Our Profession?, for the Tax Interest Group of the San Jose Silicon Valley CPAs. The seminar will be a breakfast meeting at Lou’s Village in Los Gatos, California starting at 8 a.m. For details, visit the CalCPA web site at www.calcpa.org or call Stephanie Stewart at 408-983-1122.

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HIRE Act Form available.

The IRS has released the final version of Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit. New employees will submit the form to employers to confirm they qualify as "covered employees" for the HIRE Act’s tax incentives. Qualified Employers will be able to avoid paying their 6.2% share of social security taxes for a covered employee’s wages from March 19, 2010 through December 31, 2010. In addition, qualified employers may be able to claim a retention credit of the lesser of $1,000 or 6.2% of wages paid during a required 52-week consecutive period.

A covered employee:

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Estates and trusts can deduct "bundled" fees.

The IRS extended interim relief to avoid segregating fiduciary fees that include asset management. Technically, the asset management portion is subject to a 2% of adjusted income phaseout, based on the Supreme Court’s Knight decision. The limitation will not apply for tax years beginning before January 1, 2010. (Notice 2010-32.)

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Filing dates extended for certain disaster areas.

The IRS has extended the filing dates for individual income tax returns and making deposits to IRA and Roth accounts from April 15 to May 11, 2010 for taxpayers residing in or having a business located in a federally-declared disaster area. This applies to certain counties that suffered from storms and flooding in the northeast, including in Massachusetts, Rhode Island, and New Jersey. Certain counties in West Virginia are also eligible. See www.irs.gov for details.

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California passes conformity legislation.

Governor Schwartzenegger signed SB 401(Wolf), the Conformity Act of 2010, on April 12, 2010. This legislation conforms many Calfornia tax laws to the federal tax rules, mostly as of January 1, 2010. The most important exception is the exclusion for cancellation of debt for a principal residence, which we detailed in the Extra edition of this newsletter on April 22, 2010.

Some other conformity items include:

The legislation leaves many nonconformity items, including:

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San Francisco broadcasts Financial Insider Weekly.

We are thrilled that the San Francisco public access station, SF Commons, has agreed to broadcast Financial Insider Weekly Fridays at 6:00 p.m. Pacific Time and as streaming video at the same time at www.bavc.org, "public access TV". Thanks to Karen Baker for agreeing to be our local producer in San Francisco.

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Financial Insider Weekly broadcast schedule for May and June.

Financial Insider Weekly is broadcast in San Jose and Campbell on Wednesdays at 4:30 p.m., Pacific Time. You can watch it on Comcast channel 15 for those cities. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for May and June:

May 5, James Quillinan, Esq. of Hopkins & Carley, "California real estate change of ownership rules in estate and business planning"
May 12, Don Pollard of Advanced Professionals, "What Federal Health Care Reform means for you"
May 19, Don Pollard of Advanced Professionals, "Medical insurance alternatives"
May 25, Don Pollard of Advanced Professionals, "Choosing a medical insurance policy"
June 2, John Hopkins, Esq. of Hopkins & Carley, "Succession planning issues for a family business"
June 9, Hilary Martin of The Family Wealth Consulting Group, TBA
June 16, Craig Martin of The Family Wealth Consulting Group, "Alternative investments"
June 23 and 30, TBA

Financial Insider Weekly is also broadcast as follows:

Past episodes of Financial Insider Weekly are posted on YouTube. One way to watch them is to go to our web site, www.financialinsiderweekly.com, and click on "Past Episodes."

Let me know any ideas that you have for topics or guests. Guests will usually have to be located in or near the Silicon Valley in California.

Hope you can watch or record the show. Please tell your friends about it!

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Questions and answers

Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.

For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.

Question

How does one submit money to the IRS for withholding on a 1099? What form is used to report the withholding?

Answer

First, you have to have an employer tax number to withhold the tax. You apply for one using Form SS-4. Tax deposits can be made with a depository bank using Form 8109, which you can request from the IRS. Alternatively, electronic deposits can be made. The withholding is reported using Form 945, Annual Return of Withheld Federal Income Tax. You can find these forms at www.irs.gov.

Question

I have been claiming my father as a dependent for several years. He passed away during January 2009. Can I still claim him on my 2009 income tax return?

Answer

Probably. You get to claim dependent exemptions for the year of death and the year of birth, even though the individual only was a dependent for part of the year. See IRS Publication 501 at www.irs.gov.


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Visit our new article!

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Follow me on Twitter!

If you enjoy Twitter, please follow me at www.twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

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I'm also on Facebook and LinkedIn.

you can also follow me on other social media sites, Facebook and LinkedIn.

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If you have employee stock options, have you subscribed to Michael Gray, CPA's Option Alert at no charge or obligation?

To learn more, visit stockoptionadvisors.com/subscribe.shtml

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Real estate investors, have you subscribed to Michael Gray, CPA’s Real Estate Tax Letter at no charge or obligation?

For details, visit www.realestatetaxletter.com

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Check out my blog.

I have also started a blog at www.michaelgraycpa.com. Check it out!

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P.S.

My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

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P.S. My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at taxtrimmers.com/directions.shtml.


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Michael Gray, CPA
2190 Stokes St. Ste. 102
San Jose, CA 95128
(408) 918-3162
FAX: (408) 998-2766
Hours: 8am - 5pm PDT Monday - Friday

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