Michael Gray, CPA's Tax and Business Insight

February 4, 2011

© 2011 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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Clive Baker on a slide
My grandson, Clive Baker, will be three years old this month!

February is a great month for celebrating!

Tomorrow, February 3, is Chinese New Year. Happy New Year to those who celebrate that holiday. (It’s the Asian equivalent of Christmas as a family celebration.)

This Sunday is Superbowl Sunday. Break out the guacamole, chips and drinks and enjoy the game with friends and family. Thank goodness Dallas has a covered stadium!

Valentine’s Day is Monday, February 14. Make your reservations now at that special restaurant for yourself and your sweetheart, or you might not be able to find a table.

President’s Day is Monday, February 21.

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Happy birthday, Clive!

My grandson, Clive Baker, is turning three years old this month. His passion right now is the solar system. He loves to identify and name the planets. Pretty good for “almost three!"

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David Sell
Here's David Sell!

Welcome David Sell!

David Sell has joined our firm as an intern this Tax Season.

David is a student in the Masters in Science in Accountancy program at San Jose State University. He previously earned an MBA at Santa Clara University and a BS in Electrical Engineering and Computer Science at the University of California, Santa Barbara.

David has been married to Megan for 25 years and has two grown children: Naomi, age 22, and Caitlyn, age 20.

His hobbies are reading, hiking and sailing.

In his “past life," David grew up in Santa Monica. He is an Eagle Scout. He went to an International Boy Scout Jamboree in Japan and was a sailing instructor on Catalina Island to help other Boy Scouts earn merit badges. He moved to Silicon Valley in 1980.

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Tax season is here! Make your appointment now!

There are only about two and one-half months left before the tax return due date. Time to get started now!

If we prepared your income tax returns last year, you should have already received instructions in the mail. If you haven’t, please call Dawn Siemer at 408-918-3162.

To have us prepare your income tax returns, start with the online Tax Notebook organizer. Call Dawn Siemer at 408-918-3162 for instructions to get started. We also have a paper organizer, if you prefer. We still need your documents (W-2s, 1099s, receipts for donations) to prepare your income tax returns.

We are setting up a secure internet portal for sending documents. Call Dawn Siemer for instructions.

We can prepare most income tax returns using information provided online and by mail. If you wish a personal meeting, please call Dawn Siemer at 408-918-3162 to schedule an appointment. Our calendar is filling up fast!

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Send 1099s and W-2s to IRS now.

2010 annual information returns are generally required to be filed by February 28, 2011.

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Some California businesses are required to file use tax returns.

California businesses that reported more than $100,000 in gross receipts from a business or rental property on their 2010 federal income tax returns and that don't file sales tax returns are required to electronically file a California use tax return for 2010. Businesses that registered with the State Board of Equalization last year should also file. The use tax returns and tax payments are due April 15, 2011. A use tax return must be filed even if there is no tax due.

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IRS delays processing of 2010 income tax returns.

Since Congress passed tax legislation extending the Bush tax cuts and increasing the AMT exemption for 2010, the IRS has to play catch up in releasing tax forms. They have announced that tax returns with itemized deductions won’t be processed until February 14, 2011.

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Medical residents owe FICA taxes.

The Supreme Court has settled an old issue – whether medical residents qualify for an exemption from FICA (Social Security) taxes on their wages received from teaching hospitals. The Supreme Court found in favor of the IRS and against the medical residents. (Mayo Foundation for Medical Education, Supreme Court, January 11, 2011.)

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Gift card income can be deferred.

The IRS has issued a safe harbor method of accounting for accrual basis merchants who issue gift cards to customers in exchange for returned merchandise. In addition, accrual basis merchants are allowed to defer recognizing income for gift cards redeemable for goods or services of the taxpayer or a third party. See your tax advisor if you believe the rulings will apply to you.

(Revenue Procedure 2011-17, Revenue Procedure 2011-18.)

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Florida judge rules Federal Health Care Reform unconstitutional.

U.S. District Court Judge Roger Vinson ruled in Florida et al v. United States Department of Health and Human Services that the mandate that all Americans get health insurance by 2014 in the Patient Protection and Affordable Health Care Act is unconstitutional. He also said the mandate is not severable from the rest of the Act, the entire Act is unconstitutional. This is another step in the road to the Supreme Court, which will eventually decide the issue. The Obama Administration is continuing implementing the Act.

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California doesn’t conform to exclusion of health care benefits for adult children.

A provision of the Patient Protection and Affordable Health Care Act that became effective for plan renewals beginning on or after September 23, 2010 is that employers must permit health care coverage of an employee’s adult children under age 27, even if the child doesn’t qualify as a dependent. If the employer pays the premium, it’s not taxable to the employee for federal tax reporting. The California Franchise Tax Board has announced employer payments for this coverage are taxable for California tax reporting and should be included in wages on the employee’s Form W-2. The premium relating to the adult child is also not deductible for self-employed individuals on their California income tax returns.

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Financial Insider Weekly broadcast schedule for February and March.

Financial Insider Weekly is broadcast in San Jose and Campbell on Wednesdays at 7:00 p.m., Pacific Time. You can watch it on Comcast channel 15 for San Jose and Campbell. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for the rest of January and February:

February 9, Peggy Martin, ChFC, the Family Wealth Consulting Group, “Long-term care insurance"
February 16, Dean Fabro, Bank Of The West, “Small Business Financing"
February 23, Janis Carney, Attorney, Carney, Sugai & Sudweeks, LLP, “Veteran’s Administration Pension Benefits for Long-Term Care"
March 2, Lamarr Baxter, Entrust Administration, “Investing in real estate using your IRA or Roth account"
March 9, Lamarr Baxter, Entrust Administration, “Making alternative investments besides real estate using your IRA or Roth Account"
March 16, Professor Patricia Cain, Santa Clara University, “Income tax problems of same sex couples"
March 23, Professor Patricia Cain, Santa Clara University, “Estate and gift tax problems of same sex couples"

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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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.


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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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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