Devereaux, Kuhner & Chin LLP

Archive for the ‘Financial News’ Category

The 12-member Joint Select Committee on Deficit Reduction created by the Budget Control Act of 2011 has discussed possibly reducing or completely eliminating the current $5,000,000 exemption levels for the different transfer taxes (Estate, GST and Gift).

There have been some comments suggesting that the Gift Tax Exclusion may be reduced from $5M to $1M as of January 1, 2012, rather than letting it expire on December 31, 2012, as originally planned.

The actual content of the Super Committee meetings are not actually known, but some professionals even suggest that the reduction might be effective as early as November 23, 2011.

We have no way at all of knowing what law changes will actually pass, but, given this possibility, anyone planning to make gifts using the increased exemption amount may want to consider making gifts prior to the end of this year instead of in 2012.

If you have any other questions, please contact us at (415) 692-3900.

To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

The IRS opened a second offshore voluntary disclosure initiative (OVDI) on February 8 that is scheduled to run through August 31, 2011. The IRS offers a reduced penalty framework to taxpayers who fully disclose previously unreported offshore accounts.

IRS Commissioner Douglas Shulman announced that the 2011 initiative includes a 25 percent penalty on the amount in the foreign bank accounts for the year with the highest aggregate account balance covering the 2003 to 2010 period.

However, lower penalties of 12.5 percent or 5 percent may apply to taxpayers in certain situations.

The 12.5 percent penalty will apply to small (less than $75,000) offshore accounts.

The 5-percent penalty may apply for:

The taxpayer who:

• •  did not open or cause the account to be open
• •  had minimal contact with the account
• •  has not withdrawn more than $1,000 from any year (other than closing transfers to a US account)
• •  has paid any applicable US taxes on amounts deposited to the account

Individuals who are foreign residents and who were unaware they are U.S. citizens

Taxpayers who participated in the 2009 OVDI but would have qualified for this lower 5 percent penalty

To participate in this initiative, taxpayers must file all original and amended returns for 2003 through 2010 and pay all taxes, interest and accuracy-related penalties by August 31, 2011.

More information is available in the IRS News Release IR-2011-14, which can be seen by clicking here.

If you have any other questions, please contact Karisa Chin at kchin@dkc-llp.com.

To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

While we are getting ready for our holiday festivities and New Year’s celebrations, the members of Congress and our President have been hard at work.

On December 17, President Barrack Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which provided a framework for our tax environment moving forward.

We have studied the bill and here are some of the highlights we feel you should be made aware of:

For Individuals
Tax Cuts:
·  Two-year extension of all of the existing tax rates, regardless of income.
·       Top earners remain within the 35 percent bracket
·  Capital gains and dividends tax rate remain at 15 percent
·  The $1,000 child tax credit and marriage penalty relief become effective

Estate Tax:
·  Two-year estate tax adjustment reduces the tax rate to 35 percent
·  Exemption level increases to $5M per person.

Social Security Payroll Tax:
·  Two percentage point reduction of individual Social Security payroll tax to 4.2 percent during 2011.

Alternative Minimum Tax:
·  Two-year patch for 2010 ($72,450 exemption MFJ, $47,450 exemption for non-married) and 2011 ($74,450 exemption MFJ, $48,450 for others)
·  Credits allowed against AMT through 2011

For Businesses
Bonus Depreciation:
·  100 percent bonus depreciation for capital investments purchased after September 8, 2010 and before January 1, 2012
·  179 depreciation expensing thresholds and limitations:
•  2010 & 2011 – $500,000 with $2M limitation
•  2012 – $125,000 with $500,000 limitation

Research & Development Credit:
·  Extended retroactively to 2010 and has been extended to 2011
·  The Refundable AMT/R&D credit in lieu of bonus depreciation has been reinstated for property placed in service January 1, 2011 to December 31, 2012

Qualified Small Business Stock
·  100 percent exclusion of the gain from the sale of qualifying small business stock for stock that is acquired before January 1, 2012 and held for more than five years

For a more detailed discussion of the tax law changes, please click here.

This blog post is for informational purposes only and is not intended and should not be construed to be tax advice.  Please contact Devereaux, Kuhner & Chin LLP directly for more specific guidance.

To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.