STATUS OF ESTATE TAXES

Around ten years ago, congress passed a law stating that in the year 2010 there would be no estate taxes. Nobody in the tax industry felt that this would really happen. Imagine this, Warren Buffett, whose worth billions of dollars in 2010, dies and he completely escapes estate taxes. The joke in the industry was to “advise your clients to die in 2010.” That’s the kind of humor that we tax people have.

Well, everybody thought the law would change and then five years passed; and now we are here three weeks before the end of the year and congress is now starting to say, “We’re going to lose a lot of money if there are no estate taxes in 2010; maybe we should change the law.”

Now they are discussing the possibility of making sure that there is an estate tax in 2010. Best guess is that they’ll pass a law sometime before the end of the year. Maybe they’ll leave the estate tax rate at three and one half million dollars. Who knows?

Oh, that’s not all, if congress does nothing the estate tax rate will revert back to $1,000,000 in 2011 with a high rate of 55%.

We’ll keep you posted as congress deals with this issue at the last minute.

The Washington Post has more information on the Estate Tax. Click here to read: Extending The Estate Tax.

QUOTE OF THE WEEK

"Old age is like climbing a mountain.
The higher you get, the more tired and
breathless you become, but your view
becomes much more extensive."
Ingmar Bergman,
quoted in the Victoria, British Columbia, Advocate

ADDING BACK TO YOUR W-2

As you know, it is necessary to add back to your W-2 the personal use of your corporate vehicle as well as the amount of Health Insurance the corporation paid on behalf of a greater than 2% shareholder and their families.

Here is a link to the letter we sent out to all of our clients regarding this issue: W-2 Add Back.

JUST THINKING...

What hair color do they put on the driver's licenses of bald men?

NEW RULES FOR DISCLOSING TAX RETURN INFORMATION TO THIRD PARTIES

Federal law already strictly prohibited the IRS from making disclosures of taxpayer return information within its control to third parties except with taxpayer consent. Now there are new rules that apply only to tax return information held by income tax return preparers.

So, if you would like your income tax preparer to send copies of your tax return to a third party, i.e.-your bank, your attorney..., a specific form will need to be completed, signed and returned to your tax preparer's office. This form will be held on file for one year unless specified otherwise.

You may access the Kopsa Otte consent form on our website at www.kopsaotte.com. Here's a direct link to our Third Party Consent Form for your convenience.

Below is an explanation of the rules. Please be sure to contact us if you have any questions. (800-975-4829)

Among the new rules:

• Generally, preparers must obtain taxpayer consent, either by paper or electronically depending on how the return is being filed, before tax return information can be disclosed to any third party or used for any purpose other than filing the return.


• If the taxpayer consents to the disclosure and use of his information, the consent must identify the intended purpose of the disclosure, identify the recipients and describe the particular authorized disclosure or use of the information.


• Mandatory language informs individual taxpayers that they are not required to sign the consent; that if they sign the consent, federal law may not protect their information from further disclosure; and that if they sign the consent, they can set a time period for the duration of that consent. If taxpayers fail to set a time period, the consent is valid for a maximum of one year.


• To prevent consent requests from individual taxpayers from being buried in fine print, the rules require the paper consent documents to be in 12-point type on 81/2 by 11 inch paper and require electronic consent requests to be in the same type as the Web site’s standard text, all to prevent consent requests from being too difficult to read for individual taxpayers.


• If a taxpayer declines to provide consent for an unrelated tax preparation disclosure or use request, the preparer cannot make a similar consent request. The intent is to protect taxpayers from being pressured with repeated consent requests regarding the same issue.


• Mandatory consent from taxpayers also is required if the tax information is going to be disclosed to a tax preparer located outside the United States. This provision is intended to ensure taxpayers are informed if their tax information is being sent off-shore for return preparation. The individual taxpayer’s Social Security Number also must be redacted.

FORM 1099 AND W-2 LETTER

Here is a letter that we sent reminding our clients to issue the proper forms to all Independent Contractors. If you need more information regarding this issue, please feel free to contact us.

Re: Forms 1099 and W-2

It is that time of year again to issue 1099 forms. In order to determine this, it is necessary for employers to have a signed W-9 form on file for all Independent Contractors they hire. The IRS requires that you send a Form 1099 to all individuals (not corporations) to whom you paid $600.00 or more for services, interest or rent. There is one exception to this. Any payments to a corporation for legal fees in excess of $600.00 are reportable on Form 1099-MISC. This is very important since the IRS will match 1099’s to the individual income tax returns in order to determine whether or not all income was properly reported.

Our past experience is that, if your income tax return is audited, one of the first items reviewed is whether you submitted all of the necessary Form 1099’s. This is an easy way for the IRS to raise revenues (by charging you a penalty) and force you to comply with the law.

The penalty for not complying with the filing of Form 1099’s ranges from $15.00 to $100.00 for each form not properly completed and timely filed. If the IRS can determine that a Form 1099 was intentionally not filed, the penalty is $100.00.

Nebraska is requiring all employers to report newly hired and rehired employees to the state within 20 days of date of hire. Effective January 1, 2010 employers will be required to report all Independent Contractors in addition to the new hires and rehired employees.

Another important issue is the filing of the W-2 forms. These forms must be given to your employees by February 1, 2010.

If you would like our firm to compile the necessary information and/or prepare the necessary Form 1099’s and W-2’s for you, please sign and return the enclosed engagement letter along with the completed, appropriate 1099 and W-2 worksheets to our office. Since the first returns are due February 1, 2010 we are offering a discount if you provide us with the information on or before January 11, 2010. Of course, there is no fee for the 1099 we prepare for us. That 1099 is free. If you wish to fax your information to us, our fax number is (402) 362-5475.

If you have any questions, please contact Jane Rosenau or Cheryl Harlow at our office at (402) 362-6636 or (800) 975-4829.

Kopsa Otte
Certified Public Accountants

KOPSA OTTE STRIVING FOR CONSTANT IMPROVEMENT

We are proud to announce that Theresa Fritz has earned the distinguished designation of Enrolled Agent.

Theresa, an accountant with Kopsa Otte since November of 2006, recently passed this three-part test administered by the IRS to earn her EA.

As an Enrolled Agent, Theresa has technical expertise in the field of taxation and is empowered to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.

Congratulations Theresa! We're proud of your accomplishment!