e-YWM Alert #11 - Overview of the 2010 Tax Relief Act

The recently enacted "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" is a sweeping tax package that includes, among many other items, an extension of the Bush-era tax cuts for two years, estate tax relief, a two-year "patch" of the alternative minimum tax (AMT), a two-percentage-point cut in employee-paid payroll taxes and in self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. Here's a look at the key elements of the package:

•The current income tax rates will be retained for two years (2011 and 2012), with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.

•Employees and self-employed workers will receive a reduction of two percentage points in Social Security payroll tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.

•A two-year AMT "patch" for 2010 and 2011 will keep the AMT exemption near current levels and allow personal credits to offset AMT. Without the patch, an estimated 21 million additional taxpayers would have owed AMT for 2010.

•Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 will be retained. Specifically, the new law extends the $1,000 child tax credit and maintains its expanded refundability for two years, extends rules expanding the earned income credit for larger families and married couples, and extends the higher education tax credit (the American Opportunity tax credit) and its partial refundability for two years.

•Businesses can write off 100% of their equipment and machinery purchases, effective for property placed in service after September 8, 2010 and through December 31, 2011. For property placed in service in 2012, the new law provides for 50% additional first-year depreciation.

•Many of the "traditional" tax extenders are extended for two years, retroactively to 2010 and through the end of 2011. Among many others, the extended provisions include the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes; the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers; and the research credit.

•After a one-year hiatus, the estate tax will be reinstated for 2011 and 2012, with a top rate of 35%. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years. Estates of people who died in 2010 can choose to follow either 2010's or 2011's rules.

•Omitted from the new law: Repeal of a controversial expansion of Form 1099 reporting requirements.

•Also not included: Extension of the Build America Bonds program, which permits state and localities to issue federally-subsidized municipal bonds.
We hope this information is helpful. If you would like more details about these provisions or any other aspect of the new law, please do not hesitate to call.


All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.

e-YWM Alert #10 - Holiday Party Deduction

As we get further into the holiday season, we'd like to inform you all of a little known exception to the 50% meals and entertainment limit that may help to brighten your holidays and lessen your tax burden. Expenses related to recreation, social, or similar activities incurred primarily for the benefit of employees (i.e. a company holiday party) are 100% tax deductible.

Additional deductions may be allowed for small gifts or tokens of appreciation given to employees during the holidays. The value of these gifts must be reasonable, but if they are kept to a nominal amount the business may give these gifts and claim deductions for non wage work business expenses. These gifts are deductible at 100% if they are nominal in value.

Finally, gifts given to clients and customers also have certain tax consequences. A $25 gift deduction is allowed for each client/customer each year. Gifts in excess of this amount can certainly be given, but the full cost cannot be deducted.

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020. Additional resources are always available at our website, www.ywmcpa.com.

e-YWM Alert #9 - Framework for Bipartisan Tax Agreement

e-YWM Alert #9 - Framework for Bipartisan Tax Agreement


Late on Dec. 6, President Obama announced that the Administration and the Republicans had arrived at a "framework for a bipartisan agreement" that would extend the Bush-era tax cuts and give workers a 2% reduction in Social Security tax for 2011. The President held a news conference yesterday to defend his decision to compromise with Republicans but it is uncertain at this time how the agreement will be received by Congressional Democrats. Although details of the agreement have yet to be released, its major components, as described in a Fact Sheet released by the White House, are as follows:
• The EGTRRA/JGTRRA income tax rates would be retained for two years for everyone. Presumably, current law's favorable tax treatment of long-term capital gains and qualified dividend income would be retained as well.
• A two year alternative minimum tax (AMT) "patch," which would prevent exemption amounts for individuals from dropping and allow personal credits to offset AMT.
• Retention of "key tax cuts" for working families (earned income tax credit, child tax credit, American Opportunity Tax Credit).
• Allowing businesses to write off 100% of their equipment and machinery purchases during 2011.
• A two-year extension of the R&D tax credit and other tax incentives to support business expansion. (It is not clear at this point whether the bipartisan agreement will extend all of the business and individual tax breaks that expired at the end of 2009.)
• Reducing the workers' share of Social Security tax for 2011 from 6.20% to 4.20%.
• Extending unemployment benefits for 13 months.
Reportedly, the bipartisan agreement also would reinstate the estate tax with a $5 million exemption amount and a 35% top tax rate.

The"Fact Sheet on the Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance: A Win for Our Economy, Jobs, and Working Families," released by the White House on Dec. 7, 2010 can be viewed by clicking this at http://www.whitehouse.gov/the-press-office/2010/12/07/fact-sheet-framework-agreement-middle-class-tax-cuts-and-unemployment-in

All information presented above is generic, if you would like to know how this may be applied to your specific situation please give us a call at 303-792-3020 or reply directly to this email. Additional resources are always available at our website, www.ywmcpa.com.

e-YWMnews-December 2010 WEBSITE UPDATE

Newsletter Updates- The following articles can be found at our website at http://www.ywmcpa.com/newsletter . This month our articles include:

• Tax rates in turmoil as 2010 draws to a close
  
• Year-end planning: Last minute tips for individuals
  
• Deficit commission's tax proposals spark debate
  
• FAQ? Obtaining certification for energy-efficient home improvements for tax
• How Do I: Substantiate business gifts to clients?
  
• December 2010 tax compliance calendar

If any of these articles are of interest to you be sure to visit our site during the month of December as these articles change monthly.

YWM Office News- As the new tax season approaches we'd like to offer you some tips on ways you can increase the efficiency of your tax preparation:

• For our business clients, please answer every question on the PBC list sent this month. If a question is N/A please indicate as such. We will have to follow up on all non-responses which will increase the amount of time required to complete your return.
  
• For our individual clients, please fill out the provided organizer. The organizer is designed to correspond to our tax software, having all of the numbers summarized in one place greatly increases our efficiency in preparing your return.
  
• Submit all of your information at one time. Receiving piecemeal information greatly increases the amount of time required to prepare your return as we have to revisit and analyze where we're at with the return each time we work with it.
  
• Get your information in early. Getting us your information prior to mid-March will increase the turn around time to prepare your return.
  
• If you can't get your information in early consider having us extend your return prior to the deadline. You can then take your time to organize your data as we have suggested above.

These tips should help to increase the efficiency of your return. If you have any questions please let us know.

As we approach year end, many of our business clients may be assessing their current payroll and HR service providers. If your payroll or HR (insurance and workman's compensation) needs are not being met please let us know as we may be able to assist you in resolving your problems or in choosing a new provider. For help, please contact Troy Coon in our office at troy@ywmcpa.com or at the number listed below.

During the month of November Manager Troy Coon and his wife took a trip to Ethiopia with The Cunningham Foundation. The Cunningham Foundation is a non-profit organization headquartered here in Denver and was founded by Noel and Tammy Cunningham. The trip focused on visiting various sites The Cunningham Foundation has financially supported in the past. The trip focused on three main areas close to the capital Addis Ababa. They visited an HIV orphanage that is cared for by the Sisters of Mother Theresa, though the group spent the majority of their time during the trip at a site called Project Mercy. Project Mercy is a community based organization that focuses on education, healthcare and community around an area called Yetabon. During the last part of the trip the group visited a school and library in the Awasa. The library was funded by the Colorado DECA organization. "This was a trip of a lifetime. Although people of Ethiopia do not have much in terms of opportunity or material belongings they are a truly generous and enjoyable people. I cannot say enough about the adventure," says Troy of the experience. If anyone would like to learn more about the Cunningham Foundation or Troy's adventures in Ethiopia feel free to give him a call.



A group picture taken at the Project Mercy site. Troy is in the back in red.

As always, if you have any questions or comments to make our site even better, please don't hesitate to contact us. All information on our website is generic, to determine how this affects your specific situation please give us a call at 303-792-3020.