Rebate checks floated as way to boost economy

According to an article on CNNPolitics.com on income taxes and the economy:

Treasury Secretary Henry Paulson ended his third meeting of the day with House leaders Wednesday night with no indication of a deal on a $150 billion economic stimulus package.

But a GOP leader told reporters more public comments could be expected Thursday morning.

House Minority Leader John Boehner, R-Ohio -- who spent an hour and a half with Paulson and House Speaker Nancy Pelosi, D-California, on Capitol Hill on Wednesday night -- would not say if leaders were close to a deal.

"We're hopeful," he said. "We'll have more to say tomorrow morning."

Pelosi would not answer questions about any announcement of a deal. "We're moving toward that," she said. "We're not at that place yet."

The late-night negotiations are a sign of the urgency of the talks as the United States slogs through an economic slowdown.

While the final details are still being negotiated, officials in both parties said the current outlines of the package would give individuals a tax rebate check in the neighborhood of $800, while families could receive up to $1,600.

The main sticking point in the negotiations is who the rebate checks should target. Bush has said he wants rebates for those who pay income taxes.

But Democrats say such an approach would mean tens of millions of households would get only a partial rebate or none at all -- about 65 million, the liberal Center for Budget and Policy Priorities estimates.

That group includes those whose tax bill is so low that their rebate would be much less than $800 or $1,600, as well as low-income households with no income tax liability because of credits and other tax breaks. It would also include households that do not have to file a tax return.

The current strategy is for Pelosi and Boehner to iron out the details with Paulson as soon as next week and then get the package passed in the House by the first week of February, according to officials in Congress and in the Bush administration. That will then pressure the Senate to pass the same version by mid-February before lawmakers leave town for the Presidents Day recess.

Even if that goal is reached, however, Bush administration officials acknowledge it may take several more weeks before the Treasury Department can actually cut the rebate checks and get them in the mail for consumers -- a task that will be more difficult because the Internal Revenue Service is very busy now dealing with 2007 tax returns.

One senior official noted the president signed a similar 2001 round of tax rebates around Memorial Day, after the IRS's busy season.

"We're working with the IRS right now to figure this out," the official noted.

Individual Income Tax Extensions: A Necessary Evil?

Every year large numbers of individual income tax returns are put on extension. For many people extension is a dirty word. Unfortunately, in a busy tax preparation business extending individual income tax returns is unavoidable. The reason for this is due in large part to the timing of certain deadlines.

In order to calculate wash sales the schedule D cannot be completed until the end of January. Also, employers are not required to distribute W2’s until the end of January. Both of these factors reduce the amount of time to prepare the return from 3 months 15 days to 2 months 15 days.

Brokers are not required to distribute 1099’s until the end of February. If the form 1099 is incorrect the corrected version may not come out until March. This reduces the amount of time to prepare the return to 1 month 15 days or maybe even less.

The deadline for corporate income tax returns is March 15th as opposed to the individual deadline, which is April 15th. Therefore, the preparer is forced to deal with the corporate returns before the individual returns. This reduces the amount of time to prepare an individual return to less than one month.

If you are the member of a partnership the preparer will need to have the K1 from the partnership return before completing your return. The IRS does not require the partnership to provide the K1 until April or if an extension is granted October. This being the case it may be impossible for the preparer to complete your individual income tax return by the April 15th deadline.

The factors listed above illustrate tax-preparers have a small window of time between receiving all information needed and April 15th deadline. This window in many cases can be less than a month. For a tax-preparer with hundreds of clients it is impossible to complete everyone’s individual income tax return within this small window of time.

Schedule D Software: No Substitute for a Tax Professional

Hiring a tax professional to prepare your Schedule D can be a costly. Currently, there are many software packages on the market that advertise a “do it yourself” approach to Schedule D preparation. It is easy to be seduced by these claims, as the price of the software can be much lower than the cost of a tax professional.

Unfortunately, depending on your trading, generating a Schedule D is not as easy as it sounds. When it comes to calculating wash sales, stocks and stock options are substantially identical securities. Many of the software packages on the market will not calculate the wash sales on this type of trading correctly and manual adjustments need to be made. Without a thorough knowledge of the wash sale rule you will not be able to make the proper adjustments.

The wash sale rule is just one of many obstacles in the path of creating a proper Schedule D. Other events that many software programs can’t handle are stock splits, spin offs, and option assignments, just to name a few. If any of these events have taken place in your trading account, it is no longer a simple matter of downloading your trades into the software and then having it spit out a Schedule D. Instead you will need to know the tax code well enough to be able to adjust for these events.

CEO, Jim Crimmins Offering Tax Planning Advice in Irvine, CA

Jim Crimmins, CEO of Traders Accounting will be offering timely advice on tax planning to attendees of their upcoming day trading training seminar on January 24^th in Irvine, California at the Online Trading Academy. These seminars are great for individuals who are experts in day trading or thought looking to starting up a day trading business. For a future schedule of day trading training seminars visit Traders Accounting.

Supreme Court Limits Trusts' Tax Deductions

The Supreme Court upheld limits Wednesday on income tax deductions for trusts and estates, ruling against the family that created Pepperidge Farm.

The court said trusts ordinarily may not deduct the full cost of investment advice on their income tax returns. Those expenses are deductible only when they exceed 2 percent of adjusted gross income, the same limits faced by individual filers, Chief Justice John Roberts said for a unanimous court.

The case arose over a relatively small tax dispute, $4,448, involving the income tax return filed by the trust established by the will of Henry A. Rudkin, former chairman and founder of the Pepperidge Farm company.

The trust was funded with the proceeds of the sale of Pepperidge Farm to the Campbell Soup Co. The trust had $2.9 million in assets and $625,000 in income in 2000, the year of the disputed return.

The trust reported that it spent $22,241 on investment advice and deducted all of it on its tax return. The Internal Revenue Service said the expenses could be deducted only to the extent they exceeded the 2 percent floor. The discrepancy was $4,448.

The trust sued in U.S. Tax Court, which ruled for the government. The 2nd U.S. Circuit Court of Appeals affirmed the ruling.

The case is Knight v. Commissioner of Internal Revenue, 06-1286.

Advice on Tax Planning Seminar Coming to DC

On the 19th of January, the experts at Traders Accounting will be presenting at The Online Trading Academy in Vienna, Virginia. This one day seminar will offer the best advice on tax planning whether you are starting up a day trading business or already an expert. For more information or to register visit the Online Trading Academy.

The event will cover the following topics:

· Classification of Traders

· Starting up a day trading business

· Investors

· What is a Trader to do?

· Why Trade as a Formal Business?

· Mark to Market Accounting

· Taxation of Traders

· How Are Regulated Futures Contracts and other Section 1256 Contracts Taxed?

· Self-Directed 401k plans

For more information on Traders Accounting and their upcoming seminars please visit www.TradersAccounting.com.

ATTENTION: New York Residents With a Partnership or LLC.

Are you aware that there is a New York State form due by January 31, 2007 for all partnerships and LLC’s?

Here are a few helpful links to get these form filled out and filed BEFORE the deadline. Click here for the instructions and here for the actual form. If you are not sure what you need to do or have questions on the forms contact your accountant or tax firm for help.

Ordinary Income and Capital Gains

According to an article on ordinary income and capital gains taxes, profit you make from your stock investments can be taxed in one of two ways, depending on the type of profit:

• Dividends - When you receive dividends from your stock (either in cash or stock), these dividends get taxed as ordinary income. This is also true if those dividends are in a dividend reinvestment plan. If, however, those dividends occur in a tax-sheltered plan, such as an IRA or 401(k) plan, then they’re exempt from taxes for as long as they’re in the plan. In January, investors receive a 1099-DIV statement from the issuer of the dividends that includes information on the amount of dividends earned the previous year. Check with your tax advisor because the latest tax laws offer tax advantages for dividends.

• Short-term capital gains - If you sell stock for a gain and you’ve owned the stock for just one year or less, the gain is considered ordinary income. If you buy a stock on August 1 and sell it on July 31 of the following year, that’s less than one year. To calculate the time, you use the trade date (or date of execution). This date is the date that you executed the order instead of the settlement date. However, if these gains occur in a tax-sheltered plan, such as a 401(k) or an IRA, no tax is triggered.

Long-term capital gains
Long-term capital gains are usually much better for you as far as taxes are concerned. The tax laws reward patient investors. After you have held the stock for at least a year and a day (what a difference a day makes!), your tax rate will be reduced. Get more information on capital gains in IRS Publication 550 “Investment Income and Expenses”. Because the tax on capital gains is the most relevant tax for stock investors.

Managing the tax burden from your investment profits is something that you can control. Gains are taxable only if a sale actually takes place. (In other words, only if the gain is “realized.”) If your stock in GazillionBucks, Inc., goes from $5 per share to $87, that $82 appreciation isn’t subject to taxation unless you actually sell the stock. Until you sell, that gain is “unrealized.” Time your stock sales carefully hold on to them at least a year to minimize the amount of taxes you have to pay on them.

Why traders should not use a S Corp for trading.

S Corps are better than sole proprietorships, in that you do not have to pay self employment taxes, but with S corps you have to pay yourself a "reasonable salary", and take the balance of the income as either dividends or unearned income. The problem with the "reasonable salary" is that there is no clear rules’ regarding what is considered reasonable. You have to do a lot of research and document all the information that you find. Most Traders experience highs and lows during the year and having to pay a salary is just not feasible for most traders and why subject yourself to the 15.3% of additional taxes.

In some cases the best and logical solution would be to use a LLC (Limited Liability Company). You can take tax free distributions up to the amount of capital you contributed, and the income is passed on through a K1 and taxed at your personal tax rate. This is beneficial because any losses for expenses are passed on as an ordinary loss and is deductible from your ordinary income and you are able to pocket the additional 15.3%.

Here’s a link to a web page with some great, free tips, tricks and techniques for day traders.

Highlights include:

• Order placement


• Low risk ideas


• Using mental stops


• ‘The 5-minute rule’


• Knowing what indicators to monitor


• And more

*****

Traders Accounting provides tax consulting, entity formation, tax preparation and 401(k) services that help you efficiently establish and maintain your trading business. Lower your taxes, save time, and maximize the benefits of your trading business. Visit our site for a FREE trader tax action plan.

Home Office Expense- Have you moved during this year?

Home Office Expense- Have you moved during this year? If so, recalculate your home office and net home square footage. And remember hallways, entry ways, stairways and bathroom are common areas and not include in the home square footage. You are also able to deduct a second telephone line that you but in for your business, as well as a portion of the electric, gas, home owners insurance, home owners association fees, trash pickup, and your alarm system fees. Depending on what type of business you are running out of your home and what your tax status looks like you can even deduct a percentage of your mortgage interest and real estate taxes.

Other assets that you purchase for your home office are also either expenses or can be depreciated over the average life of the item.

Income Tax Refunds: Better Late Than Never

On December 19, 2007 Congress enacted legislation, which shields middle and upper middle taxpayers from the alternative minimum tax. Unfortunately, some taxpayers who are subject to the AMT will not be able to file their returns or get their refunds until February of 2008. Due to the late action of congress the IRS will be unable to process five AMT-related forms until February 11, 2008. The forms that are subject to the delay are the following:

1) Form 8863, Education Credits.
2) Form 5695, Residential Energy Credits.
3) Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A filers.
4) Form 8396, Mortgage Interest Credit.
5) Form 8859, District of Columbia First-Time Home buyer Credit.

Year-end tax planning is imperative as it allows taxpayers to minimize their 2007 tax bills by timing the receipt of income and the claiming of deductions. Take advantage of Code Sec.179 by expensing, rather than depreciating, $125,000 worth of certain computer software or other business property purchased as late as Dec. 31, 2007.

Pay Deductibles Prior to Year-End. A good way to increase 2007 deductions is to pay deductible expenses such as charitable contributions, medical and dental expenses before year-end. Keep in mind that making a charitable contribution (or a medical care payment) with a credit card will yield a current deduction even though payment is not made until next year. Note that a donor’s pledge or promissory note does not qualify as a deductible payment this year.

Make Contributions to Retirement Plans. Taxpayers who make tax-deductible contributions to a tax-deferred qualified retirement plan before

year-end will benefit from a tax deduction as well as tax-deferral on the income earned by the investment for the long-term. The funds will generally be taxed when withdrawn, but most taxpayers expect a lower tax bracket at that time. In 2007, taxpayers can contribute up to $15,500 to a 401(k), 403(b), 457 or Simplified Employee Pension (SEP) IRA plan. Taxpayers who are age 50 and older can contribute an additional $5,000 under the catch-up provisions for a total contribution of $20,500.

Make IRA Contributions.For 2007, taxpayers may contribute a combined total of $4,000 to a traditional IRA or a Roth IRA. In addition, taxpayers who are at least 50 years old by year-end may make an additional contribution of $1,000 for a total contribution of $5,000. They have until April 15, 2008, to make their 2007 contribution to either a traditional IRA or a Roth IRA.

I Have My Corporation or LLC. Now What?

You have paid the filing fees, obtained an operating agreement or bylaws, documented the initial meetings and are the proud owner of a corporation, an LLC, or possibly both. Now that the entities are formed the first obvious step is to conduct business and start generating income. However, there are other activities outside the actual business activity that are essential to the well being of your newly established entity.

One important activity that small business owners often overlook is documenting decisions with meeting minutes. It is essential that as business owners you have at least annual meetings, which you document with official minutes. Also, it is recommended that any special decisions outside normal operations that may effect the entity’s tax situation be documented with minutes.

Without these minutes you may be risking your financial well being. Often courts will look at the meeting minutes when deciding whether or not to pierce the corporate veil. It is also possible the IRS may look at your minutes to establish the fact that you are treating your entity as a legitimate business and not as a way to deduct non-deductible personal expenses. In either scenario without the proper documentation you could find yourself on the road to financial ruin.

Final Passage of Alternative Mininmum Tax (AMT Patch)

Wednesday, December 19, 2007, House of Representatives passed the Alternative Minimum Tax (AMT). The legislation is now on the way to the President for his signature. Once signed the Internal Revenue Services can begin the remaining preparation for the next year’s filing season.

Since the AMT's inception nearly 40 years ago, the amount of income you're allowed to exempt from AMT consideration has never been adjusted for inflation.

It was meant to catch wealthy tax filers who otherwise would not have paid much under the regular income tax code. But because average income has outpaced inflation over time, more and more people start to look like the rich guys when doing their AMT calculations.

Since 2001, Congress has temporarily increased income exemption levels. The last "patch" - for 2006 - put the exemption levels at $62,550 for joint filers and $42,250 for single filers. The bill passed by the House calls for an increase in those levels to $66,250 and $44,350, respectively. Without a patch, the 2007 exemption amounts will fall to $45,000 for joint filers and $33,750 for single filers.

Traders Accounting Helps Businesses Understand Changes in Texas Franchise Tax Laws

For business owners who are not understanding the changes in the Texas franchise tax law, Traders Accounting is helping. They are the leader in business consulting and tax planning services offering expert advice on how to prepare for the implementation of the new laws. “We at Traders want to help the Texas state comptroller’s office and ensure business owners understand what is now required of them.”The Texas state comptroller's office is providing the forms through their website.

According to the Texas state comptroller’s office, “the Texas franchise tax is a privilege tax imposed on each taxable entity chartered/organized in Texas or doing business in Texas.” Each entity will have a tax rate between 0.5% and 1% depending on the criteria listed in the new Texas franchise tax instructions.

Starting a Corporation or LLC? You get what you pay for.

You have read all the articles and listened to the professionals and you are convinced that it is time for you to establish a corporation, an LLC or possibly both. Now that you have moved passed the decision of needing an entity it is time to answer the question, how do I get started?

When starting your entities it is tempting to take the cheap alternative, which is to form the entities yourself. However, incorporating business entities is not as easy as it sounds. The first step is you must complete the proper application forms required by the state agency responsible for controlling businesses in the state. Once this is accomplished the state agency will send you the articles of incorporation for your entity. This task is generally simple enough however this is still not enough. You will also need a set of bylaws in the case of corporations, an operating agreement in the case of LLC’s and minutes of the initial meetings. These documents will be very important to the future of your business. These documents contain the rules by which the entity will operate. These documents are important for several reasons. Without these rules being properly documented you are left vulnerable to the machinations of a disgruntled partner or employee. It is possible the courts will look at these documents in cases where a creditor is looking to pierce the corporate veil. Often banks and brokerages will want to see these documents before they will allow an account to be opened. Finally, the laws in your state may require such documents to be drafted and maintained.

In business it is important to cut costs. When it comes to forming your entity however, the cheap way could prove detrimental not only to the business itself but, also to you as an individual. So when forming your business structure, it is recommended that you use a professional that has knowledge and will ensure your business's success.

Can you believe it; the 2007 tax year end is just around the corner! Most new business owners assume their tax returns are due April 15th for their corporate or LLC structure. However, the due date for most all business returns are not the same as that of a personal 1040.

Corporations (“C” and Sub-Chapter “S”) must file IRS form 1120 by March 15, 2008. For LLC’s and Limited and General Partnerships, the due date for IRS form 1065 is April 15, 2008.

A word of caution for those who operate out of an LLC - check with your tax expert to confirm your business tax election. An LLC can be taxed as a partnership, a sole-proprietorship, or as a “C” or “S” Corporation.

If your business operates a qualified retirement such as a 401k Profit Sharing plan, IRS form 5500 may be required. If your plans year end falls on December 31st and if it meets the requirements for filing, the due date is July 31st.

For guidance on tax compliance and assistance with preparation, a Traders Accounting tax professional can ensure that you meet the stringent IRS guidelines.

Corporation and LLC Owners Beware! Scammers are looking for you.

There are many unscrupulous people dreaming of ways to take your money without giving you anything of value in return. One of those scams that may take the unwary by surprise consists of an official looking document being delivered to your corporation or LLC. The document talks about the importance of documentation and sites several state statutes requiring adequate records be kept. The notice then states that you must send an annual fee to the address listed by a specified due date. All in all the notice looks official (view actual notice) and is accurate in regards to the importance of keeping adequate records. However, if you read the fine print the fee is not going to a governmental agency. Instead, it is being paid to a private corporation whose services are completely unnecessary and there is even some question as to what service they are actually selling.

This particular scam has been seen frequently in California but has been seen in many other states as well. This is just one scam in many that can trap the unwary business owner so; you want to be sure to read the fine print before writing any checks.

Trends and Successful Tips for Day Traders

Traders have very different styles as to how and when they make their trades. However, there are trends and patterns that day traders can find helping them become successful at day trading. According to 123 Sensex, they list 20 rules for day traders and explain what day traders should be on the look out for.

At Traders Accounting, we always want to help offer the best advice on tax planning, and with day trading. We will keep you up to date and informed on the best ways day traders can experience the maximum gains on their investments.

Day Trading Advice From The Experts

Traders Accounting introduced their new Tax Action Plan, to help day traders with advice on tax planning from professional tax deduction consultants. Each customized tax action plan outlines strategic planning for all those seeking expert day trading advice. To get started, please visit TradersAccounting.com.

“The best day trading advice we offer is to traders who have implemented a plan prior to tax time of the upcoming year, something so simple can save people time and money,” said Jim Crimmins, President of Traders Accounting. “Our clients look to our tax deduction consultants for the best strategy in tax preparation throughout the year, asking questions and helping with decisions.”

Quick and Easy Resources for Day Traders

Looking for a comprehensive listing of some of the best companies that provide brokerage, education and other services for the active trader? Visit Traders Accounting’s Trader Resources Center.

And if you need a reliable company that provides business products and services to people who trade as a business? Traders Accounting’s Business Resources Center offers an extensive list of businesses just for you.

If you have someone else you think should be included on this page, please contact us. By working together we can continue to provide you with services you need to make managing your small business easy.

Seek Expert for Advice on Tax Planning

With the U.S. Department of Treasury changing laws so frequently, experts are needed to ensure the proper tax deductions are taken. Tax preparation for day traders and investors are different than many and investors could be missing several opportunities causing them to overpay Uncle Sam.

Traders Accounting, the largest online resource for day trading advice and day trader tax preparation, is offering a free tax action plan for this upcoming tax season. The in-depth report is reviewed by tax deduction consultants and offers day traders advice on tax planning.

Stock Market Seminar Helps Educate Traders

Traders Accounting will be hosting a three day stock market seminar on November 27-29, helping to educate traders will all their financial needs including advice on tax planning. Each attendee will have access to personal book keepers, professional tax departments and business consultants.

Registration has already begun as seats are filling up fast.

Day Trading Services and Day Trading Software

Traders Accounting – Providing Day Trading Services and Day Traders Accounting Software