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2010 Tax Relief Act

2010 Tax Relief Act

 
On December 17th, the President signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Relief Act) which includes: 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 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. The following is a summary of the most important provisions of this legislation.

Individual Tax Rates-these tax rates were scheduled to revert from the current levels back to pre-2001 rates beginning January 1, 2011 (with the top rate rising to 39.6%). However, the 2010 Tax Relief Act extends all current individual tax rates of 10, 15, 25, 28. 33 and 35 percent for two years, through December 31, 2012.

Capital Gains/Dividends-similarly, the maximum tax rate of 15% on capital gains and qualified dividends will continue for two years, through December 31, 2012.
Itemized Deductions/Personal Exemptions/Marriage Penalty Relief-the 2010 Tax Relief Act also extends the full repeal of various tax limitations that was scheduled to expire as of December 31, 2010 for two years, through December 31, 2012. As such, there is significant relief for middle income and higher-income taxpayers under these tax "extenders".

Payroll Tax Cut-the Tax Act reduces the employee-share of the OASDI portion of Social Security taxes from 6.2% to 4.2% for wages earned in calendar year 2011 up to the FICA maximum taxable wage base of $106,800. Thus, individuals earning at or above this maximum wage base amount will receive a $2,136 tax benefit in 2011. Further, self-employed individuals will pay 10.4% on self-employment income up to the income threshold. Please note that the employer's portion of the FICA expense remains at 6.2%.

Bonus Depreciation-the Tax Act boosts 50% bonus depreciation to a 100% write-off for qualified property placed in service after September 8, 2010 and before January 1, 2012. This provision is one of the most expansive for businesses. Unlike Sec. 179 expensing, it is not limited to use by smaller businesses or capped at a certain dollar levels.

Estate Tax Relief-the Tax Act revives the estate tax for decedents dying after December 31, 2009. The maximum estate tax rate is 35% with an exclusion amount of $5 million. This represents a significant reduction from the 45% rate and the $3.5 million exemption applicable for 2009. These new rate and exclusion amounts apply for 2011 and 2012. However, for those decedents dying in 2010, the Act allows for a choice between the new estate tax rules, which would include a step-up in basis, or no estate tax (as in effect for 2010) with a modified carryover basis. In effect, the Act achieves this choice by making estate tax and basis changes retroactively for estates of decedents dying after 2009 but allowing the opt-out choice for estates of decedents dying in 2010. Very importantly, the Act provides for "portability" between spouses of the maximum exclusion. This would allow a surviving spouse to elect to take advantage of the unused portion of the estate tax exclusion (i.e. unused portion of the $5 million) of his or her predeceased spouse. With this election and careful tax planning, married couples can effectively shield up to $10 million from estate tax.

Gift Taxes-for gifts made in 2010, the top gift tax rate and maximum applicable exclusion is 35% and $1 million, respectively. For gifts made after 2010, the gift tax is reunited with the estate tax with a top gift tax rate of 35% and a maximum applicable exclusion of $5 million. Of course, donors may continue to apply an annual gift tax exclusion before having to utilize part of their unified exclusion. For 2010 and 2011, the annual exclusion remains at $13,000.

Individual Tax Breaks Extended--the following tax breaks that expired at the end of 2009 will be retroactively reinstated for 2010 and extended through 2011:
the $250 above-the-line deduction for certain teachers
the election to take an itemized deduction for state and local general sales taxes
the above-the-line deduction for qualified tuition and related expenses
the provision that permits taxpayers 70 1/2 or older to make tax-free distributions from IRA accounts to charity of up to $100,000

The new law gives taxpayers some certainty in tax planning for the next two years, particularly for individual income tax rates, capital gains/dividends tax rates and the estate tax. However, these provisions are temporary and the new law pushes the ultimate fate of the Bush-era tax cuts to 2012, a presidential tax year.

 

Los Angeles Probate Attorneys, Los Angeles Probate, Los Angeles Probate Lawyers

State Income Tax Rate Comparison

If you are wondering where you should retire, here is a comparison of the state income tax rates as of 1/2007, as complied by taxadmin.org which you may find interesting:

STATE INDIVIDUAL INCOME TAXES
(Tax rates for tax year 2007 -- as of January 1, 2007)

	---Tax Rates---				# of	--Income Brackets--					---Personal Exemption---							Federal Tax
State	Low		High		Brackets	Low			High		Single			Married		Child.		Ded.
ALABAMA	2.0	-	5.0		3	500	(b)	-	3,000	(b)		1,500		3,000		300		*
ALASKA	No State Income Tax
ARIZONA	2.59	-	4.54		5	10,000	(b)	-	150,000	(b)		2,100		4,200		2,300
ARKANSAS (a)	1.0	-	7.0	(e)	6	3,599		-	30,100			22	(c)	44	(c)	22	(c)
CALIFORNIA (a)	1.0	-	9.3	(w)	6	6,622	(b)	-	43,468	(b)		91	(c)	182	(c)	285	(c)
COLORADO	4.63				1	-----Flat rate-----						-----------None-----------
CONNECTICUT	3.0	-	5.0		2	10,000	(b)	-	10,000	(b)		12,750	(f)	24,500	(f)	0
DELAWARE	2.2	-	5.95		6	5,000		-	60,000			110	(c)	220	(c)	110	(c)
FLORIDA	No State Income Tax
GEORGIA	1.0	-	6.0		6	750	(g)	-	7,000	(g)		2,700		5,400		3,000
HAWAII	1.4	-	8.25		9	2,400	(b)	-	48,000	(b)		1,040		2,080		1,040
IDAHO (a)	1.6	-	7.8		8	1,198	(h)	-	23,964	(h)		3,400	(d)	6,800	(d)	3,400	(d)
ILLINOIS	3.0				1	-----Flat rate-----						2,000		4,000		2,000
INDIANA	3.4				1	-----Flat rate-----						1,000		2,000		1,000
IOWA (a)	0.36	-	8.98		9	1,343		-	60,436			40	(c)	80	(c)	40	(c)	*
KANSAS	3.5	-	6.45		3	15,000	(b)	-	30,000	(b)		2,250		4,500		2,250
KENTUCKY	2.0	-	6.0		6	3,000		-	75,000			20	(c)	40	(c)	20	(c)
LOUISIANA	2.0	-	6.0		3	12,500	(b)	-	25,000	(b)		4,500	(i)	9,000	(i)	1,000	(i)	*
MAINE (a)	2.0	-	8.5		4	4,550	(b)	-	18,250	(b)		2,850		5,700		2,850
MARYLAND	2.0	-	4.75		4	1,000		-	3,000			2,400		4,800		2,400
MASSACHUSETTS (a)	5.3				1	-----Flat rate-----						4,125		8,250		1,000
MICHIGAN (a)	3.9				1	-----Flat rate-----						3,300		6,600		3,300
MINNESOTA (a)	5.35	-	7.85		3	21,310	(j)	-	69,991	(j)		3,400	(d)	6,800	(d)	3,400	(d)
MISSISSIPPI	3.0	-	5.0		3	5,000		-	10,000			6,000		12,000		1,500
MISSOURI	1.5	-	6.0		10	1,000		-	9,000			2,100		4,200		1,200		* (r)
MONTANA (a)	1.0	-	6.9		7	2,300		-	14,500			1,980		3,960		1,980		* (r)
NEBRASKA (a)	2.56	-	6.84		4	2,400	(k)	-	27,001	(k)		106	(c)	212	(c)	106	(c)
NEVADA	No State Income Tax
NEW HAMPSHIRE	State Income Tax is Limited to Dividends and Interest Income Only.
NEW JERSEY	1.4	-	8.97		6	20,000	(l)	-	500,000	(l)		1,000		2,000		1,500
NEW MEXICO	1.7	-	5.3		4	5,500	(m)	-	16,000	(m)		3,400	(d)	6,800	(d)	3,400	(d)
NEW YORK	4.0	-	6.85		5	8,000	(b)	-	20,000	(b)		0		0		1,000
NORTH CAROLINA (n)	6.0	-	8.0		4	12,750	(n)	-	120,000	(n)		3,400	(d)	6,800	(d)	3,400	(d)
NORTH DAKOTA (a)	2.1	-	5.54	(o)	5	30,650	(o)	-	336,550	(o)		3,400	(d)	6,800	(d)	3,400	(d)
OHIO (a)	0.649	-	6.555		9	5,000		-	200,000			1,400	(p)	2,800	(p)	1,400	(p)
OKLAHOMA	0.5	-	5.65	(q)	7	1,000	(b)	-	10,000	(b)		1,000		2,000		1,000		* (q)
OREGON (a)	5.0	-	9.0		3	2,750	(b)	-	6,851	(b)		159	(c)	318	(c)	159	(c)	* (r)
PENNSYLVANIA	3.07				1	-----Flat rate-----						-----------None-----------
RHODE ISLAND	25.0% Federal tax liability (s)								---			---		---		---
SOUTH CAROLINA (a)	2.5	-	7.0		6	2,570		-	12,850			3,400	(d)	6,800	(d)	3,400	(d)
SOUTH DAKOTA	No State Income Tax
TENNESSEE	State Income Tax is Limited to Dividends and Interest Income Only.
TEXAS	No State Income Tax
UTAH	2.30	-	6.98	(t)	6	1,000	(b)	-	5,501	(b)		2,550	(d)	5,100	(d)	2,550	(d)	* (t)
VERMONT (a)	3.6	-	9.5		5	30,650	(u)		336,551	(u)		3,400	(d)	6,800	(d)	3,400	(d)
VIRGINIA	2.0	-	5.75		4	3,000		-	17,000			900		1,800		900
WASHINGTON	No State Income Tax
WEST VIRGINIA	3.0	-	6.5		5	10,000		-	60,000			2,000		4,000		2,000
WISCONSIN (a)	4.6	-	6.75		4	9,160	(v)	-	137,411	(v)		700		1,400		700
WYOMING	No State Income Tax
								-
DIST. OF COLUMBIA	4.5	-	8.7		3	10,000		-	40,000			2,400		4,800		2,400

Source: The Federation of Tax Administrators from various sources.
(a) 17 states have statutory provision for automatic adjustment of tax brackets, personal exemption or standard deductions to the rate of inflation. Massachusetts, Michigan, Nebraska and Ohio indexes the personal exemption amounts only.
(b) For joint returns, the taxes are twice the tax imposed on half the income.
(c) tax credits.
(d) These states allow personal exemption or standard deductions as provided in the IRC.  Utah allows a personal exemption equal to three-fourths the federal exemptions.
(e) A special tax table is available for low income taxpayers reducing their tax payments.
(f) Combined personal exemptions and standard deduction.  An additional tax credit is allowed ranging from 75% to 0% based on state adjusted gross income.  Exemption amounts are phased out for higher income taxpayers until they are eliminated for households earning over $56,500.
(g) The tax brackets reported are for single individuals.  For married households filing separately, the same rates apply to income brackets ranging from $500 to $5,000; and the income brackets range from $1,000 to $10,000 for joint filers.
(h)  For joint returns, the tax is twice the tax imposed on half the income.  A $10 filing tax is charge for each return and a $15 credit is allowed for each exemption.
(i)  Combined personal exemption and standard deduction.
(j) The tax brackets reported are for single individual.  For married couples filing jointly, the same rates apply for income under $31,150 to over $123,751. A 6.4% AMT rate is also applicable.
(k) The tax brackets reported are for single individual.  For married couples filing jointly, the same rates apply for income under $4,000 to over $50,001.
(l) The tax brackets reported are for single individuals.  For married couples filing jointly, the tax rates range from 1.4% to 8.97% (with 7 income brackets) applying to income brackets from $20,000 to over $500,000.
(m) The tax brackets reported are for single individuals.  For married couples filing jointly, the same rates apply for income under $8,000 to over $24,000.  Married households filing separately pay the tax imposed on half the income.
(n) The tax brackets reported are for single individuals.  For married taxpayers, the same rates apply  to income brackets ranging from  $21,250 to $200,000.  Lower exemption amounts allowed for high income taxpayers. Tax rate scheduled to decrease after tax year 2007.
(o) The tax brackets reported are for single individuals.  For married taxpayers, the same rates apply  to income brackets ranging from  $51,200 to $336,551.  An additional $300 personal exemption is allowed for joint returns or unmarried head of households.
(p) Plus an additional $20 per exemption tax credit.
(q) The rate range reported is for single persons not deducting federal income tax.  For married persons filing jointly, the same rates apply to income brackets ranging from $2,000 to $15,000.  Separate schedules, with rates ranging from 0.5% to 10%, apply to taxpayers deducting federal income taxes.
(r) Deduction is limited to $10,000 for joint returns and $5,000 for individuals in Missouri and to $5,000 in Oregon.
(s)  Federal Tax Liability prior to the enactment of Economic Growth and Tax Relief Act of 2001.
(t) One half of the federal income taxes are deductible. Taxpayer has an option of using the standard brackets and rates with all deductions, or paying a flat 5.35% of income with limited deductions.
(u) The tax brackets reported are for single individuals.  For married couples filing jointly, the same rates apply for income under $51,200 to over $336,551.
(v) The tax brackets reported are for single individuals.  For married taxpayers, the same rates apply to income brackets ranging from $12,210 to $183,211. An additional $250 exemption is provided for each taxpayer or spouse age 65 or over.
(w) An additional 1% tax is imposed on taxable income over $1 million.

Mina N. Sirkin is a Board Certified Specialist attorney in Estate Planning, Probate and Trust Law by the Board of Legal Specialization of the State Bar of California.  MS. Sirkin practices in Los Angeles County, California.  [email protected].  http://www.SirkinLaw.com.

Why do actors do stupid things?

Wesley Snipes to Go on Trial in Tax Case

Sometimes you just wonder why some actors do stupid things.    Wesley, if you made that much money, why couldn't you just pay Uncle Sam? $14M would have been petty cash for you!!!

In a story, in the NY Times, David Cay Johnston wrote:

"BY: DAVID CAY JOHNSTON

From 1999 to 2004, the actor Wesley Snipes earned $38 million appearing in more than half a dozen movies, including two sequels to his popular vampire thriller “Blade.”

Skip to next paragraph

Peter Cosgrove / AP File Photo

Actor Wesley Snipes with his press assistant Judy Smith in December 2006. The 45-year-old action star is set to go on trial Monday, Jan. 14, 2008, on tax fraud and conspiracy charges.

The taxes he paid in the same period? Zero.

But unlike other celebrities who find themselves on the wrong side of the Internal Revenue Service, Mr. Snipes has a flamboyant explanation: he argues that he is not actually required to pay taxes.

Mr. Snipes, who is scheduled to go on trial Monday in Ocala, Fla., has become an unlikely public face for the antitax movement, whose members maintain that Americans are not obligated to pay income taxes and that the government extracts taxes from its citizens illegally.

His trial has become the most prominent income tax prosecution since the 1989 conviction of the billionaire New York hotelier, Leona Helmsley, who went to prison for improperly billing personal expenses to her business.

Tax deniers maintain that the law only appears to require payment of taxes. All their theories have been rejected by the courts, including the one invoked by Mr. Snipes, which is known as the 861 position, after a section of the federal tax code.

Adherents say a regulation applying the 861 provision does not list wages as taxable, though it does say that “compensation for services” is taxable. The courts have uniformly rejected all such theories, and eight people have been sentenced to prison after not paying taxes based on the 861 argument.

Despite the court rulings, juries have acquitted some prominent tax resisters in recent years, and failed prosecutions have encouraged others to join. Even when the government has failed to obtain convictions, it succeeded in collecting the taxes through civil enforcement.

J. J. MacNab, a Maryland insurance analyst who tracks people who deny they owe taxes and has testified before Congress about the movement, said that an acquittal of Mr. Snipes would be a severe setback for the I.R.S.

“He will get more press and attention than any other victory by the tax deniers, and the growth in new members will be exponential,” she said.

Mr. Snipes, 45, is charged with two felonies: conspiracy to defraud the government and filing a false claim for a $7 million refund (a claim for the year 1997, before he stopped paying taxes). He is also charged with failing to file tax returns for the six years starting in 1999. Prosecutors say they intend to show that Mr. Snipes moved tens of millions of untaxed dollars offshore and gave the government three worthless checks totaling $14 million to cover some taxes.

In court papers and interviews, Mr. Snipes says that he is not guilty and that he acted on the advice of two tax professionals. They are being tried alongside him and are promoters of the 861 position and other tax theories.

One is Douglas Rosile, who was stripped of his accounting license in 1997. The other is Eddie Kahn, who has served prison time for tax crimes. Both are under federal court order to stop promoting tax evasion, including the 861 position.

The lawyer representing Mr. Snipes at trial is Robert Bernhoft of Milwaukee, who has been barred by court order since 1999 from selling a program under which he said people could legally stop paying income taxes.

Mr. Snipes, who grew up in the Bronx, is best known for tough-guy roles in movies like “Blade,” “U.S. Marshals,” and “Passenger 57,” but he also starred in films by Spike Lee (“Jungle Fever,” “Mo’ Better Blues”) and Ron Shelton (“White Men Can’t Jump”).

His involvement with the tax resistance movement may stem from his association with the Nuwaubians, a quasi-religious sect of black Americans who promote antigovernment theories and who set up a headquarters in Georgia in the early 1990s.

In 2000, Mr. Snipes sought a federal permit for a military training compound on land next to the Nuwaubian camp; the Bureau of Alcohol, Tobacco and Firearms rejected the request.

“Snipes is already drawing whole new demographics to the movement,” Ms. MacNab added. “Tax protesters used to be white, 50 or older, blue-collar, rural and often connected to racist movements, but Snipes is young, urban and famous.”

She and others said the movement got a boost in 2005 when a jury acquitted Joseph Banister, a former criminal investigator for the I.R.S., who used his acquittal as proof that his views on the tax law were correct. One problem with that case was that even though his co-defendant, Al Thompson of Lake Shasta, Calif., was acquitted of conspiracy in a separate trial, Mr. Thompson is serving six years in prison for failing to withhold taxes from his employees and turn the money over.

Federal prosecutors also failed to convict a Louisiana lawyer, Tom Cryer, who, like Mr. Snipes, said he sincerely believed that he was not required to pay taxes. Another resister, Robert Lawrence of Peoria, Ill., had his case dropped in 2006 after arguing that tax forms violate the federal Paperwork Reduction Act — a strategy that had been falling out of favor among tax opponents but has since gained new adherents. Both men were still liable for the taxes after their cases.

Prosecutors also failed to convict a FedEx pilot, Vernice Kuglin of Memphis, who said she wrote the I.R.S. asking what law makes her liable for taxes, but got no response. She later signed papers conceding she owed more than $600,000 in taxes, and last week her goods, including her 14-year-old vehicle, were auctioned in Memphis. Ms. Kuglin said that despite the court filing, she continues to believe that she does not owe taxes.

Tax specialists and lawyers say that the Snipes case hinges on whether he can persuade jurors that he sincerely believed that he did not have to pay taxes, while prosecutors will argue that he was just trying to avoid them. The Supreme Court has ruled that people can make such an argument, but two leading defense lawyers said that Mr. Snipes might have a hard time using it as a defense.

Michael Louis Minns, a Houston lawyer who has defended and won acquittals for tax protesters, said that the three bad checks that Mr. Snipes sent the government to cover $14 million of taxes would seem to destroy a defense based on that argument.

“You can win acquittal with a good-faith defense that you sincerely believed you do not have to pay taxes,” Mr. Minns said. “But not if you make inconsistent claims.”

William Cohan, a lawyer in Rancho Santa Fe, Calif., who also represents tax opponents, said another hurdle is the refund claim form signed by Mr. Snipes. The signature statement, or jurat, was altered so that instead of saying it was signed under penalty of perjury, the word “no” was inserted before “penalty.”

“That’s just devastating because if you sincerely believe you are not required to pay taxes, why would you alter the jurat?” Mr. Cohan said."

This is a clear case of greed.   He could have done anything with the $14 M.  If he didn't want Uncle Sam to spend it for him, he could have donated it to some charity and gotten a tax deduction for it.  Who writes bad checks to the IRS?  Was this guy nuts?

Mina N. Sirkin is a Board Certified Specialist in Estate Planning, Probate and Trust Law by the Board of Legal Specialization of the State Bar of California.   Ms. Sirkin practices in Los Angeles County, California.  [email protected]  http://www.SirkinLaw.com.