December 7, 1992

1992 Year End and Clinton Planning

          Planning is harder this year due to the uncertainty of next year. Will chameleon-like Uncle Bill or the liberal Democrat Congress under Messrs. Gebhardt and Rostenkowski determine the new taxing policy? Higher taxes loom ahead but where will the cutoff be? I fear that incomes below $200,000 will not be spared; as the levels at which deductions and personal exemptions phase out will be lowered and deductions will be by capping mortgage interest and other deductions.

         The primary principle of year end planning has not changed looking at two years together to minimize your total tax for both. This means estimating your income and deductions for each year.

          For those with alternate minimum tax problems, probably the best advice is to continue moving taxable income to nontaxable. In general, do not try to move deductions from year to year. Try to purchase municipal bonds.

          A reversal of S-Corporation status might be in the cards as many S owners will look nervously at the idea of a 36% top personal tax rate.

Postal Inspectors Warn of IRS Refund Scam

          The U.S. Postal Inspection Service is warning consumers to beware of a notice in the mail that says the IRS is holding a refund check in your name. To claim the money the notice says all you have to do is send $10 to an address in Florida. Those who send in $10 do not get a refund. instead, they get a claim form, something the IRS gives away free. Millions of notices have been sent to addresses throughout the U.S. and postal inspectors have seized almost $1 million from accounts belonging to the scam operators.

New Federal Tax Deposit Rules for 1993

          A new simplified system for the deposit of withheld employment taxes has been put into place for 1993. The new rules are widely acknowledged as simplifying the current rules by categorizing all employers as either monthly or semi-weekly depositors and by eliminating eighth monthly deposits. Once an employer is assigned a status as a monthly or semi-weekly depositor, it will retain that status throughout the entire calendar year.

New Direct Rollover and 20% Withholding Regulations Issued

          The IRS has issued temporary regulations explaining the new (post 12/31/92) mandatory 20% withholding rule that targets distributions that are not rolled over directly. Briefly, after December 31, 1992 eligible rollover distributions are subject to a mandatory 20% withholding unless the recipient elects to have the payout made to another qualified plan or IRA via a direct rollover. There are no exceptions for amy rollovers exceeding $200.

David Dinkins v. IKEA

          When does a tax stop being a nuisance and become a cost? According to IKEA when the rate is 8 1/4 %. IKEA, under a new New Jersey policy can charge a 3% sales tax and New York City charges 8 1/4%, a 5 1/4% difference. On $3,000 of furniture that`s over $150. On another note, business continues to leave New York to avoid the Unincorporated Business Tax, Commercial Rent Tax and the Corporation Tax that only allows a $15,000 salary deduction to a corporate officer. Jersey City and environs looks to be the biggest winner.
          Wake up David!! Wake up Mario!!

Phone from Home

          Did you notice gas prices jump 8¢ a gallon? It`s due to the new oxygenated gasoline that had to be used starting November 1, 1992 due to the Federal Clean Air Act. Any other reason to know about the Clean Air Act? If you are looking at telecommuting you might have to. The 1990 amendments to the Federal Clean Air Act require states to enact clean air policies , and by 1996 all businesses with more than 100 employees at sites classified by the EPA as severe or extreme (NYC?) will be required to reduce the number of cars commuting to their locations.

          The most popular form of telecommuting is where the employee works at home whether full time or several days a week. Maybe the company will reclassify you as an independent contractor. Can you get a home office deduction?

          Two new forms of telecommuting are satellite offices and Neighborhood work centers. A neighborhood work center is where companies that cannot afford to set up a satellite office can sometimes rent space at a site where employees from different companies are housed in the same work location and share resources. These new forms are now in existence in Hawaii and on the West Coast. Is this a new business opportunity for you?

         We wish you and yours a very happy holiday season and a healthy and prosperous new year. If you have any questions about these or any other matters, please call us.