California Tax Refunds

Sorry for two tax entries in a row. But this one is specifically for us Californians - Mom, Dad, Bonnie, Greg, Cheryl, and Jim. Considering California is expected to run out of money in about four weeks, this wasn't too unexpected. Here is the bad news regarding your California tax refund.

Information provided by Spidell...

Last Friday the California State Controller announced the state would not send tax refunds for 30 days beginning February 1. According to the Franchise Tax Board they will continue to process returns as normal but the State Controller will stop issuing refunds on February 1.
Tax returns that have not completed processing by the FTB and the State Controller's Office before February 1 will have their refunds delayed. Thus, based on our understanding of processing time, we believe that a taxpayer who e-files their California return using direct deposit of any refund could possibly receive a refund if the return is accepted by the FTB on or before this Friday, January 23.

Note: As the situation changes daily, no one can guarantee that refunds will be released, even if filed by January 23. Be sure to advise your clients that filing early may mean an earlier refund, but there is no guarantee.

We recommend the taxpayer request direct deposit of refunds, which will speed up the receipt of the refund both now and when the State Controller releases the refunds.

They could extend this indefinitely. Basically, you are now a general creditor of the state who has given them an involuntary short-term loan. They owe you money but who knows if and when you will get it. They will have to pay interest on this, but if they don't even have the money to give you the principal...

Your Friendly Neighborhood Tax Advice

I went to a seminar yesterday that highlighted changes in the tax law for 2008. I have listed those items that I think will be of benefit to members of the family. Make sure you read the audit warnings at the bottom - there is something very important that definitely impacts Mormons. Anyway, here goes…

Capital Gains - If you are in the 15% tax bracket, any capital gains up to the 15% bracket limit will be taxed at 0%! This is a significant change. If your taxable income (income minus exemptions and deductions) is less than $65,100 you will benefit.

Educator Expenses - Teachers (that would be you Marjorie) can deduct up to $250 of unreimbursed expenses. This was set to expire but has been extended through 2009.

HSAs - If anyone has an HSA account, you are now allowed to make a one time contribution from your IRA directly to your HSA account. You effectively would avoid taxes on any amounts that you move as distributions from HSA accounts are not taxable.

Property Tax Standard Deduction - The regular standard deduction is a set amount. If you are blind or over 65 you can add to this standard amount. They have now added a third category for those who pay property taxes. So if you don't have enough deductions to itemize and you pay property taxes you can now claim up to an additional $1,000 on top of your $10,900 standard deduction!

Itemized Sales Tax Deduction - You guys in Texas lucked out. This ridiculous deduction that George Bush gave (only because he was from Texas) has been extended through 2009. I hope you're happy.

Business Mileage - You (John) can claim 50.5 cents per mile for the first half of 2008 and 58.5 cents for the second half. In 2009, the amount is 55 cents per mile.

Charitable Mileage - Most people don't know they can deduct mileage while assisting a charity. For example, if you drive to a soup kitchen to help for the day, you can deduct 14 cents per mile for the round trip. Also, if you are helping with the ward's cannery assignment (not for personal canning) you would also qualify. Sorry dad, the trips to the Oakland temple would be considered personal in nature.

AUDIT WARNINGS!!!

The IRS and state governments (especially CA) are increasingly desperate for revenues. Since they can't raise taxes, they have increased the level of audits significantly to bring in more money. Now more than ever, you must make sure you are dotting the i's and crossing the t's. Here are a couple of examples…

Charitable Donations - You are required to have written proof of your charitable donation BEFORE you file your tax return. The IRS actually sued a family last year regarding this point. The family made legitimate, qualified donations to their church. When they were audited, they went back to their church for a duplicate copy of their donations for proof. The IRS denied their deduction because they were supposed to have secured a copy before the return was filed. The court agreed. So do NOT lose your tithing settlement records! BTW - Cancelled checks won't save you either.

Home Interest - The IRS is aware of the massive abuse on this one and is coming down hard. Contrary to popular belief, you are NOT allowed to claim all interest reported to you on a first mortgage. You are only allowed to claim interest on "original acquisition indebtedness." If you financed $100k on a $150k home when you first bought it and subsequently refinanced it to $300k over the years, you are only allowed to deduct interest on the first $100k of the refinanced loan. You may still be able to claim the interest on an additional $100k if you meet the requirements for home equity indebtedness but that is a separate deduction.

Earned Income Credit - The IRS is looking very carefully at anyone who takes this credit from now on. They have realized that the error (fraud) rate is about 24% and for some reason they are a little testy about it now. Take it if you qualify, but just know your return is likely to be scrutinized.

Blast From the Past

We went up to Grandma and Grandpa's house to find some pictures for scrapbooking. As we were looking, we came across this little beauty! Ladies and gentlemen this is a quality photograph you have before you. The essence of the 70s has been marvelously captured in all its glory. I would love to have a red jacket like that now though. It is so retro that I would be completely styling this holiday season. Please note the devious smile on John's face. He's looking at the back of my head and trying not to laugh. I am forced to wonder what exactly he must have wiped on the back of my head when no one was looking.

Career Change

I have been informed by some that sister Wendy and I displayed some of the weaknesses of our kind over Thanksgiving as we discussed accounting. Some even considered our conversations dull. I am shocked. Well, I have found a humorous skit from Monty Python that I think you will all enjoy. However, you should know before viewing that a "chartered accountant" is the British/Canadian equivalent to the U.S. certified public accountant. Enjoy.

http://www.youtube.com/watch?v=XMOmB1q8W4Y

Analysis of the BYU v. U of U Game

http://www.youtube.com/watch?v=k6CROOR2QN8

Thanksgiving Stuff

Thanksgiving was great. I am grateful for the time I had to spend with family. It is always nice being together and being able to play games. Wendy was especially pleased that she was able to win her first game of Ticket to Ride with the Stevens family. I think it was a red-letter day for her.

We also saw the new James Bond movie and enjoyed it but we think the first one was just a touch better. There was a trailer for the new Star Trek movie (which is due out in May). It looks AWESOME. I'm still geeking out about it.

Here are a few pictures from the weekend's festivities.

Wendy and I took the girls to Chuck-E-Cheese on Saturday. The girls had been begging to go ever since it opened in Layton last month. The girls really enjoyed having Chelsie join them too. We have learned that Kenna has some kind of sixth-sense when playing Deal or No-Deal. The first time she played she used one token and got 30 tickets (40 is the highest and 30 is second best). The second time she played a double token game which can give you a maximum of 80 tickets. She was making all the decisions and I was just watching. She got down to just two cases (80 and 26) and was given her final offer of 51 tickets. At this point I spoke up and told her to take it. She turned slowly toward me and gave me a look that clearly said I had no idea what I was talking about. After a pause she said, "No deal!" and hit the button. The computer opened her case to reveal 80 tickets! There was a small group of mothers that had been watching and they starting muttering in disbelief. Here is a picture of Kenna proudly wearing her tickets.

My Big Fat Nazi-Run CPA Exam

Well, today was my first foray into the world of the Certified Public Accountant (CPA) Exam. I crammed from Friday evening straight through to last night (this morning) at 12:30 AM. - except a break for church of course. I didn't even get to see the BYU v. Air Force game which I'm told was awesome.

My test was at 9:00 AM and I left for the testing center at 7:00 AM which ended up being a very wise decision. It should have taken 40 minutes to get there but wound up being and hour and a half this morning. So I'm still early. Good so far.

The girl at the desk wants two forms of ID which I give her. But then we argue over the second ID (my Utah concealed weapons permit). She tries to tell me that it's not a state issued ID. I say it is. She says it isn't…and so on and so on. Finally, she says I can use a credit card. These of course are not issued by a state nor does it have a picture. But this apparently is a superior form of ID (as compared to an ID that took an FBI background check to get) and she is finally happy. Or not. It appears I haven't signed my credit card. So she has me take her pen and sign it right there. Well if that doesn't prove I'm me, I don't know what does.

Next, I'm asked to show her my notice to sit (NTS) - an email from the state that says I'm allowed to take the test. Now keep in mind that you can't even register for a test unless you have received this in the first place. The fact that I'm registered ought to be proof….but it's not. Fortunately my laptop is in the car, I foolishly think to myself. "Can I show you the email" I ask her? (No.) "Why not?" (You must have the paper.) "The paper would just be a print of the email." (That's the policy.) "Can I print it here," I ask as I look around at the bank of computers? (No.) What am I supposed to do? (Go find a Kinko's…and you need to be back in 30 minutes or you will forfeit your $300 testing fee.)

I am now sprinting out of the building muttering under my breath and wishing I could actually perform the Cruciatus Curse. (I'm beginning to think that Lord Voldemort wasn't born evil, he was just forced to take the CPA Exam.) I don’t have a USB drive so I rip my blackberry apart and take the memory card out, log onto my computer, transfer the file, put phone back together, do Google search for Kinko's, enter 1st address into GPS (15 miles - no good), enter 2nd address (5 miles - we have a winner!), start car, and peel-out leaving copious amounts of rubber behind.

I then proceed to do a reenactment of one of the finest shows of the eighties, the Dukes of Hazzard, and am desperately keeping an eye out for Roscoe and Enos. I get to Kinko's and go running in telling the girl that I am in a hurry. She immediately prints the file and tells me no charge! (That was the highlight of the morning.) So back in the car for the second lap.

I get back to the testing center and do a power-slide into my parking spot, go running in with sweat running down my forehead, and put the form on the desk with a minute to spare. She tells me I'm just in time and hands me scratch paper but doesn't pick up the form. "Don't you need it," I ask? (I just need you to write down the number on the scratch paper.) "Do you keep it?" (No.) "Does it go with the test?" (No. You just need the number.) Goosefrabah, goosefrabah, goosefrabah!!!! The Anger Management technique is not working.

I am then escorted into what can only be described as the "booking room." I must empty all of my pockets of everything. No phone, wallet, watch, jewelry, gum, change, tic-tacs, lint, pencil… "Wait a minute, I can't have a pencil?" (We'll give you a pencil.) "Why can't I use my pencil?" (You must use OUR pencil.) Seriously, why am I surprised anymore? At least I got to keep my belt and shoes on. I was beginning to wonder. After being fingerprinted and photographed I am allowed to start my test.

There are three sections of multiple guess and two sections of "simulations." I did well until I got to the last simulation. These take about 40 minutes each and I only had 20 left. I sped through it and with only 5 minutes left turned to the final task; which was to write a letter on a given topic. I read the instructions and realized I had no idea and there are now only four minutes left. I start writing anyway since you get points for grammar and literacy and not just content. As I start typing, thoughts actually begin to form. But that little clock is counting down like the Jeopardy theme song as my fingers are doing the River Dance on the keyboard. I wrote three paragraphs in four minutes and entered the last period as the clock ran out! And to think that I get to do this three more times.