Dear Clients:
Happy New Year. The IRS likes to call the upcoming time period “Filing Season”. The other term is “Tax Season”. We are preparing and Becky is printing organizers as we speak. They should be mailed in the second half of the month. Do not stress about filling out every line. The organizers are a guide and “see attached” can be written with the commensurate W-2, 1099 or whatever work paper that is presented. Even though we work long hours, we really enjoy tax season. It has been a year since we last saw many of you and it is always great to spend time catching up on the past year.
We wanted to let you know about a few items on our end. Sheri Turk, who has been with us a year, has passed her final CPA exam. We congratulate her. She has been a tremendous addition to our practice family. We have hired Ed Keough as a staff accountant. He is a former Marine and moved back to the area after living in California. He worked for a CPA firm there and has several tax seasons of experience. We are looking forward to working with him and having him on staff. Our firm had a hugely successful year last year. It was our best year since 1999 and that is a remarkable accomplishment in this economy. We would like to thank you again for your loyalty, support and business.
Billing rates are staying the same with the exception of Sheri Turk will be billed at $135 per hour and Adrianne Day will be billed at $175 per hour. This is an increase of $10 per hour for each of them.
Please visit our website. www.jeleanos.com We want it to be a tool. There are many downloadable forms, important links and my blog.. One form we developed is a list of expenses that are deductible. We have been developing the list as we work on returns seeing the various expenses clients have taken. This will assist in reminding you of possible deductions for your business.
IRA We are taking the position that on the long term basis, the tax rates are going to rise. The Fed and the states are in huge deficit positions. Please keep in mind that at some point IRA’s are taxable. It occurs when you make withdrawals or your beneficiaries make the withdrawal. If you are in a lower bracket, please make sure we address this issue. Would you rather pay 15% federal and 7.5% MD now or 33% later? Please think about this. This tax planning strategy is a major focus this year. Last year we started having some clients move for instance $20,000 out of an IRA and into a Roth. It does not have to be done all at once. We can make withdrawals for example over a three year period to make the tax more palatable. It is all dependent on each client’s situation.
Next Topic and this is important. The IRS is changing their audit tactics. They will still be auditing individual returns but they are now of the mind that they can obtain more leverage for their actions if they monitor the tax preparers more closely. Recently, they sent 21,000 preparers a “4809 Letter”. We are proud to say we did not receive a letter. See http://www.irs.gov/taxpros/article/0,,id=249069,00 or go to www.irs.gov and type 4809 in the search. Here is the verbiage in the first paragraph:
“You are receiving this because the returns you prepared for the clients during the most recent filing season have a high percentage of attributes typically containing inaccuracies and misinterpretations of the tax law. The enclosed document addresses some income tax issues our review suggests you may have misunderstood or misinterpreted.”
They are going to audit the work papers of ten percent of the recipients of these letters. That means they are going to go their office and make the tax preparer pull each file and show them the documentation.
The other disturbing item is that on this year’s Schedule C which we file for clients with unincorporated business’ or one person LLC’s and Schedule E rental property there are two questions. First “are you required to file 1099’s “ and second “did you file the 1099’s”. We are really upset about these actions by the Internal Revenue Service. The IRS matching system is in full gear and if these questions are answered incorrectly more notices will be forthcoming. You are signing the return under penalties of perjury and need to answer all the questions that are asked.
The point of the above explanation is that our workpapers must support all deductions. We have requested you to provide adequate documentation for contributions. You have done a terrific job with that request. We must make sure that the goal of proper support for the deductions is accomplished more than ever. We need to abide by the rules.
Please call or write me with any questions or issues you might have now or during preparation of the return. As always if you feel that the staff person working on your return is not a good fit ,then please let me know.
We want you to have a happy, prosperous and healthy new year and we look forward to seeing you soon.
Best Regards,
Joan
Joan E. Leanos CPA