news & noteworthy
Alerts, Updates and Other
Tax and Accounting Tidbits for Business and Home
Presented electronically by Norman, Johnson & Co., PA Certified Public Accountants
The Gift That Keeps On Taking – According to the Consumers Union, millions of
consumers are expected to buy or receive gift cards this holiday season, but
many will discover their cards come with a catch. Too many gift cards include
unexpected fees and tight expiration dates that can limit their usefulness and
drain away their value.
Gift cards issued by banks generally come with monthly service
fees so that recipients lose $2 or more each month from their cards. Gift cards
sold by some major restaurants and retailers come with dormancy fees that
penalize recipients with a monthly charge if their card remains unused after a
certain period of time. Other cards automatically expire as early as six months
after they are issued. A handful of states have enacted laws to address these
practices. Click here
for more information on SC and other state gift card laws.
A
new proposed Federal law, The Fair Gift Card Act, protects consumers by
prohibiting gift card issuers from imposing a dormancy or service fee, unless
the gift card has less than $5 remaining on it after 24 consecutive months of
inactivity and the fee does not exceed $1. The bill requires that gift cards
remain valid for at least five years and allows states to enact stronger
protections.
The
Consumer Reports Money Advisor recommends that consumers check on gift card
expiration dates and fees, which usually can be found on the card, on an accompanying
sleeve, or on the issuer’s web site. I checked one of mine - $2.50 a month fee
beginning in the seventh month.
IRS Commissioner Says Enforcement Efforts
are on the Increase – In November,
IRS Commissioner Mark Everson released a series of spreadsheets and related
materials showing an upswing in IRS enforcement efforts. They're part of an
effort by the agency to counter recent criticism of its enforcement efforts.
The IRS's reports show the following levels of enforcement activity:
There were 195,200
audits of high-income taxpayers, those earning $100,000 or more. That figure
represents a 40% increase from 2003 and a 74% increase from 2002.
Total audits of
all individual taxpayers topped 1 million for the first time since '99. The
figures show a nearly 19% increase from 2003 and almost a 36% increase from
2002.
One in six of
large corporations were audited in fiscal year 2004.
Audit rates of
small business corporations, those with assets under $10 million continued to
drop. Only 7,290 returns (.32%) were audited, the seventh year of decline, but
over 85% of these audits were field audits, as opposed to correspondence
audits.
Worthy Quote: “We could
certainly slow the aging process down if it had to work its way through
Congress.” – Will Rogers, cowboy, performer, journalist, ambassador, common
man’s philosopher; 1879 – 1935.
Tax Collectors, Oh My – Over the years there have been many jokes about tax
collectors, but a new initiative is no joke and will change the playing field
of tax collection. Tax collection is to become privatized. As many as 2.6
million tax debts could be turned over to private collection agencies under a
new tax bill passed in October. Private collection agencies could be contacting
taxpayers as early as 18 months from now.
Accountant Speak – Net Profit or
Loss: Net Profit or Net Income is the amount by which total revenue exceeds
total expense. Net Loss is the amount that remains when total expense exceeds
total revenue. The more popular expression of these two situations is called
“The Bottom Line”.
Other Tax News –
FUTA threshold increased – The IRS has issued final regulations that exempt
employers from depositing FUTA taxes until their FUTA tax liability exceeds
$500. The new rule applies for periods beginning after
Standard mileage rate increases by 3˘ for 2005: IRS has announced that the optional mileage allowance
for owned or leased autos (including vans, pickups or panel trucks) is 40.5˘ for
business travel after 2004. That's 3˘ more than the 37.5˘ allowance for 2004
business travel. This largest-ever year-to-year mileage-rate increase is due to
higher prices for vehicles and fuel.
Important Tax Thresholds to Know for 2005 – The IRS has recently announced its adjusted numbers
for the year 2005. Here are some you may find useful.
Estate Tax
applicable exclusion amount will be $1,500,000 (same as 2004)
Gift Tax
applicable exclusion amount remains unchanged at $1,000,000.
The annual gift
tax exclusion remains unchanged at $11,000.
Annual limit for
defined benefit plans is now $170,000 (up from $165,000)
Annual limit for
defined contribution plans is increased to $42,000 (up from $41,000)
Compensation
limit for qualified plan purposes is $210,000 (up from $205,000)
Elective Deferral
limitation is increased to $14,000 (from $13,000)
The limitation on
SIMPLE plans is increased to $10,000 (from $9,000)
The limits on
Roth and traditional IRA contributions increases to $4,000 (from $3,000)
Notes from all over: Where the
Money Is Going - The 3 most popular
destinations for foreign direct investments in 2004 were
Watching the Calendar – Super Bowl XXXIX is February 6th this year, just 37
more days; Both 1099 and W-2 forms are due to vendors and employees by the end
of this month, January 31st; Corporate tax returns are due March 15th
(calendar year companies); and the biggie – personal income tax returns are due
in just 105
days!
Got a friend or associate that needs help
with accounting, taxes, or financial planning? We appreciate
your referrals. Invite your referral to call for a complimentary conference to
review their situation.
Happy New Year! On behalf of our entire firm we wish you and
your family a prosperous and healthy new year. We appreciate your business and
the opportunity to serve you in the upcoming year.
Jim Norman and Gary Johnson
Norman, Johnson & Co., PA is a Spartanburg,
SC based CPA firm which was founded in 1990.
The firm offers a wide range of audit, accounting, tax, business
consulting, and financial planning services for individuals, businesses,
governmental entities, and not-for-profit clients.
This newsletter is published
monthly on the first of each month and alerts and special topics as they are
deemed informative. Information contained in this newsletter is derived from
sources believed to be accurate. You should
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