The Whitlock Company, CPAs and Consultants, Springfield Missouri

As if the economic downturn wasn’t bad enough, state taxing authorities are on the warpath — and your business may very well be in their crosshairs. With budget woes approaching crisis point across the country (witness California’s well-publicized meltdown), state treasuries are stretched painfully thin.

In response to their empty coffers, state taxing authorities are actively targeting both in-state and out-of-state companies for income and sales tax compliance.

IRS Commissioner Douglas Shulman has announced that the IRS will no longer attempt to draft rules on the taxation of employer-provided cell phones. Instead, Shulman reported that the agency will wait for Congress to take action. The commissioner made this announcement during a January 8 television interview. “We’re quite hopeful Congress is going to act on this,” Shulman stated, “In the meantime, we’re not doing anything special or moving forward with any initiatives.”

January brought two surprises to Capitol Hill. Health care reform, which appeared to be on a fast track to enactment, was significantly slowed by the Democrats’ loss of their filibuster-proof majority in the Senate. Congress also did not pass a retroactive extension of the federal estate tax for 2010, leaving intact, at least for the immediate future, a new carryover basis regime. The new make-up of the Senate is expected to shift Congress’ focus to more job creation measures, possibly with some targeted business tax cuts.

Deferred tax assets on a bank’s balance sheets have always been a problem for regulators. Most of the deferred tax assets are currently disallowed for capital purposes. And now with banks piling up losses and creating deferred tax assets due to net operating loss carryovers regulators are taking a harder look at these assets. Writedowns of these assets are expected and will more likely hurt regional and community banks.

A move is underway in Congress to stave off the sunset of the estate tax in 2010 and prevent a wholesale revision of the transfer tax rules in 2011.

The end of the 2009 year will also spell the end of many tax breaks for both individuals and businesses. Some of these tax breaks are “temporary” credits and deductions that Congress typically extends for another year or two at the last moment. Other sunsetting provisions are relatively new, with no previous track record on their being extended. In either case, however, the unfamiliar economic climate in which our nation finds itself makes predicting whether Congress will find the funding necessary to extend any particular tax break this time around, beyond 2009, a matter of guesswork. The following is a list of important tax breaks expiring at the end of 2009.

Health care reform continues to dominate Congress’ fall agenda but lawmakers also have many other tax bills to address before the end of the year. On the table are bills to extend some popular but temporary tax breaks, estate tax reform and more. It is an ambitious agenda that has some lawmakers predicting that they will be working right up to the end of the year.

As the end of 2009 approaches, it is a good time to start year-end tax planning. Between now and December 31, 2009, there is time to put in place some tax saving strategies. Many of these strategies are familiar ones; others are tailored to these challenging economic times.

I think these initiatives are great! Anything that will allow people to put more into their retirement plans and save on current taxes is a good idea in my opinion.

Many back-to-school college students and their families are facing the toughest time in years, in meeting the costs of higher education due to the recent economic downturn. In an attempt to face this challenge, Congress recently passed some tax relief for college students and families that, together with scholarships, loans and work-study grants, can provide invaluable lifelines this year. The tax relief is twofold: the new American Opportunity Tax Credit and more liberal withdrawal rules for Section 529 plans to cover technology needs. Both tax provisions are temporary – for 2009 and 2010 only – but likely will be extended in some form if the need continues.