office

Dear Client:

This past year has been a year of change for many of us. Between the recession, job loss, and massive federal tax benefits and state tax increases, tax planning is more important now than ever.

Both the IRS and the state of California have changed the tables used to deduct income tax from your paycheck. Caution: These changes could mean you will owe a big tax bill.

Important changes include:

Increased deduction for education expenses for 2009 and 2010;

Bigger credits for solar and energy efficient property

COBRA benefits and unemployment that may be taxable

Withholding changes during the year that could create a surprise tax bill

New California small business hiring credit

Normally, we like to try to push income into the next year and take deductions early. But that strategy may not be the best one looking at the next couple of years. Also, job changes (including severance pay, unemployment, and income reduction), foreclosures, and investment losses present a new set of challenges. We want to make sure we limit your tax bill to the smallest legally possible.

The President wants to raise taxes on high-income taxpayers in 2011 and popular wisdom says the capital gain rates will go up. California again has a big revenue shortfall. The Legislature has already borrowed from 2010 and 2011, so we could easily see large tax increases in 2010.

Let’s check your withholding: Major changes in withholding and taxes for both federal and California could create a big tax bill.

If you fall into any one of the following categories, you should come for a withholding check-up to make sure you don’t have to write a big check this April.

Call for an appointment if you:

Have children or other dependents;

Have more than one job;

Are married and you both work;

Received a COBRA subsidy;

Receive a pension and you have taxes taken out of your pension;

Have or expect to have total income over $1 million;

Owed taxes when you filed your last year’s return and did not change your withholding;

Had a short sale or foreclosure; and/or

Got married, divorced, or became widowed this year.

Even if your financial situation is dire, a short tax planning session now could save a big tax bill and penalties next year. Please call our office to schedule an appointment as soon as possible so we can do what we can before December 31 to cut your tax bill.

Sincerely,

Your Tax Professionals at Teders Bookkeeping & Tax Service, Inc.