Consulting OnLine ©

Bob Parrish CPA, P.C. HOME (941) 387-0926 ~ It Is:

SIMPLE - must be set up by October 1 of the calendar year

SEP - Must be setup by and funded by : A SEP can be established after the end of the taxable year, as long as it is established before the due date, including extensions, of the employer's return. Code Section 404(h)(1)(B) ; Prop. Reg. 1.408-7(b).

IRA - Must be setup by 4/15 and funded by 4/15

401K -----------

Pens Plan ------------

HR10 - Must be setup before end of tax and year and must be funded BEFORE filing the tax return

ROLLOVERS

(a) IN GENERAL

Rollovers are a flexible device used to transfer funds from one eligible retirement plan to another. A is a tax-deferred transaction in which cash or other property is distributed by a plan or an IRA, followed (or preceded) by contributions to another plan or IRA.  The generally must be made within 60 days of receipt of the property distributed, and, if the distribution is made from a qualified plan, must be made in the form of a direct transfer to avoid withholding.  See for discussion of the rules on and the taxation of rollovers and direct transfers.

For distributions after December 31, 2001, the IRS may waive the 60-day period if the failure to waive that requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the individual's reasonable control. Code Section 408(d)(3)(I). or example, the IRS may issue guidance that includes objective standards for waiving the 60-day period, such as waiving the rule due to military service in a combat zone or during a presidentially declared disaster, or for a period during which the participant has received payment in the form of a check but has not cashed the check, or for errors committed by a financial institution, or in cases of inability to complete a due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error. H. Conf. Rep. 107-84, 107th Cong., 1st Sess. (2001). For distributions before January 1, 2002, the IRS does not have authority to waive or extend the 60-day period, and has refused to do so even when taxpayers took all necessary actions in a timely manner, did not know that the distribution could be rolled over, or did not know that another party had acted against their instructions.

Rollovers can be made:

(1) from qualified plans to qualified plans 

(2) from qualified plans to eligible governmental Code Section 457(b) plans, for distributions after December 31, 2001 

(3) from qualified plans to Code Section 403(b) tax-sheltered annuities, for distributions after December 31, 2001 

(4) from qualified plans to IRAs 

(5) from IRAs to IRAs 

(6) from IRAs to qualified plans 

(7) from IRAs to Code Section 403(b) tax-sheltered annuities, for distributions after December 31, 2001 

(8) from IRAs to eligible governmental Code Section 457(b) plans, for distributions after December 31, 2001 

(9) from eligible governmental Code Section 457(b) plans to eligible governmental Code Section 457(b) plans, for distributions after December 31, 2001,

(10) from eligible governmental Code Section 457(b) plans to qualified plans, for distributions after December 31, 2001,

(11) from eligible governmental Code Section 457(b) plans to Code Section 403(b) tax-sheltered annuities, for distributions after December 31, 2001,

(12) from eligible governmental Code Section 457(b) plans to IRAs, for distributions after December 31, 2001 

(13) from Code Section 403(b) tax-sheltered annuities to Code Section 403(b) tax-sheltered annuities, for distributions after December 31, 2001 

(14) from Code Section 403(b) tax-sheltered annuities to qualified plans, for distributions after December 31, 2001 

(15) from Code Section 403(b) tax-sheltered annuities to eligible governmental Code Section 457(b) plans, for distributions after December 31, 2001, and

(16) from Code Section 403(b) tax-sheltered annuities to IRAs, for distributions after December 31, 2001 

 

	1999	2000
Personal exemption	2,750	2,800
Reduced by 2% of AGI in excess of:
Married filing joint	189,950	193,400
Single	126,600	128,950
Head of Household	158,300	161,150
Married Filing Separate	94,975	96,700

 

 

Standard Deduction	1999	2000
Married Filing Joint	7,200	7,350
Single	4,300	4,400
Head of Household	6,350	6,450
Additional for over 65 or for those that are legally blind:
Married	850	850
Unmarried	1,050	1,100

 

Dependents of Another	1999	2000
Allowed Std. Deduction	700	700

 

Max unearned income without kiddie tax	1400

 

Itemized Deductions	1999	2000
Deductions reduced by 3% of the adjusted gross income if it exceeds:
Married Filing Joint	126,600	128,950
Single	126,600	128,950
Married Filing Separate	63,300	64,475

 

 

Social Security	1999	2000
Maximum earnings subject to the social security or self-employment tax	72,600	76,200
Maximum yearly earnings before reduction in benefits:
Under 65 - reduced $1 for every $2 in excess:	9,600 ($800 per month)	10,800 (900 per month)
Age 65-69 reduced $1 for every $3 in excess:	15,500 (1,292/mo)	17,000 (1,417/mo)
FICA - OASDI rate	6.20%	6.20%
FICA - HI rate	1.45%	1.45%
SE Tax Rate	15.30%	15.30%

 

Meals and Entertainment Limitations	50%	50%
Section 179 Expensing Election	20,000	19,000
Self-employed health insurance	60%	60%
Section 179	19000	20000
401k	10000	10500

 

Student Loan Interest Deductions 2,000 1,500 Student Loan Interest Phase-Out       (Modified AGI)     Married Filing Jointly 60,000 to 75,000 60,000 to 75,000 Others 40,000 to 55,000 40,000 to 55,000 Hope Credit Per Student - Greater of 100% of $1,000 Tuition/Fees and 50% of Next $1,000 Tuition/Fees $1,500 $1,500 Lifetime Learning Credit After 06/30/98 and Before 2003     20% of $5,000 Tuition/Fees 1,000 1,000 Educational Credits Phase-Out (Modified AGT)     Married Filing Jointly 80,000 to 100,000 80,000 to 100,000 Others 40,000 to 50,000 40,000 to 50,000 Child Tax Credit - Child Under Age 17 500 500 Child Tax Credit Threshold Amounts         Phase-Out     Married Filing Jointly 110,000 110,000 Single or Head of Household 75,000 75,000 * .325 (01/01/99 through 04/01/99 ** Bill Pending

	The information presented above is subject to change and is not offered as specific advice. Please consult with your tax advisor.

 

	1999	2000
Employer provided passes	$65/ Mo	$65/Mo
Qualified parking permit	$175/Mo	$175/Mo
Excise Tax Starts	$36000/6%	$38000/5%

 

The IRS periodically adjusts the mileage rate to reflect automobile operating costs.

Individuals who use their cars for business travel usually have the option of deducting actual expenses or claiming the IRS mileage allowance, plus parking and tolls.

Mileage Allowance - cents per mile YEAR RATE (all are 'cents per mile')     Business Mail Carrier Charity Medical Moving Household               2002   36.5     13 13 2001   34.5     12 12 2000   32.5   14 10 10 1999 after 3/31   31   14 10 10 1999 until 3/31   32.5   14 10 10 1998   32.5   14 10 10 1997   31.5   12 10 10 1996   31   12 10 10

The change in the business mileage rate will primarily benefit self-employed individuals who use the IRS mileage rate, in lieu of actual expenses, to compute their car-expense deductions. The change will also affect some employees who are reimbursed by their employer for job-related use of their personal car. Employees who are reimbursed for car expenses.

The IRS mileage allowance serves as an important benchmark in private industry. Many corporations use the IRS mileage rate to gauge how much to reimburse employees for job-related use of their personal cars.

Additional Expenses

PARKING FEES, TOLLS AND LOAN INTEREST ON THE VEHICLE: In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses.) CHOOSING THE STANDARD MILEAGE RATE. If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then in later years, you can choose to use either the standard mileage rate or actual expenses. If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after that date.

 

 

Federal Minimum Wage

$5.15 per hour

Personal Service Corporations

 

Depletion

The following percentages are for taxable years beginning in:

1991	15 percent
1992	18 percent
1993	19 percent
1994	20 percent
1995	21 percent
1996	20 percent
1997	16 percent
1998	17 percent
1999	24 percent
2000	xx percent

 

Estate and Gift Tax Facts 2000   1999 Annual Gift Tax Exclusion Per Donee $10,000   $10,000 Lifetime Exemption 675,000   650,000 Maximum Tax Rate 55%   55% Pension Facts     Elective Deferrals 410(k) Limitation 10,500   10,000 Pension/SEP Maximum Compensation 170,000 160,000 Pension/SEP Maximum Contribution 30,000 30,000 Education IRA Per Beneficiary 500   500 Education IRA Phase-Out (Modified AGT)     Married Filing Jointly 150,000 to 160,000   150,000 to 160,000 Others 95,000 to 110,000   95,000 to 110,000 Roth IRA 2,000   2,000 Roth IRA Phase-Out     Married Filing Jointly 150,000 to 160,000   150,000 to 160,000 Single 95,000 to 110,000   95,000 to 110,000 Roth IRA, Rollover, or Conversion AGI Limit 100,000   100,000 Capital Gains Tax Rates     Sales     Held Greater than 12 Months 20%   20% 15% Tax Bracket Filers 10%   10% Capital Gain Exclusion (Sale of Residence After 05/06/97)     Married Filing Jointly 500,000   500,000 Single 250,000   250,000

	The information presented above is subject to change and is not offered as specific advice. Please consult with your tax advisor.

 

 

Per Diem rates		1999			2000
	Lodging	Meals & incidentals	Total	Lodging	Meals & incidentals	Total
High-Low Method
High locality	$143	$42	$185	$159	$42	$201
Other localities	$81	$32	$113	$90	$34	$124
Trucking Industry	Out of Pocket	$38
Standard CONUS Rate	$50	$30	$80

 

Note: Major changes in the coverage of per diem rates effective in this amendment are:

Lodging rates do not include any taxes. They are now room rates only. Actual costs paid for lodging taxes may be reimbursed to the traveler as a miscellaneous expense (see 301-11). Additional seasons (up to four) have been added where appropriate. There may be more than one rate within a county now. Please read the tables carefully. Many previously combined locations are now shown separately with different rates (i.e., Alexandria, Arlington, Montgomery County, Prince Georges County, Fairfax County, and Loudoun County, are now listed separately from Washington, DC). There is one new M&IE tier: $46

Note: Trucking Industry Rates:

A standard daily per diem for meals an incidentals of $38 can be used for those in the trucking industry.  The lodging must be determined by actual out of pocket expenses.   There must be proof of the number of nights away from home.  A recent Private Letter Ruling from the IRS indicated the standard lodging rate will not be accepted to prove a deduction - can be used for reimbursing employees only. 

 

Citation: Chief Counsel Advice 199917059 LETTER RULING However, the revenue procedure does not provide a method whereby the federal lodging rate may be used to substantiate deductions for lodging expenses. In fact, the regulations do not authorize the Service to provide such a substantiation method. Rather, as noted, section 1.274-5T(c)(2)(iii)(A) requires that taxpayers provide documentary evidence, such as receipts, paid bills, or similar evidence sufficient to support an expenditure for lodging while traveling away from home. Accordingly, if a taxpayer wishes to deduct unreimbursed lodging expenses, the taxpayer must substantiate the expenses as required under section 1.274-5T. The taxpayer may not treat the expenses as substantiated by relying on the federal lodging rate.

There is a DANGER:  If the taxpayer desires to use the standard CONUS rate for lodging, then the trucker cannot use  the $38 rate, but must use the $30.   WE ARE CURRENTLY GATHERING INFORMATION FROM AUTHORITATIVE LITERATURE TO ASCERTAIN THE PROPER COURSE OF ACTION.

FEDERAL PER DIEM RATES

The federal per diem rate is equal to the sum of the federal lodging expense rate and the federal meal and incidental expense (M&IE) rate for the locality of travel. Note that although per diem rates may be used to substantiate deductions for lodging, meals, and incidental expenses, or for meal expenses only, they may not be used to substantiate deductions for lodging expenses only. Chief Counsel Advice 199917059. Incidental expenses include, but are not limited to, expenses for laundry, cleaning and pressing of clothes, and fees and tips for services, such as waiters and baggage handlers. Incidental expenses do not include taxicab fares or the cost of telegrams or telephone calls and thus may be accounted for and reimbursed separately.

ATTENTION

 

 

50%Limit

In general, you can deduct only 50% of your business-related meal and entertainment ex-penses.  (If you are subject to the Department of Transportation's "hours of service" limits, you can deduct a higher percentage. See In-dividuals subject to "hours of service" limits, later.) The 50% limit applies to employees or their employers, and to self-employed per-sons (including independent contractors) or their clients, depending on whether the ex-penses are reimbursed. Figure A summarizes the general rules explained in this section. 

Exceptions to the 50%Limit

Generally, business-related meal and enter-tainment expenses are subject to the 50% limit. Figure A can help you determine if the 50% limit applies to you.  Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions.

1 – Employee's reimbursed expenses.

If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an account-able plan. Accountable plans are discussed in chapter 6.

2 – Self-employed. If you are self-employed, your deductible meal and enter-tainment expenses are not subject to the 50% limit if all three of the following requirements are met.

1) You have these expenses as an inde-pendent contractor.

2) Your customer or client reimburses you or gives you an allowance for these ex-penses in connection with services you perform.

3) You provide adequate records of these expenses to your customer or client. (See chapter 5.) In this case, your client or customer is subject to the 50% limit on the expenses.

Example. You are a self-employed attor-ney who adequately accounts for meal and ntertainment expenses to a client who reim-burses you for these expenses. You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. If the client can deduct the expenses, the client is subject to the 50% limit.   If you (the contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the   client for those expenses, you are subject to  the directly-related or associated test and to  the 50% limit.

3 – Advertising expenses. You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. For ex-ample, the expense of sponsoring a television or radio show is deductible, as is the expense of distributing free food and beverages to the general public.

4 – Sale of meals or entertainment. You are not subject to the 50% limit if you actually sell meals, entertainment, goods and ser-vices, or use of facilities to the public. For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a busi-ness expense.

5 – Charitable sports event. You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qual-ified charitable sports event. For the condi-tions the sports event must meet, see Ex-ception for events that benefit charitable organizations under Entertainment tickets, earlier.

Individuals subject to "hours of service " limits. You can deduct a higher percentage of your meal expenses if the meals take place during or incident to any period subject to the Department of Transportation's "hours of service" limits. The percentage is 55% for 999, and it gradually increases to 80% by the year 2008.   individuals subject to the Department of Transportation's "hours of service" limits in-clude the following persons.

1) Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations.

2) Interstate truck operators and bus drivers who are under Department of Transportation regulations.

3) Certain railroad employees (such as en-gineers, conductors, train crews, dispatchers, and control operations per-sonnel) who are under Federal Railroad Administration regulations.

4) Certain merchant mariners who are under Coast Guard regulations.

 

 

Individual Tax Rate Schedules
1999			2000
...	Rate (%)	Taxable Income ($) 1999 Brackets*	...	Rate (%)	Taxable Income ($) 2000 Brackets*
Married Filing Jointly	15 28 31 36 39.6	$0 - 43,050 43,051 - 104,050 104,051 - 158,550 158,551 - 283,150 Over 283,150	Married Filing Jointly	15 28 31 36 39.6	$0 - 43,850 43,851 - 105,950 105,951 - 161,450 161,451 - 288,350 Over 288,350
Head of Household	15 28 31 36 39.6	$0 - 34,550 34,551 - 89,150 89,151 - 144,400 144,401 - 283,150 Over - 283,150	Head of Household	15 28 31 36 39.6	$0 - 35,150 35,151 - 90,800 90,801 - 147,050 147,051 - 288,350 Over - 288,350
Single	15 28 31 36 39.6	$0 - 25,750 25,751 - 62,450 62,451 - 130,250 130,251 - 283,150 Over - 283,150	Single	15 28 31 36 39.6	$0 - 26,250 26,251 - 63,550 63,551 - 132,600 132,601 - 288,350 Over - 288,350
Married Filing Separately	15 28 31 36 39.6	$0 - 21,525 21,526 - 52,025 52,026 - 79,275 79,276 - 141,575 Over - 141,575	Married Filing Separately	15 28 31 36 39.6	$0 - 21,925 21,926 - 52,975 52,976 - 80,725 80,726 - 144,175 Over - 144,175

 

Corporate Tax Rates		...	Trust Tax Rates
Rate (%)	1998, 1999 & 2000	.	Rate (%)	1999	2000
15 25 34 39 34 35 38 35	$0 - 50,000 50,001 - 75,000 75,001 - 100,000 100,001 - 335,000 334,001 - 10,000,000 10,000,001 - 15,000,000 15,000,001 - $18,333,333 over - 18,333,333	.	15 28 31 36 39.6	$0 - 1,750 1,751 - 4,050 4,051 - 6,200 6,201 - 8,450 Over - 8,450	$0 - 1,750 1,751 - 4,150 4,151 - 6,300 6,301 - 8,650 Over - 8,650

 

 

Estate Tax Rates & Exemption
Estate Tax Exclusion	1999	2000
.	$650,000	$675,000

 

 

Rates (%)	Taxable Estate
37 39 41 43 45 49 53 55	$625,000 - 750,000 750,000 - 1,000,000 1,000,001 - 1,250,000 1,250,001 - 1,500,000 1,500,001 - 2,000,000 2,000,001 - 2,500,000 2,500,001 - 3,000,000 Over - 3,000,000

 

 

Transportation
Fringe Benefit - employer provided passes and vehicles
Fringe Benefit - personal use of car amount per trip
Fringe Benefit - Qualified parking permits
Luxury Auto Tax Base Amount
Business mileage through 4/1
Business mileage after 4/1
Charity use of car
Medical & Moving use of car
Rural mail carrier rate
Depreciation component of std mileage rate
High cost per diem travel rate
Low cost per diem travel rate

 

Retirement Pension Plans
Max Annual benefit for Defined Benefit Plan
Max annual contribution Defined Contribution Plan
Threshold for excess distribution penalty
Highly compensated employee (in general)	100,000
Annual compensation limit	160,000
SEP DeMinimis compensation amount	400
SEP Non-discrimination amount	150,000
401k max compensation	160,000
401k max exclusion
IRA deduction limit	2000