2010 Year-End Client Letter

Individual Client Letter

We are surprised how quickly the year has passed! On the income tax scene Congress continues to work on last minute income tax bills as of the date of this letter, but you can be assured we stay abreast of all the latest changes as they occur! With the economic issues this year you can be sure that we will work more diligently than ever to keep your tax bill at the lowest legal amount.
 
We are once again making our tax organizers available, for free, to anyone who requests one-if you have not used one in the past please email our office to request one for 2010, as it is our attempt to be as thorough as possible in the preparation of your return. If you received an organizer last year we will email this year’s organizer to the same address. The tax organizer may not be enough however, and we wanted to bring some special items to your attention below.
 
Home Owner Energy Credits
If you (and spouse if married) made or are considering investing in insulation, storm windows or doors, high efficiency furnaces or water heaters or similar energy improvements there is a 30% Federal income tax credit available in many cases. The bad news? It expires December 31, 2010 so get those improvements done now!
 
New Hybrid, Electric or Diesel Cars or Trucks
Several special new tax credits are available this year if you bought a brand new car, light truck, motorcycle or RV during the year. If you bought a new vehicle please bring us a copy of the invoice so that you get this special credit.
 
Mortgage Interest
Recent IRS scrutiny of home mortgage interest deductions now require us to carefully track re-financings and the use of loan proceeds. Please provide us with any new home loan information, closing statements from any re-financings, and a summary of what any additional loan proceeds were used for.
 
Charity
A scary IRS court case in 2008 reminds us of the rules on charitable contributions. ALL deductions of any amount must have a receipt. Any individual contribution over $250 must also have an acknowledgement letter from the charity, and the letter must be dated by the date we file your return. The letter should show the date and amount of any individual contribution over $250, and should also state that no goods or services were received in return for the contribution.
 
Foreign Accounts
If you have read any news in the last year you know that the IRS is looking closely for offshore accounts. If you have an account with over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund) please let us know as some special rules will apply to you.
 
Mileage Deductions
Deductible mileage rates changed during the year. Please provide us with the number of medical miles you drove during the year for this deduction. This includes trips to the doctor, dentist, pharmacy, dialysis, as well as any charity related volunteer work mileage.
 
Education Credits
A major revision of college credits by President Obama has provided us with the new “American Opportunity Credit”, a special credit for undergraduate college students. If you have children in college or near to college, please discuss some options with us to assure that you receive the best benefit for these costs.
 
Roth IRA Conversions
You will be hearing from lots of “experts” this year that you need to convert your retirement accounts to Roth IRAs. While there are a number of advantages to conversions, there are an equal number of disadvantages that carry some major tax consequences. All conversions for 2010 must be completed by December 31, 2010.
 
Gift Changes
Effective 1/1/2009 the amount you may give to one person in one year without any return filing requirements has been increased to $13,000. Additionally, Congressional inaction on the estate tax front requires most people that have any substantial net worth to immediately consider estate planning.
 
Worthless Stocks and Bonds
If you own stocks or bonds that became worthless this year please be sure to provide us with the cost and purchase dates so that we can take any allowable deductions.
 
Future Income Tax Rates & Other
With record Federal deficits predicted for the next 10 years, it is a possibility that future tax rates will be substantially higher than today. If you are considering selling property or stock there is a good chance that 2010 will be the lowest capital gains rates any of us will ever see again, and the 2010 rates continue to be the lowest rates since before World War II. You might want to discuss some tax strategies with us if you are expecting a major asset sale in 2010 or 2011.
 
There are literally hundreds of other changes, extensions and deletions that we will consider this year while preparing your return. Because of these changes we are requesting everyone to try to have their tax information in to us at least two weeks earlier than normal.
   

Business Client Letter

We are once again writing to remind you of law changes, problem areas, and information we will need to prepare your 2010 business tax return.
 
Problem Areas
The IRS continues to place an increased emphasis on actual physical inventory on hand at December 31. Please make sure to physically count your inventory, retain the records, and provide us with the accurate total cost of inventory on hand at December 31, 2010. Do not include consignments you are holding from other people in this number. In the event of an audit you must be able to provide copies of physical count sheets, so we are this year placing an increased emphasis upon obtaining correct year end physical inventory amounts.
 
We also want to remind you to make sure that your corporate minutes must be maintained on an annual basis-we do not maintain these forms for you, they are maintained by the officers of the corporation. Of course only S and C corporations are required to maintain minutes, LLC’s have no such requirement.
 
Major changes have been made in depreciation rules this year, so let us know if you have bought or are considering the purchase of any major equipment or buildings.
 
Tax Return 10-Point Information Needed
As usual we also need the following information to prepare your tax return for this year (check off as completed):

1. __ Copies of any new bank loans obtained during the year,
2. __ Copies of any federal or state tax correspondence received during the year,
3. __ Copies of any equipment purchase invoices over $500,
4. __ Loan payoffs, by loan number, of all business loans at December 31,
5. __ Copies of your year-end bank reconciliation(s),
6. __ 12/31/10 Year End Balances of: Accounts Receivable $___________, Cost of Inventory on Hand $________, Unpaid 941 Deposit for December $__________, Unpaid State(s) Withholding deposits for December $____________________, Unpaid Sales tax for December $_____________, Unpaid wages earned thru 12/31/10 $__________
7. __ An engagement letter needs to be signed and returned to us,
8. __ Year end summary of business activity-back up or hard copy (Peachtree back-up, trial balance, etc.),
9. __ Sales breakdown by state and city if applicable (call us to determine),
10. __ Information on any changes in ownership, stock holding, locations or number of stores.

If you use Peachtree, we will require that you restore and close out 2010 information after we complete your work so that your records match the tax returns filed with the IRS.