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| Winter 2004 In This Issue:
For 2004 Social Security Wage Base up to $87,900; Nanny Tax Limit Remains at $1,400 The Social Security
Administration has announced that the 2004 wage base for determining the
maximum amount of earnings subject to the Social Security tax will be $87,900,
an increase of $900 from the 2003 wage of $87,000. At a rate of 6.2%, the
total maximum social security tax that your employer will withhold from your
salary increases from $5,394 in 2003 to $5,449 in 2004. Higher Mileage
Rates for 2004
This makes these
the same as the charitable mileage rate which remains at 14 cents for 2004. 
January 15, 2004 February 2, 2004 Form W-2 Forms 940, 941, 943 Form 945March 17, 2004 Forms 1120, 1120SApril 15, 2004 Forms 1040, 1041, 1065 Form 1040-ES and 1041-ES
Health Savings Accounts Proposed A bill to create tax-preferred savings accounts for medical expenses to its Medicare expansion legislation was recently passed. Starting in 2004, the bill creates tax-preferred Health Savings Accounts (HSAs) and Health Savings Security Accounts (HSSAs) that will be much less restrictive than Medical Savings Accounts (MSAs) which never caught on because of their limitations to self-employed, small firms and people without basic coverage. "The bill will provide new flexibility and affordability to health insurance purchasers. And, more importantly, it will put health insurance coverage within reach of many more people."HSAs can be set up only by those with high-deductible policies. The minimum allowable deductible is $2,000 for family coverage and $1,000 for self-only coverage. Copayments cannot exceed $10,000 per year for married and family coverage, $5,000 for individual coverage. HSA owners cannot have basic health insurance, i.e., typical plans that cover most ailments, with low deductibles and copay requirements. HSAs are supposed to be tapped to pay what basic coverage would have paid. Those covered by Medicare are prohibited from establishing HSAs, but disability, dental, vision and long-term care insurances are permitted. Also, persons who can be claimed as someone's dependent cannot set up HSAs. Individuals can deduct HSA contributions, but only up to an amount equal to the deductible on the associated insurance policy. Annual payins are limited to $5,150 for family coverage and $2,600 for self-only coverage. Individuals born before 1950 can contribute an extra $500 for 2004. The deduction is taken above the line, so non-itemizers can claim it also. Alternatively, the contributions can be funded through salary reduction. These plans are worth checking into, especiaoly by healthy folks who can benefit from the tax-free compounding of their unused HSA payins. Other features include:
Planes, Trains and "Automobiles" Automobiles put into use in 2003 have tricky rules with the maximum first-year depreciation deduction. As a general rule, if a car is placed in service after May 5, 2003 and the taxpayer claims 50% bonus depreciation on it, the first-year write-off cannot exceed $10,710. For autos placed in service before May 5, 2003, if the 30% bonus depreciation is taken, the cap is $7,660. Otherwise, the write-off ceiling is $3,060. The limits for light trucks and vans are $300 higher than those for autos. Additionally, the expensing rules provide even larger potential write-offs for taxpayers. Up to $100,000 of the cost of certain SUVs, vans and trucks placed in use in 2003 can be expensed if their gross vehicle weight exceeds 6,000 pounds.
Client Tax Organizers Watch for your 2003 Tax Organizer to be arriving soon. The Organizer has been designed to assist you in preparation of your 2003 income tax return. It contains many of the common items of income, expense deductions and credits, as well as questions that help us determine the proper handling of these items. The organizers are provided for your convenience and are not required for completion of your income tax return. If you have any other methods to gather your tax information, we will be happy to use those records rather than the organizer. Please give us a call at 325-942-6713 if you have any questions or need additional help.
Businesses Using IRS.gov to get Employer Identification Numbers Businesses are turning to an on-line application form on IRS.gov to get new employer identification numbers. The Internal Revenue Service has issued more than 498,000 of the numbers through its online application since it became available in April. The online application form immediately issues a new employer or taxpayer identification number, or EIN or TIN, eliminating both paperwork and the usual four to 10 day wait to receive an EIN or TIN number through paper processes. The IRS assigns the nine-digit numbers to identify taxpayers. The number is required for a host of purposes and getting it quickly is important for someone starting a business. A business cannot establish a bank account, for instance, without one.
Legislature Adds Penalties to Property Tax Renditions Several bills were introduced in the 78th Texas Legislature regular session dealing with penalties for not filing a Business Personal Property (BPP) rendition as required. The one bill that survived - SB340 - now provides penalties for the late or non-filing of a BPP rendition, starting in 2004. Important provisions include:
In addition, SB 340:
Extended Office Hours... During tax season, the offices of Oliver, Rainey & Wojtek have extended work hours from 8am to 6pm Monday through Friday and from 8am to 12pm on Saturdays, effective January 17, 2004. We understand the importance of using convenient meeting times to help meet the demands of your schedules. We are available for appointments at our office or at your place of business.
Record Retention Guide
For business purposes:
Bank Records
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