August, 2008

Mortgage Interest Limitations

The IRS has started auditing for the limitation on mortgage interest for people who have taken money to live on (or buy a boat) out of their house.

If you borrowed money to make improvements, you’re OK.

If you borrowed money and invested it in a business, you’re OK.

If you borrowed money and blew it on gummy bears, you may have non-deductible mortgage interest—interest you have to pay, but is non-deductible.

You can borrow up to the “adjusted purchase price” of your house and deduct it.

You can borrow an additional $100,000 and deduct it for regular tax too, but not for AMT! We call this a HELOC – home equity line of credit.

Additional amounts borrowed can be deducted if they can be “traced” to an investment activity—that is to say, if you can show how you used the money in your business, or you bought rental real estate with the funds.

Other amounts are considered “personal” interest, and that hasn’t been deductible since the 80’s (ah, the good old days when credit card interest was deductible!)

The IRS has realized they could “make some money” here and we’re expecting to see some audits which will include this issue.

So, what do you need to do? Keep track of your mortgages. Keep those mortgage interest statements. Collect the information on the original purchase of your home and provide it with the next round of tax returns. Start collecting the statements now – perhaps a “2008 Tax” file folder somewhere?

Corporate Returns due September 15, Personal due October 15th

If you are on extension, your return is due quite soon. We’ve been pretty busy so if you know you need to file, give us a call, get us your materials, and do it soon please!

If you’re not on extension, you’re already filing late, and there’s a penalty (based on the amount you owe) of 4.5% per month, so you should want to file as soon as possible too! There’s really nothing I can do to lessen this penalty other than to get your return filed.

Classes – Basic Payroll, Household Employees, Schedule C and Mortgage Interest Tracing

In conjunction with the IRS and EDD, Andy's going to be doing some Basic Payroll seminars coming up in the near future.

Basic Payroll: Seminar runs 9 am – 3 pm with an hour for lunch

The next seminar will be Basic Payroll in Oakland at Elihu M. Harris State Building,1515 Clay Street, Room 1 or 2, Second Floor,
August 6th Thirty nine people are already registered for this seminar, but we have room if you want to drop in.

September 10th
October 15th

Basic Payroll in San Rafael is presented at 120 North Redwood Drive, 2nd floor, Redwood Room East Wing, Room E-212 on
October 22nd

These seminars have proven to be very popular, plus they’re free.

Household Employees
If you’ve got ‘em you should know how to prepare the payroll tax. It’s different from commercial employment—the forms are different, the limits are different, and the due dates are different. This class is scheduled for Saturday, August 23rd in Lafayette, 9 am to 1 pm at 100 Lafayette Circle. Look for our Tax Buddha sandwich board sign (space is limited, so sign up early!). Sign up sheet is at and the CPE is pending. The class is good for people who have household employees and need to know what to do, and this appears to be the only place to learn about both California and Federal law at the same time.

How to Prepare your Own Schedule C
Prepare your business taxes for ’07 and get ready for ‘08. Review what the IRS wants to know from you and how to report it on the Schedule C for your business. This is a class for business owners who need a basic understanding of their 1040 Schedule C tax forms. We’ll also talk about what to do with the numbers once you have them. We can’t guarantee you won’t get audited, but this class will make it less likely.

Andy will be at the US Small Business Administration offices in San Francisco at 455 Market Street, 6th Floor October 1, 6-8:30 pm. This class will be free.

For the Tax Professional – Mortgage Interest Tracing

Andy will be teaching at Asilomar in Pacific Grove near Monterey CA September 6th 8:30 am – 10:10 am on Mortgage Interest Tracing Rules and the $1 Million Cap and what we need to know in advance of preparing tax returns for 2008 to keep our clients who are audited for mortgage interest out of trouble. This is part of the CSTC’s 1st Annual Get-A-Way Retreat. For more info, contact but it is slow to load, so be patient!

S-Corporations Part 1: Getting in and Staying in, along with the NEW Part 2: Staying in and Getting Out are scheduled for November in Lafayette, dates and location yet to be determined.

For relaxation and Clear Thinking: On The Spot

To carry you through the summer, we recommend meditation and that you check out On The Spot Massage at to help you relax. A relaxed mind is a clear thinking mind. Makes an excellent gift for your tax preparer or other important person in your life.

The 8-Fold Path to Paying Less Tax and Avoid an Audit

“The 8-Fold Path to Paying Less Tax and Avoid an Audit” is a booklet for people already in business who need to know what they need to know to stay out of trouble while maximizing their after-tax profit. We’ll have a preview of the book for bookkeepers August 27th at Buttercup Grill & Bar, 660 Ygnacio Valley Road, Walnut Creek
Contact Mimi at E-mail:
Voicemail: 925-473-9282
Fax: 925-473-9229

New Phone and Fax Numbers

We have moved our office to a shared commercial space in Alameda (the Berkeley address is still good, it is a PMB) and have new phone numbers. The old numbers still forward, but AT&T gets a fee for each call forwarded. New numbers are:
Phone (510) 522-2300
Fax (510) 522-2307