This topic is a hot issue as one can see the effects on non-compliance on President Clintons nomination of Zoe Baird in the early 90s and now President-Elect Bushs current Labor Secretary, both of whom were toppled by law violations in the Nanny-Tax Rules, so a word to the wise is sufficient.
Please contact our office to discuss the ramifications of the current law which requires individuals to pay Social Security and Medicare Taxes and file Schedule H for monies paid exceeding $ 1,300.00 in 2001 (up from $ 1,200.00 last year) to nannies, housekeepers or other household workers. Even though Congress passed a simplified "Nanny-tax" law in 1994, recently released data shows that compliance is very dismal. In 1998, only 310,367 returns filed included Schedule H, out of 122.4 million individual income-tax returns filed in 1998. In 1999, only 294,000 returns filed included Schedule H, which is less than 1Ž4 of 1% of all individual returns. Obviously there is resistance from many of the workers who want to work off the books, complication of paperwork required to conform without the necessity of engaging outside help and perhaps they figure they wont get caught.
You can find the Internal Revenue Service Publication 926 entitled "Household Employers Tax Guide For Wages Paid in 2000" on the IRS Website www.irs.gov under Forms and Publications section.
Capital Gains Taxes Rates
Under the 1997 tax reform act, starting in 2001, an existing 10% long-term capital gains rate will be reduced to 8% on stocks and other investments held more than five years. The rate applies to the part of your net capital gains that would be taxes at 15% if there were no capital gains rates. This provision generally applies to individuals in the lowest tax bracket. For higher income taxpayers, another change applies to reducing the capital gains tax from 20% to 18%, which generally requires paying capital gains taxes up front.
Section 179 Depreciation Expensing
Generally under Code Section 179 of the Internal Revenue Code, the cost of equipment purchased in 2001 can be expensed up to $ 24,000 (up from $19,000 last year) instead of depreciated over several years.
Please contact our office or your advisor to discuss the specific merits and applications of any material presented herein. The information is intended to inform and alert the reader of tax and accounting items of interest, but since it is presented in abbreviated form, time-sensitive and not all-inclusive, it should be implemented only upon in-depth consultation with your appropriable advisors. Also contact referenced venders for additional specific information and application.
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