Are you nervous about the stock market and your 401(k)? Are you too busy to manage your stock holdings? Do you wish someone else made the investment decisions for you? If you have a sizeable account, you can hire your own money manager. Those questions were asked by Investor Business Daily with the accompanying solution. There is a money management firm in Dallas that will "hold the hands" of their clients and "let the client be involved in the process as much as they want to be."
Money managers do exactly what their title suggest, they manage your money. A financial planner gives advise in several areas, includiing retirement planning, estate planning, insurance, taxes and investment asset allocation. A money manager actually manages your assets, choosing which stocks and mutual funds to invest in.
You will need to invest at least $100,000 to be able to hire a manager. Many firms have set portfolios made up of mutual funds and will invest the moey in these portfolios according to each client's situation.
If you have $ 1 million or more, you can hire managers who will invest your money in individual holdings. Often you won't pay mutual fund fees or money manager fees. Smith Barney Asset Management will customize portfolios, for investors with specific social and enviromental concerns. If an investor is adverse to tobacco stocks, the firm will not include such qquities in the client's portfiolo. Or if the client wants to invest in companies that are proactive in reducing pollution, the firm will find the best stocks in that category.
Your professional money manager will also help manage your tax situation, says Paine Webber. Since the manager knows your cost basis, the manager can take that into considertion, when buying and selling equities.
Your money manager fee will usually be between 1% and 2% of assets, depending on the size of your account, the bigger the account, the smaller the percentage. With over 27,000 registered investent advisers in the U. S. you have plenty to choose from.
Do your due diligence before selecting a money manager. Experts suggest:
1. Do a background check with a Form ADV Part II;
2. Look at real returns based on actual client accounts after management; fees
3. Consider risk by looking at how the manager performs in bad times;
4. Ask where your assets will be held. They should be with a third party custodian;
5. Have the manager sign a fiduciary oath which states the manager is acting as a fiduciary and is not selling products;
6. Get referrals through a third party, such as a broker, financial planner or CPA.
GIVE OUR OFFICE A CALL
This intellectual capital is provided to our friends and clients. While this letter hopefully gives you a heads up on several strategies that you might use before the year end, there are any more techniques that can be used depending on a client's individual circumstances. If you know someone that is looking for a way to save taxes and avoid IRS audits, think of us. We may be reached by phone at (720) 642-8953 or by write us at isueirs@aol.com.
Remember, we save you taxes and keep you away from the IRS. No Exceptions. No Time Limit. No Conditions. No IRS.
Sunday, November 23, 2008
Savings Opportunities for 2008
Tax laws are constantly changing; and this year is no exception. There has been a world of changes and opportunities. With proper planning, you can save month in taxes in 2008. Here is a sampling of the opportunities:
CAPITAL GAINS AND DIVIDENDS
The maximum tax rate on new long term capital gains and qualified dividends for taxpayers in the 15% or 10% regular income tax brackets is reduced form 5% to 0%. As the stands right now, the 0% rate is scheduled to remain in effect through 2010.
This may be a good year to have your children sell securities that have increased in value. However, such sale may trigger the “kiddie tax”.
The tax break isn’t just limited to low-income taxpayers. If you can push your taxable income for 2008 below the cut-off point for the regular 25% tax bracket, your long term capital gains and dividend income could qualify for the 0% rate.
SMALL BUSINESS ASSETS
Under the new economic stimulus law, your business can deduct up to $250,000 of business assets placed in service in 2008. In addition, a firm may elect bonus depreciation equal to 50% of the cost of any qualified assets.
If transacted properly, your firm can combine the improved Section 179 deduction with the bonus depreciation. Your regular depreciation deductions may be claimed for any un-recaptured cost.
MORTGAGE INSURANCE
Congress previously approved a one-year deduction for mortgage insurance premiums in 2007. A full deduction was available for taxpayers with and Adjusted Gross Income of under $100,000. Once income exceeded that threshold amount, the deduction was phased out. The new mortgage relief law extends this tax break for three years, through 2010.
IRA CONTRIBUTIONS
If you contribute to an IRA, the contributions may be fully or partially deductible. Although deductions are generally not available to high-earning taxpayers, if either spouse participates in an employee’s retirement plan, contributions may still grow on a tax-deferred basis until withdrawn.
The contribution limit for 2008 increased from $4,000 to $5,000. If you are age 50 or older, you can increase the deduction by an additional $1,000. The deadline for contributions, for 2008, is April 15 of 2009.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No exceptions. No time limits. No IRS
CAPITAL GAINS AND DIVIDENDS
The maximum tax rate on new long term capital gains and qualified dividends for taxpayers in the 15% or 10% regular income tax brackets is reduced form 5% to 0%. As the stands right now, the 0% rate is scheduled to remain in effect through 2010.
This may be a good year to have your children sell securities that have increased in value. However, such sale may trigger the “kiddie tax”.
The tax break isn’t just limited to low-income taxpayers. If you can push your taxable income for 2008 below the cut-off point for the regular 25% tax bracket, your long term capital gains and dividend income could qualify for the 0% rate.
SMALL BUSINESS ASSETS
Under the new economic stimulus law, your business can deduct up to $250,000 of business assets placed in service in 2008. In addition, a firm may elect bonus depreciation equal to 50% of the cost of any qualified assets.
If transacted properly, your firm can combine the improved Section 179 deduction with the bonus depreciation. Your regular depreciation deductions may be claimed for any un-recaptured cost.
MORTGAGE INSURANCE
Congress previously approved a one-year deduction for mortgage insurance premiums in 2007. A full deduction was available for taxpayers with and Adjusted Gross Income of under $100,000. Once income exceeded that threshold amount, the deduction was phased out. The new mortgage relief law extends this tax break for three years, through 2010.
IRA CONTRIBUTIONS
If you contribute to an IRA, the contributions may be fully or partially deductible. Although deductions are generally not available to high-earning taxpayers, if either spouse participates in an employee’s retirement plan, contributions may still grow on a tax-deferred basis until withdrawn.
The contribution limit for 2008 increased from $4,000 to $5,000. If you are age 50 or older, you can increase the deduction by an additional $1,000. The deadline for contributions, for 2008, is April 15 of 2009.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No exceptions. No time limits. No IRS
Sunday, November 9, 2008
Year-End Savings for Individuals
The end of 2008 is happening upon us faster than we think. With the year drawing to a close, now is an ideal time to review your tax situation and evaluate strategies that may help minimize your tax bill. Once December 31 passes, your 2008 tax bill is essentially set. Taking certain steps before then, however, can make a difference.
As is the case year after year, favorable changes to the tax laws made in 2008 are also accompanied by unfavorable modifications. This year-end, of course, our unprecedented financial crisis looms large. This crisis generates tax loss situations that we may not have faced in recent years, as well as a more urgent need to maximize current income that involves taking steps to minimize tax payments whenever possible.
TRADITIONAL TAX STRATEGIES
Year-end tax planning tips typically fall into two general groups: (1) the traditional strategies that have proven themselves useful year after year, and (2) new opportunities and pitfalls that have arisen from recent changes to the tax laws.
Tried and true tax planning techniques can help virtually every taxpayer save money; some, of course, more than others. How much you can save depends on your individual circumstances, but examination of the following general areas is worth a look --in addition to considering the tax impact of any special circumstances in which you might find yourself this year.
Income shifting. One of the most fundamental year-end tax planning techniques involves accelerating deductible expenses in 2008 and deferring income, if economically feasible, into 2008. By delaying taxable income you defer taxes. Delaying taxable income may also prevent you from losing lucrative tax breaks that can be reduced or eliminated altogether as your income level rises and propels you into a higher tax bracket.
With only a few months left until the end of the year, you can probably anticipate with reasonable certainty what income and deductions you will be reporting on your 2008 tax return. You may also be able to predict with relative accuracy what your income and expenses for the first few months of 2009 will include. The ability to gauge your income and expenses for 2008 and into 2009 provides a golden opportunity to shift income or expenses into one year or the other depending on what will save you the most overall taxes.
Shifting income, however, is not always a matter of simply delaying receipt of funds. Tax rules may require you to recognize certain types of income when you have earned the right to receive it, even if you arrange for its delayed payment. This office can help you recognize and navigate the differences.
Deduction management. Essential year-end tax planning requires determining whether you will take the standard deduction or whether you will itemize your deductions. Consider "bunching" deductible expenses into one or the other year depending upon whether the standard deduction may be taken in one year or whether the adjusted gross income limits for medical (7.5 percent) or miscellaneous itemized deductions (2 percent) may be more easily met.
Even if you know you will itemize deductions, accelerating or deferring them is often a question of determining your probable tax bracket for year end and the next year to maximize their after tax value. Sometimes planning is as simple as paying your state estimated tax or real estate taxes in one year or the other; at other times, it's a question of making certain you gather the right proof and follow the proper steps in time to be entitled to a deduction in one year or the other. Again, this office can help.
Portfolio timing. The end of the year is the right time to examine your investments (winners and losers over the course of the year) to take the steps necessary to minimize your capital gains income and maximize the benefit of any capital losses. Especially this year, when the stock market took its roller-coaster ride, gathering your portfolio's records for the entire year can make a difference in not only what you might buy or sell in November and December but what estimated tax you will need to pay (or not pay) for the fourth quarter of 2008.
Long-term capital losses can be used to fully offset long-term capital gains. Losses taken in excess of gains can also be used to offset up to $3,000 in ordinary income (or $1,500 for a married couple filing separately). The strategy for short-term gains and losses follows a similar game plan, although coordinating the two sometimes takes special care. Unlike excess business losses that can be carried back two years to net an immediate refund in many cases, an individual's net capital losses unfortunately can only be carried forward.
In calculating gains or loss for purposes of balancing your gains and losses at year end, remember that, for tax purposes, it's not how much your stocks have gone down for the year but rather have much gain or loss you've realized since purchasing them. For example, you still may owe capital gains tax on stock acquired in 2001 at $15/share even though it may have dropped $20 in 2008 from a high of $65 to $45 when you sold it. You still have capital gain of $30/share on the sale.
Retirement planning. Year-end planning for 2008 also involves maximizing annual contributions to your retirement plan accounts, since one year's limit cannot be added to the next years if not taken in time. While contributions to IRAs may be applied retroactively if made before the filing deadline, an individual's elective deferral contribution made as an employee to a qualified plan must be made before the end of the calendar year.
Maximizing contributions to your retirement plan (or plans) before year-end also allows you to reduce your adjusted gross income in direct proportion to those contributions. This in turn can give you the benefit of increasing the deductibility of medical and other deductions subject to adjusted gross income floors.
As many 401(k) plan account owners have realized in 2008, managing a tax-deferred retirement account is not a "set it and forget it" proposition. Although sheltered from tax, a 401(k) or other defined contribution plan also requires careful management of the performance of those investments and re-allocation of assets whenever appropriate. Unfortunately, losses on any 401(k) plan are not tax deductible; nor can they offset capital gains in non-tax sheltered accounts.
Gift-giving. Slow and steady estate planning can yield dramatic results. Nowhere is that more apparent than devising an annual gift giving plan to family members. Before year-end 2008, you can transfer up to $12,000 per person, per year, without paying gift tax on the amounts transferred. Married couples can gift $24,000 per person by "splitting" their gifts. In 2009, the annual exclusion rises to $13,000 ($26,000 for couples). This strategy not only avoids the possibility of paying a hefty estate tax later, but it removes earnings from those gifts from your taxable income bracket into that of the lower-bracket gift recipient.
NEW OPPORTUNITIES
Tax law changes constantly, and therefore so must individual tax planning. Tax year 2008 is no exception. While fundamental techniques should not be overlooked, attention to tax legislation is equally important for most taxpayers. In 2008, Congress passed a host of provisions to encourage consumers to jumpstart the economy by having more money in their pockets to spend.
In addition to the Economic Stimulus checks that were mailed out -for the most part- before this past September, tax legislation in 2008 renewed or enhanced many benefits for individual taxpayers, some only for 2008 and others for both 2008 and 2009. Maximizing these tax benefits between 2008 and 2009, therefore, requires care in respecting a variety of effective dates.
AMT patch. The Emergency Economic Stabilization Act of 2008 (EESA) included among its many provisions a so-called alternative minimum tax (AMT) "patch." For the 2008 tax year, the AMT exemption amounts are raised to once again insulate most middle-income taxpayers from the reach of the AMT. The patch is only for 2008. Hopes are high that in 2009 Congress finally will face up to the need to find a permanent solution to the AMT and pass AMT reform rather than yet another patch.
Income for forgiveness of mortgage indebtedness. Those principal-residence homeowners who have part of their mortgage debt forgiven as part of a workout or foreclosure have been spared having to pay income tax on that forgiven income. The Mortgage Indebtedness Relief Act of 2007 first applied this tax-free treatment to debt forgiveness taking place from 2007 through 2009. The Emergency Economic Stabilization Act of 2008 extended it through 2012.
State and local sales tax deduction. Despite being one of the more popular tax breaks, the deduction for state and local sales taxes is not permanent and had been set to expire at the end of 2007. Under this deduction, taxpayers who itemize deductions the option of claiming either state and local income taxes or state and local general sales taxes. The Emergency Economic Stabilization Act of 2008 extended this deduction for 2008 and 2009.
Tuition and fees deduction. Taxpayers may continue to deduct qualifying tuition and fees paid in 2008 that are required for the student's enrollment or attendance at a post-secondary school. The tuition and fees deduction is an above-the-line write-off that, depending on adjusted gross income, can reduce taxable income by as much as $4,000. They are frequently more valuable than taking a Hope or Lifetime learning education credit. Since this deduction also has been extended for 2009, deciding in which tax year an upcoming tuition payment will be made can help maximize your overall education deductions and credits.
Classroom deduction. Full-time teachers, instructors, counselors, and other educators can deduct up to $250 worth of books, supplies, software, and other qualifying materials that they provide out of pocket expenses. The deduction had been set to expire at the end of 2007, but Congress now has extended it for 2008 and 2009. Educators should remember that this deduction is based on the calendar year rather than the school year.
Tax-free IRAs charitable contributions. The EESA extends through December 31, 2009, the opportunity for certain taxpayers age 70 1/2 or older to make tax-free distributions from IRAs for charitable purposes. This contribution can include any required minimum distribution that the taxpayer would be otherwise required to take.
Residential energy property. The high cost of energy is encouraging many people to make energy efficient improvements to their homes. If you are contemplating installing energy-efficient doors and windows, water heaters or other items in 2008, you may want to wait until 2009.
Several years ago, Congress created a residential tax credit for installing energy efficient doors and windows, water heaters and similar items. The nonrefundable lifetime credit could reach as high as $500. However, the credit expired at the end of 2007. Surprisingly, the EESA reinstates the credit but not for 2008. The new law reinstates the credit for 2009 through 2016. The EESA also expands the credit to include certain stoves that use renewable plant-derived fuel along with other enhancements; so while the credit is not available for 2008, the expanded credit for 2009 may be worth waiting for.
Another incentive is available in 2008 for certain energy efficient improvements. Solar electric property, small wind energy property and some heat pump property may qualify for the residential alternative energy tax credit. Additionally, you can use the residential alternative energy credit against AMT liability in 2008.
Biking to work. Another new tax break that doesn't begin until 2009 is a new employer- provided transportation fringe benefit. In addition to transit passes and van pooling, employers starting in 2009 can offer their employees up to $20/month as a tax-free benefit if they commute to work by bicycle. To inaugurate this benefit starting in January, however, employers must incorporate it into their written fringe benefit plan, a process that should start soon.
Vacation Home Conversions. Gain from the sale of a principal residence that is allocable to periods of "nonqualified use" can no longer be excluded from the taxpayer's gain realized on its sale. A technique that has been used by many vacation home owners is to eventually convert that second home into a principal residence before its sale and claim a full $250,000 principal residence exclusion ($500,000 for joint filers) on the gain. Due to a loophole closing provision in the 2008 Housing Assistance Tax Act, any conversion made after December 31, 2008, cannot shelter the portion of that gain allocable to post-2008 appreciation.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to incorporate into your year-end tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to utilize before year-end, there are many more techniques that can be used depending upon a client's individual circumstances. For a more detailed plan that can be customized to your particular circumstances, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time limit. No IRS.
As is the case year after year, favorable changes to the tax laws made in 2008 are also accompanied by unfavorable modifications. This year-end, of course, our unprecedented financial crisis looms large. This crisis generates tax loss situations that we may not have faced in recent years, as well as a more urgent need to maximize current income that involves taking steps to minimize tax payments whenever possible.
TRADITIONAL TAX STRATEGIES
Year-end tax planning tips typically fall into two general groups: (1) the traditional strategies that have proven themselves useful year after year, and (2) new opportunities and pitfalls that have arisen from recent changes to the tax laws.
Tried and true tax planning techniques can help virtually every taxpayer save money; some, of course, more than others. How much you can save depends on your individual circumstances, but examination of the following general areas is worth a look --in addition to considering the tax impact of any special circumstances in which you might find yourself this year.
Income shifting. One of the most fundamental year-end tax planning techniques involves accelerating deductible expenses in 2008 and deferring income, if economically feasible, into 2008. By delaying taxable income you defer taxes. Delaying taxable income may also prevent you from losing lucrative tax breaks that can be reduced or eliminated altogether as your income level rises and propels you into a higher tax bracket.
With only a few months left until the end of the year, you can probably anticipate with reasonable certainty what income and deductions you will be reporting on your 2008 tax return. You may also be able to predict with relative accuracy what your income and expenses for the first few months of 2009 will include. The ability to gauge your income and expenses for 2008 and into 2009 provides a golden opportunity to shift income or expenses into one year or the other depending on what will save you the most overall taxes.
Shifting income, however, is not always a matter of simply delaying receipt of funds. Tax rules may require you to recognize certain types of income when you have earned the right to receive it, even if you arrange for its delayed payment. This office can help you recognize and navigate the differences.
Deduction management. Essential year-end tax planning requires determining whether you will take the standard deduction or whether you will itemize your deductions. Consider "bunching" deductible expenses into one or the other year depending upon whether the standard deduction may be taken in one year or whether the adjusted gross income limits for medical (7.5 percent) or miscellaneous itemized deductions (2 percent) may be more easily met.
Even if you know you will itemize deductions, accelerating or deferring them is often a question of determining your probable tax bracket for year end and the next year to maximize their after tax value. Sometimes planning is as simple as paying your state estimated tax or real estate taxes in one year or the other; at other times, it's a question of making certain you gather the right proof and follow the proper steps in time to be entitled to a deduction in one year or the other. Again, this office can help.
Portfolio timing. The end of the year is the right time to examine your investments (winners and losers over the course of the year) to take the steps necessary to minimize your capital gains income and maximize the benefit of any capital losses. Especially this year, when the stock market took its roller-coaster ride, gathering your portfolio's records for the entire year can make a difference in not only what you might buy or sell in November and December but what estimated tax you will need to pay (or not pay) for the fourth quarter of 2008.
Long-term capital losses can be used to fully offset long-term capital gains. Losses taken in excess of gains can also be used to offset up to $3,000 in ordinary income (or $1,500 for a married couple filing separately). The strategy for short-term gains and losses follows a similar game plan, although coordinating the two sometimes takes special care. Unlike excess business losses that can be carried back two years to net an immediate refund in many cases, an individual's net capital losses unfortunately can only be carried forward.
In calculating gains or loss for purposes of balancing your gains and losses at year end, remember that, for tax purposes, it's not how much your stocks have gone down for the year but rather have much gain or loss you've realized since purchasing them. For example, you still may owe capital gains tax on stock acquired in 2001 at $15/share even though it may have dropped $20 in 2008 from a high of $65 to $45 when you sold it. You still have capital gain of $30/share on the sale.
Retirement planning. Year-end planning for 2008 also involves maximizing annual contributions to your retirement plan accounts, since one year's limit cannot be added to the next years if not taken in time. While contributions to IRAs may be applied retroactively if made before the filing deadline, an individual's elective deferral contribution made as an employee to a qualified plan must be made before the end of the calendar year.
Maximizing contributions to your retirement plan (or plans) before year-end also allows you to reduce your adjusted gross income in direct proportion to those contributions. This in turn can give you the benefit of increasing the deductibility of medical and other deductions subject to adjusted gross income floors.
As many 401(k) plan account owners have realized in 2008, managing a tax-deferred retirement account is not a "set it and forget it" proposition. Although sheltered from tax, a 401(k) or other defined contribution plan also requires careful management of the performance of those investments and re-allocation of assets whenever appropriate. Unfortunately, losses on any 401(k) plan are not tax deductible; nor can they offset capital gains in non-tax sheltered accounts.
Gift-giving. Slow and steady estate planning can yield dramatic results. Nowhere is that more apparent than devising an annual gift giving plan to family members. Before year-end 2008, you can transfer up to $12,000 per person, per year, without paying gift tax on the amounts transferred. Married couples can gift $24,000 per person by "splitting" their gifts. In 2009, the annual exclusion rises to $13,000 ($26,000 for couples). This strategy not only avoids the possibility of paying a hefty estate tax later, but it removes earnings from those gifts from your taxable income bracket into that of the lower-bracket gift recipient.
NEW OPPORTUNITIES
Tax law changes constantly, and therefore so must individual tax planning. Tax year 2008 is no exception. While fundamental techniques should not be overlooked, attention to tax legislation is equally important for most taxpayers. In 2008, Congress passed a host of provisions to encourage consumers to jumpstart the economy by having more money in their pockets to spend.
In addition to the Economic Stimulus checks that were mailed out -for the most part- before this past September, tax legislation in 2008 renewed or enhanced many benefits for individual taxpayers, some only for 2008 and others for both 2008 and 2009. Maximizing these tax benefits between 2008 and 2009, therefore, requires care in respecting a variety of effective dates.
AMT patch. The Emergency Economic Stabilization Act of 2008 (EESA) included among its many provisions a so-called alternative minimum tax (AMT) "patch." For the 2008 tax year, the AMT exemption amounts are raised to once again insulate most middle-income taxpayers from the reach of the AMT. The patch is only for 2008. Hopes are high that in 2009 Congress finally will face up to the need to find a permanent solution to the AMT and pass AMT reform rather than yet another patch.
Income for forgiveness of mortgage indebtedness. Those principal-residence homeowners who have part of their mortgage debt forgiven as part of a workout or foreclosure have been spared having to pay income tax on that forgiven income. The Mortgage Indebtedness Relief Act of 2007 first applied this tax-free treatment to debt forgiveness taking place from 2007 through 2009. The Emergency Economic Stabilization Act of 2008 extended it through 2012.
State and local sales tax deduction. Despite being one of the more popular tax breaks, the deduction for state and local sales taxes is not permanent and had been set to expire at the end of 2007. Under this deduction, taxpayers who itemize deductions the option of claiming either state and local income taxes or state and local general sales taxes. The Emergency Economic Stabilization Act of 2008 extended this deduction for 2008 and 2009.
Tuition and fees deduction. Taxpayers may continue to deduct qualifying tuition and fees paid in 2008 that are required for the student's enrollment or attendance at a post-secondary school. The tuition and fees deduction is an above-the-line write-off that, depending on adjusted gross income, can reduce taxable income by as much as $4,000. They are frequently more valuable than taking a Hope or Lifetime learning education credit. Since this deduction also has been extended for 2009, deciding in which tax year an upcoming tuition payment will be made can help maximize your overall education deductions and credits.
Classroom deduction. Full-time teachers, instructors, counselors, and other educators can deduct up to $250 worth of books, supplies, software, and other qualifying materials that they provide out of pocket expenses. The deduction had been set to expire at the end of 2007, but Congress now has extended it for 2008 and 2009. Educators should remember that this deduction is based on the calendar year rather than the school year.
Tax-free IRAs charitable contributions. The EESA extends through December 31, 2009, the opportunity for certain taxpayers age 70 1/2 or older to make tax-free distributions from IRAs for charitable purposes. This contribution can include any required minimum distribution that the taxpayer would be otherwise required to take.
Residential energy property. The high cost of energy is encouraging many people to make energy efficient improvements to their homes. If you are contemplating installing energy-efficient doors and windows, water heaters or other items in 2008, you may want to wait until 2009.
Several years ago, Congress created a residential tax credit for installing energy efficient doors and windows, water heaters and similar items. The nonrefundable lifetime credit could reach as high as $500. However, the credit expired at the end of 2007. Surprisingly, the EESA reinstates the credit but not for 2008. The new law reinstates the credit for 2009 through 2016. The EESA also expands the credit to include certain stoves that use renewable plant-derived fuel along with other enhancements; so while the credit is not available for 2008, the expanded credit for 2009 may be worth waiting for.
Another incentive is available in 2008 for certain energy efficient improvements. Solar electric property, small wind energy property and some heat pump property may qualify for the residential alternative energy tax credit. Additionally, you can use the residential alternative energy credit against AMT liability in 2008.
Biking to work. Another new tax break that doesn't begin until 2009 is a new employer- provided transportation fringe benefit. In addition to transit passes and van pooling, employers starting in 2009 can offer their employees up to $20/month as a tax-free benefit if they commute to work by bicycle. To inaugurate this benefit starting in January, however, employers must incorporate it into their written fringe benefit plan, a process that should start soon.
Vacation Home Conversions. Gain from the sale of a principal residence that is allocable to periods of "nonqualified use" can no longer be excluded from the taxpayer's gain realized on its sale. A technique that has been used by many vacation home owners is to eventually convert that second home into a principal residence before its sale and claim a full $250,000 principal residence exclusion ($500,000 for joint filers) on the gain. Due to a loophole closing provision in the 2008 Housing Assistance Tax Act, any conversion made after December 31, 2008, cannot shelter the portion of that gain allocable to post-2008 appreciation.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to incorporate into your year-end tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to utilize before year-end, there are many more techniques that can be used depending upon a client's individual circumstances. For a more detailed plan that can be customized to your particular circumstances, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time limit. No IRS.
Over the next 12 months, the Small Business and Self Employed Division (SB/SE) of the Internal Revenue Service will focus on increased enforcement, says Faris Fink, Commissioner of the SB/SE division.
The Small Business is responsible for the majority of the tax gap, Fink told a session of the American Institute of Certified Public Accountants National Tax Conference. Fink said "Enforcement has a necessary presence when you are talking about tax administration".
But the enforcement will recognize (a) there are taxpayers who can not properly do their taxes, (b) taxpayers who will not properly do their taxes and (c) some who truly need assistance with compliance. All, of which, must be coupled and balanced with education and taxpayer services.
How such recognition will occur is unclear. But, the Commissioner said some of the areas the Division will be examining include
S-corporation;
LLC's;
High-income filers, and;
Abusive transactions.
S corporations are likely to receive particular scrutiny but further review would not be limited to S corporations but to all passthrough entities like partnerships, which can expect to receive a "significant amount of attention" because SB/SE has found this to be an area of abuse and would like to curb what he called a growing trend of abusive transactions. The Commissioner said there would be a renewed effort to address high-income filers, typically classified as those whth an adjusted gross income of over $200,000.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to use in your business planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several audit techniques that are coming, you might like to know how to avodi the audits. For a more detailed plans that can be customized to your particular circumstances, give us a call at 702-642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. We guarantee our work. No Exceptions. No Time limit. No IRS.
The Small Business is responsible for the majority of the tax gap, Fink told a session of the American Institute of Certified Public Accountants National Tax Conference. Fink said "Enforcement has a necessary presence when you are talking about tax administration".
But the enforcement will recognize (a) there are taxpayers who can not properly do their taxes, (b) taxpayers who will not properly do their taxes and (c) some who truly need assistance with compliance. All, of which, must be coupled and balanced with education and taxpayer services.
How such recognition will occur is unclear. But, the Commissioner said some of the areas the Division will be examining include
S-corporation;
LLC's;
High-income filers, and;
Abusive transactions.
S corporations are likely to receive particular scrutiny but further review would not be limited to S corporations but to all passthrough entities like partnerships, which can expect to receive a "significant amount of attention" because SB/SE has found this to be an area of abuse and would like to curb what he called a growing trend of abusive transactions. The Commissioner said there would be a renewed effort to address high-income filers, typically classified as those whth an adjusted gross income of over $200,000.
GIVE OUR OFFICE A CALL
With the complexity of the tax law, understanding what tax planning provisions to use in your business planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several audit techniques that are coming, you might like to know how to avodi the audits. For a more detailed plans that can be customized to your particular circumstances, give us a call at 702-642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. We guarantee our work. No Exceptions. No Time limit. No IRS.
Wednesday, November 5, 2008
Business Forms
As part of our educational series, we answer the question of why it is so useful to set up your firm as an LLC. When setting up a new business or expanding an existing one...one of the most important decisions to make is the choice of legal entity.
Today, few firms are formed as regular C corporations, and even S corporations are becoming less popular. LLC’s are becoming the entity of choice. Some of the key tax issues when selecting a form of business are....
How its operating income will be taxed, and
How its owners will be taxed in the future when they exit the firm
In addition, a business founder will want to have flexibility in managing it, arranging its ownership structure, and allocating income among themselves. On all of these points,
C-corporations now generally are inferior compared with the pass-through entity alternatives available today.
A C-corporation is a separate taxpayer subject to corporate level taxes. But a pass-through entity has its income taxed directly on the personal tax returns of its owners..avoiding the corporate level tax. The pass-through entity alternatives are....
S-corporations are corporations organized in the normal manner under state law, which provide their owners with corporate protection against personal liability for the business obligations. The IRS imposes important restrictions on S-corporations. For instance: they can only have one class of stock; profits must be distributed to owners pro rate with stock ownership; and, there can be no more than 100 shareholders.
Partnerships are unincorporated business entities. They are not subject to the restrictions that the IRS applies to S corporations and so are much more flexible to use. A catch is at least one partner who is active in the firm must be personally liable for its obligations as a general partner. Others who are passive investors may attain limited liability as limited partners.
Limited liability companies (LLCs) have only recently become available in all 50 states as a cross between a corporation and a partnership, offering the best of both. Like a corporation, an LLC provides protection to all its owners against personal liability for a business obligation. But an LLC owner is usually taxed by the IRS as a partner.
The advantages of pass through entities to consider...Operating income. Because
C-corporations are subject to their own corporate level tax, profits paid to shareholders as dividends are subject to double taxation. First, as income to the corporation, then to the dividend recipient.
Capital gains realized by the corporation do not receive the new low 15% tax rate paid by individuals. They are taxed at ordinary corporate rates. Losses incurred by a business are locked in the business and can’t be used by its owners to offset other income.
The income of pass-through entity is taxed directly on its owners’ personal tax returns. Thus, double taxation of profits is avoided, capital gains receive the lower personal tax rate, and business losses can be deducted by the firm’s owners personally.
Corporate level taxes also create problems when the owner of a private C-corporation wants to sell the firm. The owner probably will want to sell the stock of the business to obtain tax-favored capital gains. But the buyer probably will want to buy the business’s assets so the purchase price will be attributed to them and they can be depreciated from a higher basis. If the seller insists on a stock sale, the buyer will want to pay less because they obtain smaller depreciation deductions. But if the seller accepts a sale of assets, gain will be taxed to the corporation at normal rates, and profits distributed from the sale will be subject to double tax. Pass-through entities are able to avoid these problems because of the lack of entity level tax. A sale of either the business or its assets will have the same basic result on its owners tax return.
Here are the differences among pass-through business forms. For many years the choice of pass-through entity was only between an S-corporation and a partnership. The trade-off was that an S-corporation provides protection against personally liability for business debts. The details of the law that apply to LLCs vary by state and LLC status may not be available for all kinds of businesses or in all circumstances. If you own a business that is already operating as a C corporation, consider expanding it through subsidiary or sibling firms organized as a pass-through entity. But there are problems...
Profits are taxed to owners even when not distributed to them. So if profits are retained in the business to fund growth, the owners may not have cash with which to pay the tax. You can, however, have the business always distribute enough funds to cove the tax on its total profits.
Owners of pass-through entities are subject to restrictions on tax-favored benefits and perks that do not apply to owners-employees of C corporations.
Owners of partnerships and LLCs are not salaries employees who receive W-2s and IRS rules governing their compensation are complex.
This intellectual capital is provided to our clients and friends. For this and other strategies write us at isueirs@aol.com or phone our office at (702)642-8953. So if you know someone that is looking to save taxes, avoid audits and remain invisible to the IRS, think of us. We guarantee our work product. No exceptions, No conditions. No time limits. No IRS.
Today, few firms are formed as regular C corporations, and even S corporations are becoming less popular. LLC’s are becoming the entity of choice. Some of the key tax issues when selecting a form of business are....
How its operating income will be taxed, and
How its owners will be taxed in the future when they exit the firm
In addition, a business founder will want to have flexibility in managing it, arranging its ownership structure, and allocating income among themselves. On all of these points,
C-corporations now generally are inferior compared with the pass-through entity alternatives available today.
A C-corporation is a separate taxpayer subject to corporate level taxes. But a pass-through entity has its income taxed directly on the personal tax returns of its owners..avoiding the corporate level tax. The pass-through entity alternatives are....
S-corporations are corporations organized in the normal manner under state law, which provide their owners with corporate protection against personal liability for the business obligations. The IRS imposes important restrictions on S-corporations. For instance: they can only have one class of stock; profits must be distributed to owners pro rate with stock ownership; and, there can be no more than 100 shareholders.
Partnerships are unincorporated business entities. They are not subject to the restrictions that the IRS applies to S corporations and so are much more flexible to use. A catch is at least one partner who is active in the firm must be personally liable for its obligations as a general partner. Others who are passive investors may attain limited liability as limited partners.
Limited liability companies (LLCs) have only recently become available in all 50 states as a cross between a corporation and a partnership, offering the best of both. Like a corporation, an LLC provides protection to all its owners against personal liability for a business obligation. But an LLC owner is usually taxed by the IRS as a partner.
The advantages of pass through entities to consider...Operating income. Because
C-corporations are subject to their own corporate level tax, profits paid to shareholders as dividends are subject to double taxation. First, as income to the corporation, then to the dividend recipient.
Capital gains realized by the corporation do not receive the new low 15% tax rate paid by individuals. They are taxed at ordinary corporate rates. Losses incurred by a business are locked in the business and can’t be used by its owners to offset other income.
The income of pass-through entity is taxed directly on its owners’ personal tax returns. Thus, double taxation of profits is avoided, capital gains receive the lower personal tax rate, and business losses can be deducted by the firm’s owners personally.
Corporate level taxes also create problems when the owner of a private C-corporation wants to sell the firm. The owner probably will want to sell the stock of the business to obtain tax-favored capital gains. But the buyer probably will want to buy the business’s assets so the purchase price will be attributed to them and they can be depreciated from a higher basis. If the seller insists on a stock sale, the buyer will want to pay less because they obtain smaller depreciation deductions. But if the seller accepts a sale of assets, gain will be taxed to the corporation at normal rates, and profits distributed from the sale will be subject to double tax. Pass-through entities are able to avoid these problems because of the lack of entity level tax. A sale of either the business or its assets will have the same basic result on its owners tax return.
Here are the differences among pass-through business forms. For many years the choice of pass-through entity was only between an S-corporation and a partnership. The trade-off was that an S-corporation provides protection against personally liability for business debts. The details of the law that apply to LLCs vary by state and LLC status may not be available for all kinds of businesses or in all circumstances. If you own a business that is already operating as a C corporation, consider expanding it through subsidiary or sibling firms organized as a pass-through entity. But there are problems...
Profits are taxed to owners even when not distributed to them. So if profits are retained in the business to fund growth, the owners may not have cash with which to pay the tax. You can, however, have the business always distribute enough funds to cove the tax on its total profits.
Owners of pass-through entities are subject to restrictions on tax-favored benefits and perks that do not apply to owners-employees of C corporations.
Owners of partnerships and LLCs are not salaries employees who receive W-2s and IRS rules governing their compensation are complex.
This intellectual capital is provided to our clients and friends. For this and other strategies write us at isueirs@aol.com or phone our office at (702)642-8953. So if you know someone that is looking to save taxes, avoid audits and remain invisible to the IRS, think of us. We guarantee our work product. No exceptions, No conditions. No time limits. No IRS.
The Good Habit Groove
When entrepreneurs empbrace these thirteen business management habits, success is sure to follow. As a business owner, you are... well... busy. But those nitpicky tasks you are putting off could help you avoid some serious future problems. Ty Freyvogel, founder of EntrepreneusLab.com, has a "good habit" list you should adopt pronto.
When you started your own company, your focus was on doing anything and everything to get it off the ground. Most likely, you spent day and night building the business, solving problems, working overtime to please customers. Now you are proud to say that your venture is a success. But in all the hustle and bustle, you've likely let some small but critcal details fall by the wayside. Unfortunately, says entrepreneurial expert Ty Freyvogel, those nagging little business practices that so often get overlooked are the same ones that can keep you a step or two or ten ahead of the competition.
Being a really successful business owner is all about forming good habits, says Freyvogel. If you don't keep up with certain tasks, tasks that you probably think of as non-essential...you might get lucky and avoid a major catastrophe. But then again, you might not. And is that really a chance you want to take? There's no time like the present to start devolping habits that will help you run a more solid business. And if you're worried about where to start, don't be. EntrepreneursLab.com has created a checklist of business management habits that will help you keep a tight rein on your business and pull ahead of the pack.
Items on the the checklist will help business owners minimuze the number of problems they must deal with on a daily basis. You've got enough on your plate. Having a checklist of tasks that helps you eliminate problems before they arise will keep your business healthy and you sane. So here is the checklist of thirteen good habits that every busienss owner should develop.
When you started your own company, your focus was on doing anything and everything to get it off the ground. Most likely, you spent day and night building the business, solving problems, working overtime to please customers. Now you are proud to say that your venture is a success. But in all the hustle and bustle, you've likely let some small but critcal details fall by the wayside. Unfortunately, says entrepreneurial expert Ty Freyvogel, those nagging little business practices that so often get overlooked are the same ones that can keep you a step or two or ten ahead of the competition.
Being a really successful business owner is all about forming good habits, says Freyvogel. If you don't keep up with certain tasks, tasks that you probably think of as non-essential...you might get lucky and avoid a major catastrophe. But then again, you might not. And is that really a chance you want to take? There's no time like the present to start devolping habits that will help you run a more solid business. And if you're worried about where to start, don't be. EntrepreneursLab.com has created a checklist of business management habits that will help you keep a tight rein on your business and pull ahead of the pack.
Items on the the checklist will help business owners minimuze the number of problems they must deal with on a daily basis. You've got enough on your plate. Having a checklist of tasks that helps you eliminate problems before they arise will keep your business healthy and you sane. So here is the checklist of thirteen good habits that every busienss owner should develop.
1. Review all your systems from top to bottom. Carefully examine what is working and what isn’t. Decide where the problems are and figure out what can be fixed. You might be able to repair the problems yourself, or you might need outside guidance. maybe you need a computer expert to help you use the technology more efficiently or maybe you need a financial or tax expert to improve the way you do your books. Whatever you do, don’t assume anything. Don’t assume that just because you have had a certain system in place from day one that it is adding value to your firm.
2. Review all vendor contracts. Take a look at how much business you are doing with each vendor. Are you getting the best rates based on how much you are working together? Is the relationship mutually beneficial for you and for them? If not, don’t be afraid to make a chance. If you’re happy with your vendors, on the other hand, take the time to tell them.
3. Find your best customers. You may be surprised to find out that your best customers are not who you think they are. Examine all your customers through a profitability lens. When I do my customer review, I am always surprised to see who may best customers are. Just because you always seem to be doing something for certain customers does not mean they are the most profitable.
4. Touch base with your best clients. Be sure to tell them you appreciate their business and ask if there is anything you can improve on or do differently to help them grow their business.
5. Hold annual performance reviews. Discuss with your employees what they can do to help the company run more smoothly. Also, take the time to find out what they feel most passionate about in their work, and ask if there is another part of the business in which they’d like to play a larger role.
6. Engage your employees as partners. The best people to help you solve problems, particularly those involving customers, are the ones who experience them on a daily basis. That’s right. your employees are a wellspring of ideas on how you can make your customers happier. Hold a meeting designed to get them to share those ideas. Listening to an implementing your employee’s suggestions is a great way to make them feel valued.
7. Do a “spring cleaning” at lease once a year. Purge your office. There’s no need to hand onto all of that stuff that you either don’t need or that doesn’t work anymore. Your employees will like working in a cleaner environment. Chances are they...and you, will be happier and more productive.
8. Review your marketing campaign. You should always make time to take a look at which marketing efforts are driving businesses, and which are not. Do not hesitate to make changes if you think your current efforts are not paying off.
9. Overhaul your website. In the same way that retail stores move around their floor sets, you need to make changes to your website to keep people coming back. Make sure all of your information is updated, and post any articles that have recently mentioned your work.
10. Take a look at your business cards. Chances are you are handing out your business cards to all kinds of people; your customers, your vendors, potential customers, everyone. Make sure all of the information is updated.
11. Review professional magazine subscriptions. Are you really reading all those magazines that come each month? Chances are at lease some of them are getting piled up somewhere in the office. Cancel magazine subscriptions that are not valuable for you or your employees.
12. Consider technology upgrades. If you need new computers or a new phone system to help things run more smoothly, don’t hesitate to make these upgrades. A new computer, phone system or other technology upgrade can make a huge difference in the daily lives of your employees.
13. Smart companies use accountants for more than counting beans. If you are not talking with your accountant year round about changes in business strategy and tax and reporting issues, you could be wasting a precious resource. First, no one knows you and your industry better than the firm that checks your books. Today’s accountants handle tax planning, risk management, mergers, strategic planning, budgeting and regulatory compliance, asset protection and IRS audits.
This intellectual capital is provided to our clients and friends. For more on this and other strategies contact us at isueirs@aol.com or phone our office at (702) 642-8953. So if you know someone that is looking to save taxes, avoid audits and remain invisible to the IRS, think of us. Saving you money is what we do. No exceptions, No conditions. No time limits. No IRS.
Sunday, November 2, 2008
Massive Tax Act Provides Relief for Individuals
On October 3, 2008 the Emergency Economic Stabilization Act is designed to help rescue the economy from the current financial situation. As part of this"bailout" there are $132.2 billion in tax braks. The law extends many tax breaks that had expired at the end of 2007 and adds a "patch" to the alternative minimum tax (AMT) to keep 23 million taxpayer from owing this tax in 2008.
EXTENDERS: You may benefit from the dozens of tax deductions and credits that had expired at the end of 2007. These include:
* Deduction for educators out of pocket classroom expeses of $250
* Deduction for tuition and fees up to $4,000 as an adjustment to gross income
* Option to deduct state and local sales tax or state and local income tax
* Tax-free transfer of IRA funds up to $100,000 to charity if over age 70
* Tax-free treatment for homeowners who have their indebtedness forgiven when their home is forclosed on or they work out their mortgage with lenders. This break sunsets in 2012.
* Homeowners who do not itemize deductions can deduct real property taxes up to $500 for singles or $1,000 for joint filers as an additional standard deduction.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time Limits, No Conditions. No IRS
EXTENDERS: You may benefit from the dozens of tax deductions and credits that had expired at the end of 2007. These include:
* Deduction for educators out of pocket classroom expeses of $250
* Deduction for tuition and fees up to $4,000 as an adjustment to gross income
* Option to deduct state and local sales tax or state and local income tax
* Tax-free transfer of IRA funds up to $100,000 to charity if over age 70
* Tax-free treatment for homeowners who have their indebtedness forgiven when their home is forclosed on or they work out their mortgage with lenders. This break sunsets in 2012.
* Homeowners who do not itemize deductions can deduct real property taxes up to $500 for singles or $1,000 for joint filers as an additional standard deduction.
GIVE OUR OFFICE A CALL
With the complexity of the tax laws, understanding what tax planning to use in your end-of-the-year tax planning strategy can be a daunting task. While this letter hopefully gives you a heads up on several strategies that you might like to use before year end, there are many more techniques that can be used depending on a client’s individual circumstances. For a more detailed plan, give us a call at (702) 642-8953 or write me at isueirs@aol.com.
Remember, we save you taxes and keep you invisible to the IRS. No Exceptions. No Time Limits, No Conditions. No IRS
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