Congress has passed a change to the Retirement Account rules that require taxpayers to take minimum annual withdrawals after age 70 1/2. If the president signs the bill as expected, the change will be effective for tax year 2009.
Don't be confused and don't fail to withdraw for 2008. There is no change to the rules for required minimum distributions for 2008. The penalty for failure to withdraw the required distribution is onerous - 50% of the required amount not withdrawn.
I proposed a similar change to Indiana senators Bayh and Lugar, and retirement industry experts, several weeks ago. However, I hoped that the change would have been effective for 2008, and it will not be.
RMDs reduce account balances. This is not a good strategy for taxpayers who don’t need the money to live on and who want to keep compounding the money in the account, but the government wants distributions to occur so that they can be taxed.The amount of the RMD is calculated on your retirement account balance at the end of the previous year. In general terms, if your account is worth 40% less now than last December, your RMD would be 40% less if calculated on today’s balances as opposed to last year’s balance. A lower RMD would leave more in the account to compound and grow. A higher RMD further depletes an already devastated account.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
12/18/08
Congress passes Worker, Retiree and Employer Recovery Act of 2008
A lame-duck Congress has passed the "Worker, Retiree and Employer Recovery Act of 2008." The act, which President Bush is expected to sign, includes more than 40 major provisions and
over 130 tax code changes.
With this many changes in one bill alone, if you don't think you need a tax specialist to help you minimize your taxes, you're fooling yourself.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
over 130 tax code changes.
With this many changes in one bill alone, if you don't think you need a tax specialist to help you minimize your taxes, you're fooling yourself.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
12/11/08
Home Energy Credits
A client called to ask whether she should invest in a water heater now (December 2008) or wait until 2009. I really like that she is strategically integrating her taxes with other parts of her life. As I told her, the federal tax credits for energy-efficient windows, doors and water heaters, which were enacted for 2006-2007 were renewed in the fall of 2008 -- but for 2009 only. The credits skip over 2008!! By waiting three short weeks until January 1, 2009, she will reduce her tax bill. Who knows, she might also find a lower price during after-Christmas sales!
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
12/2/08
When to begin taking Social Security benefits
A common way of deciding when to begin taking Social Security benefits has been to calculate the break-even age. That's the age the client must live beyond in order for the highter, delayed benefits to provide a higher lifetime income.
However, the break-even method omits many factors that can influence the age at which benefits should begin, including cost-of-living adjustments (COLAs), taxes, and spousal benefits.
Contact me to help you decide when is the best age for you to start Social Security benefits.
Making the wrong choice could cost you more than $100,000 over a 30-year period.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
However, the break-even method omits many factors that can influence the age at which benefits should begin, including cost-of-living adjustments (COLAs), taxes, and spousal benefits.
Contact me to help you decide when is the best age for you to start Social Security benefits.
Making the wrong choice could cost you more than $100,000 over a 30-year period.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/26/08
Possible changes to Required Minimum Distributions
The Wall Street Journal is reporting that Congress is considering possible changes to the Retirement Account rules that require taxpayers to take minimum annual withdrawals after age 70 1/2 – perhaps allowing to delay the withdrawals or reducing the required amount. There may also be some tax relief for taxpayers who have have already received the required minimum distributions (RMD) for this year.
These are changes that I proposed to Indiana senators Bayh and Lugar, and retirement industry experts, several weeks ago.
RMDs reduce account balances. This is not a good strategy for taxpayers who don’t need the money to live on and who want to keep compounding the money in the account, but the government wants distributions to occur so that they can be taxed.
The amount of the RMD is calculated on your retirement account balance at the end of the previous year. In general terms, if your account is worth 40% less now than last December, your RMD would be 40% less if calculated on today’s balances as opposed to last year’s balance. A lower RMD would leave more in the account to compound and grow. A higher RMD further depletes an already devastated account.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
These are changes that I proposed to Indiana senators Bayh and Lugar, and retirement industry experts, several weeks ago.
RMDs reduce account balances. This is not a good strategy for taxpayers who don’t need the money to live on and who want to keep compounding the money in the account, but the government wants distributions to occur so that they can be taxed.
The amount of the RMD is calculated on your retirement account balance at the end of the previous year. In general terms, if your account is worth 40% less now than last December, your RMD would be 40% less if calculated on today’s balances as opposed to last year’s balance. A lower RMD would leave more in the account to compound and grow. A higher RMD further depletes an already devastated account.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/25/08
Standard Mileage Rates
Many taxpayers prefer to use the Standard mileage rate for deducting their business, charity, medical or moving mileage, perhaps because they find it more convenient than tracking all actual expenses related to non-personal use of their cars.
However, it takes only slightly more discipline and time to substantiate Actual mileage expense, rather than Standard. And, in most cases, the Actual expense deduction will be greater than the Standard.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
Here are the IRS rates for 2009 and prior tax years.
STANDARD MILEAGE RATES
_____Business___Med___Charity
_____________& Moving
2009 $0.550 $0.24__$0.14
Business rate includes $0.21/mile depreciation
Last
half
2008 $0.585 $0.27__$0.14
Business rate includes $0.21/mile depreciation
1st
half
2008 $0.505 $0.19__$0.14
Business rate includes $0.21/mile depreciation
2007 $0.485 $0.20__$0.14
Business rate includes $0.19/mile depreciation
However, it takes only slightly more discipline and time to substantiate Actual mileage expense, rather than Standard. And, in most cases, the Actual expense deduction will be greater than the Standard.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
Here are the IRS rates for 2009 and prior tax years.
STANDARD MILEAGE RATES
_____Business___Med___Charity
_____________& Moving
2009 $0.550 $0.24__$0.14
Business rate includes $0.21/mile depreciation
Last
half
2008 $0.585 $0.27__$0.14
Business rate includes $0.21/mile depreciation
1st
half
2008 $0.505 $0.19__$0.14
Business rate includes $0.21/mile depreciation
2007 $0.485 $0.20__$0.14
Business rate includes $0.19/mile depreciation
11/24/08
Planning a business trip?
Planning a business trip? You can tack on one or more personal days and deduct the related costs as business expenses if staying the extra day(s) results in equal or less costs for the longer trip than the shorter duration (due to air fare pricing or package discounts, for instance).
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/18/08
The time is now
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
Taking a deduction for IRA losses
Technically, it is possible to take an income tax deduction for an IRA loss. In practice, it's not easy.
If the loss is in a Roth IRA, then all Roth IRAs must be liquidated before you can take a loss deduction.
If the loss is in a traditional IRA, then all traditional IRAs must be liquidated before you can take a loss deduction. For most taxpayers, their entire annual IRA contribution was already deducted as an adjustment. Therefore losses arising from deductible, traditional IRA contributions cannot generate income tax deductions; only losses from non-deducted traditional IRA contributions can create income tax deductions.
If you have such a loss, the deduction is a miscellaneous itemized deduction only to the extent that it and similar deductions exceed 2% of Adjusted Gross Income.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
If the loss is in a Roth IRA, then all Roth IRAs must be liquidated before you can take a loss deduction.
If the loss is in a traditional IRA, then all traditional IRAs must be liquidated before you can take a loss deduction. For most taxpayers, their entire annual IRA contribution was already deducted as an adjustment. Therefore losses arising from deductible, traditional IRA contributions cannot generate income tax deductions; only losses from non-deducted traditional IRA contributions can create income tax deductions.
If you have such a loss, the deduction is a miscellaneous itemized deduction only to the extent that it and similar deductions exceed 2% of Adjusted Gross Income.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/17/08
Franchises are over-rated as new business models
U.S. News and World Reports Magazine says that the prospect of new business success of franchises, is over-rated. The magazine quotes John Jantsch, small-business consultant and author Duct Tape Marketing: "They can attract customers, but at the end of the day, it's not that profitable. The start-up costs are high, and you're paying royalties to the franchises."
Despite the fact that self-employment as a business owner creates numerous opportunities for taking a bite out of taxes, I wholeheartedly agree with John Jantsch's assessments.
What does a franchiser have that you don't?
1. Training? Can't you get that somewhere else for much less, or for free? Many times, vendors provide adequate (often free) training.
2. Tech support? Again, vendors to the rescue.
3. A marketing plan? Read John Jantsch's books.
4. A proven concept? Of course the franchisor says its proven, but if it really is there will be enough public information that you can certainly emulate the basic concept, garnering most purely by observation.
5. Financing? Franchisor-provided financing may be easy, but it's not necessarily the least expensive financing. If you can't get outside financing, you should reconsider the whole idea.
6. A brand!! Yep, Americans love brands. So, get a creative team together, even college seniors or marketing interns, and create a memorable brand name, a logo and a workable mission statement.
The difference between profit and loss, especially in the important first years - and ultimately success or failure - can be the amount of royalty you're obligated to pay a franchisor, sometimes up to 19-20%.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
Despite the fact that self-employment as a business owner creates numerous opportunities for taking a bite out of taxes, I wholeheartedly agree with John Jantsch's assessments.
What does a franchiser have that you don't?
1. Training? Can't you get that somewhere else for much less, or for free? Many times, vendors provide adequate (often free) training.
2. Tech support? Again, vendors to the rescue.
3. A marketing plan? Read John Jantsch's books.
4. A proven concept? Of course the franchisor says its proven, but if it really is there will be enough public information that you can certainly emulate the basic concept, garnering most purely by observation.
5. Financing? Franchisor-provided financing may be easy, but it's not necessarily the least expensive financing. If you can't get outside financing, you should reconsider the whole idea.
6. A brand!! Yep, Americans love brands. So, get a creative team together, even college seniors or marketing interns, and create a memorable brand name, a logo and a workable mission statement.
The difference between profit and loss, especially in the important first years - and ultimately success or failure - can be the amount of royalty you're obligated to pay a franchisor, sometimes up to 19-20%.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/13/08
When will you get your broker statements and 1099s?
It seems that you're always waiting for at least one broker, who is late, to send you a 1099 so you can complete your taxes.
Well, you'll be waiting longer. The due date is February 15 (or if that's a holiday or weekend, next business day). Don't expect to get all your 1099s until February 17, 2009. And, issuers can request or rely on waivers and get them out later with little or no penalty.
Meanwhile, don't overlook that fact that many 1099s don't look like IRS forms. Issuers can use substitute formats, so the same information is often buried deep within year-end account statements.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
Well, you'll be waiting longer. The due date is February 15 (or if that's a holiday or weekend, next business day). Don't expect to get all your 1099s until February 17, 2009. And, issuers can request or rely on waivers and get them out later with little or no penalty.
Meanwhile, don't overlook that fact that many 1099s don't look like IRS forms. Issuers can use substitute formats, so the same information is often buried deep within year-end account statements.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/12/08
How is the IRS spending $7.5 million of your taxes?
The IRS is spending approximately $7.5 million in matching grants to support its Volunteer Income Tax Assistance grant program (VITA). The IRS is awarding matching grants to 111 organizations in 46 states and the District of Columbia that plan to offer free return-preparation sites in 2009.
The top locales: TX $590,400, NY $482,175, CA $462,860, and TN $292,585. The AARP Foundation will receive a $600,000 matching grant for its multi-state program.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
The top locales: TX $590,400, NY $482,175, CA $462,860, and TN $292,585. The AARP Foundation will receive a $600,000 matching grant for its multi-state program.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/11/08
The Silver Lining in Losses
Investors can sell investments that are now priced lower than when they were purchased, and realize a loss. That loss might be used to offset income elsewhere this year or in future years. In effect, the government subsidizes your loss by reducing taxable income and income tax.
Meanwhile, if you have a profitable position, by selling now you lock in a profit. The tax on that sale might be offset by capital losses (above). If you think the profitable stock is going to do even better in the months and years ahead, you can re-purchase that security after waiting thirty days.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
Meanwhile, if you have a profitable position, by selling now you lock in a profit. The tax on that sale might be offset by capital losses (above). If you think the profitable stock is going to do even better in the months and years ahead, you can re-purchase that security after waiting thirty days.
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/10/08
Must tax rates go up?
Why tax rates (not just income taxes) must go up:
- Existing deficits
- Costs of two wars
- Rising entitlement costs from the retirement of the Baby Boom generation
- Deepening recession hurts tax revenue
- Unemployment results in lower Social Security and Medicare tax revenue
- Business closures, home foreclosures and personal bankruptcies reduce local property tax revenue
- Lower retail sales reduce state and local sales tax revenues
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
- Existing deficits
- Costs of two wars
- Rising entitlement costs from the retirement of the Baby Boom generation
- Deepening recession hurts tax revenue
- Unemployment results in lower Social Security and Medicare tax revenue
- Business closures, home foreclosures and personal bankruptcies reduce local property tax revenue
- Lower retail sales reduce state and local sales tax revenues
The time is now to strategically plan to stop wasting money on taxes you are not required to pay.
11/5/08
Who Gets Obama's Tax Cuts?
According to US News and World Report, Tuesday, November 4, 2008:
" ...who gets a tax cut -- actually a refundable tax credit -- is in dispute, with several different income ceilings being mentioned during the closing days of the campaign.
One group that won't get a cut is households making $250,000 or more.
Obama has promised to roll back the 2001 and 2003 investment- and income-tax cuts for those folks."
Even those people, who might benefit from any Obama tax changes, can maximize those benefits by strategic tax planning. Anyone who has to pay any income tax, even if less than in previous years, should take action to further reduce their tax bill and take advantage of any and all credits and deductions. The time is now to strategically plan to reduce your taxes and stop wasting money on taxes you’re not required to pay.
" ...who gets a tax cut -- actually a refundable tax credit -- is in dispute, with several different income ceilings being mentioned during the closing days of the campaign.
One group that won't get a cut is households making $250,000 or more.
Obama has promised to roll back the 2001 and 2003 investment- and income-tax cuts for those folks."
Even those people, who might benefit from any Obama tax changes, can maximize those benefits by strategic tax planning. Anyone who has to pay any income tax, even if less than in previous years, should take action to further reduce their tax bill and take advantage of any and all credits and deductions. The time is now to strategically plan to reduce your taxes and stop wasting money on taxes you’re not required to pay.
11/4/08
Time to Pay the Price
I bet you pay income tax.
However, 45.6 million households pay no federal income tax.
Obama's plans would expand that to 63 million; McCain would bring that figure to 62 million households paying no federal income tax.
TIME Magazine addressed the problem:
However, 45.6 million households pay no federal income tax.
Obama's plans would expand that to 63 million; McCain would bring that figure to 62 million households paying no federal income tax.
TIME Magazine addressed the problem:
"The growth in the ranks of those who pay no income tax raises an important question: How are we going to finance our government?"
"So where is the dough going to come from? ... the upper middle class, broadly defined. If we need more money to keep the country running, here's betting that is where it's going to be found."
"So where is the dough going to come from? ... the upper middle class, broadly defined. If we need more money to keep the country running, here's betting that is where it's going to be found."
TIME Magazine, November 10, 2008
The time is now to strategically plan to reduce your taxes and stop wasting money on taxes you’re not required to pay.
Taxes are going up! Will you be ready?
What’s ahead for U.S. taxpayers:
The Reagan-era small-government ideology is defunct … everyone is awaiting serious government as a partner for business and society … We will have to expand government spending by several percent of Gross Domestic Product to face our cascading problems … The idea that our fiscal mess can be addressed with the current tax system is absurd.
The time is now to strategically plan to reduce your taxes and stop wasting money on taxes you’re not required to pay.
The Reagan-era small-government ideology is defunct … everyone is awaiting serious government as a partner for business and society … We will have to expand government spending by several percent of Gross Domestic Product to face our cascading problems … The idea that our fiscal mess can be addressed with the current tax system is absurd.
From Fortune Magazine, October 27, 2008
The time is now to strategically plan to reduce your taxes and stop wasting money on taxes you’re not required to pay.
11/2/08
Do taxes go up no matter who wins the election?
Arthur Laffer is the author of The End of Prosperity: How Higher Taxes Will Doom the Economy—If We Let It Happen. He is the father of Reagan-era supply side economics. When interviewed by Kirk Shinkle in U.S. News & World Report (October 27, 2008), Laffer said:
"I think they're [taxes] going a lot higher ... I don't see how they avoid massive tax increases ... And if you're going to try to raise revenue, you've got to do it on broadbased taxes that hit low-income people as well - sales taxes, income taxes, payroll taxes ... It's not as though Obama is bad and McCain is good. They still don't get pro-growth policies."
The time is now to strategically plan to reduce your taxes and stop wasting money on taxes you’re not required to pay.
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