Below is a link to a great article from the Houston Chronicle. I highly recommend that you look at your tax situation over the next month. The greatest impact I can have on my clients tax situation is to be proactive in tax planning.
Make sure you look at the Make Work Pay tax credit. Withholding tables were changed earlier this year and everyone was opted in as though you qualify for the credit. However, if you make over $75k single or $150k married, you may not qualify. If you do not qualify, you will have to pay back this credit that is being paid to you via changes in the withholding tables throughout 2009.
http://www.chron.com/disp/story.mpl/business/6514749.html
Tuesday, July 7, 2009
Tuesday, June 16, 2009
Six Great Ways To Optimize Your Tax Strategy
See my article via the link below:
http://www.cobizmag.com/articles/six-great-ways-to-optimize-your-tax-strategy/
http://www.cobizmag.com/articles/six-great-ways-to-optimize-your-tax-strategy/
Thursday, June 11, 2009
Is Your Tax Return Correct? How do you know?
It is common to get a second opinion when you go to a doctor or dentist. Many people even have more than one financial planner to bounce investment ideas off of. So why do so many people not get professional advice when it comes to their taxes?
Many Americans are struggling each and every month to pay their bills and put food on the table. Many of these same people are not optimizing their tax situation. Perhaps you are getting a $6k refund every year. Did you know you can change your withholding to make an additional $500 per month. I would imagine that may cover the car and gas for the month, right?
As many people have switched over to self preparation using, in many cases, online software to prepare their taxes, what I hear back is that they don’t know if the return is done accurately. I get it. It is 2009 and most people know how to use a computer and get on the internet. But, let’s be honest, after you input the numbers and hit print, do you really know if your return was done correctly?
The tax code is very complex. In fact, the tax code is currently over 3.6 Million words long. In 2008 there were over 500 changes! It is a lot to keep track of and that is why I recommend that you meet with a tax professional. In reviewing returns done by outside firms/self preparation, we find that over 80% are not correct. About half of that time, we are able to amend the return and get an average of $1,300 back for our clients.
So, I ask you, is your return accurate? How do you know? The IRS is currently auditing 2006, so you may not find out for a few years.
Many Americans are struggling each and every month to pay their bills and put food on the table. Many of these same people are not optimizing their tax situation. Perhaps you are getting a $6k refund every year. Did you know you can change your withholding to make an additional $500 per month. I would imagine that may cover the car and gas for the month, right?
As many people have switched over to self preparation using, in many cases, online software to prepare their taxes, what I hear back is that they don’t know if the return is done accurately. I get it. It is 2009 and most people know how to use a computer and get on the internet. But, let’s be honest, after you input the numbers and hit print, do you really know if your return was done correctly?
The tax code is very complex. In fact, the tax code is currently over 3.6 Million words long. In 2008 there were over 500 changes! It is a lot to keep track of and that is why I recommend that you meet with a tax professional. In reviewing returns done by outside firms/self preparation, we find that over 80% are not correct. About half of that time, we are able to amend the return and get an average of $1,300 back for our clients.
So, I ask you, is your return accurate? How do you know? The IRS is currently auditing 2006, so you may not find out for a few years.
Wednesday, May 27, 2009
The Confusing World of Capital Gains
Almost everything one owns and sues for personal or investment purposes is a capital asset. Examples are homes, household furnishings, and stocks or bonds held in personal accounts. When a capital asset is sold, the difference between the amount it sold for and the basis, which is usually what you paid for it, is a capital gain or a capital loss.
It is important to know the impact of taxes on the sale of your assets. This is why proactive tax planning is so important.
Gains on collectibles and small business stock (section 1202 stock) is taxed at 28%. Gain on real property (attributable to straight-line depreciation) is taxed at 25%. 18% capital gains is attributable to gains on capital assets held more than five years and acquired after 2000 (does not apply until 2011 tax year). 15% is the amount of tax you will pay on a gain to the extent taxable income is taxed at a rate over 15% (this is the most common rate). Effective rate on gain from small business tock eligible for the 50% exclusion is 14% (better call me if you think you own small business stock). )% gain to the extent taxable income is taxed at 10% or 15%.
I understand that this article may be a little confusing, but goes to emphasize the importance of forward looking tax planning. Taxes are not something you do once a year. It is important, if you are interested in saving money, to meet with a tax advisor prior to the disposition of any capital asset. If you sold a stock for a $25,000 gain, you pay 15% in taxes to the fed plus any state taxes. Further, you may be required to pay these taxes before April 15th to avoid a penalty.
It is important to know the impact of taxes on the sale of your assets. This is why proactive tax planning is so important.
Gains on collectibles and small business stock (section 1202 stock) is taxed at 28%. Gain on real property (attributable to straight-line depreciation) is taxed at 25%. 18% capital gains is attributable to gains on capital assets held more than five years and acquired after 2000 (does not apply until 2011 tax year). 15% is the amount of tax you will pay on a gain to the extent taxable income is taxed at a rate over 15% (this is the most common rate). Effective rate on gain from small business tock eligible for the 50% exclusion is 14% (better call me if you think you own small business stock). )% gain to the extent taxable income is taxed at 10% or 15%.
I understand that this article may be a little confusing, but goes to emphasize the importance of forward looking tax planning. Taxes are not something you do once a year. It is important, if you are interested in saving money, to meet with a tax advisor prior to the disposition of any capital asset. If you sold a stock for a $25,000 gain, you pay 15% in taxes to the fed plus any state taxes. Further, you may be required to pay these taxes before April 15th to avoid a penalty.
Friday, May 8, 2009
Tuesday, April 7, 2009
COBRA Continuation Coverage Guidance
The IRS has released Notice 2009-27 providing extensive guidance on issues facing employers
regarding the 65% COBRA premium subsidy for assistance eligible individuals. The premium
reduction applies for coverage periods beginning on or after February 17, 2009.
Notice 2009-27 provides a Q&A section with examples covering 58 separate questions on a
variety of issues, including:
• What is considered an “involuntary termination”
• Who are assistance eligible individuals
• How the premium reduction is calculated
• Types of coverage eligible for the premium reduction
• The dates and duration of the premium reduction period
• Recapture provisions
Among the issues that have been clarified:
• An involuntary termination may include a lay-off period with a right of recall or a temporary
furlough period if these include a loss of health coverage.
• An involuntary termination may also include a termination elected by an employee in return
for a severance or buy-out package where the employer has indicated that a certain number
of remaining employees in the group will be terminated.
• Whether or not premium assistance is available during a period of severance depends on
whether, under the severance policy, the individual’s COBRA period is considered to start
while receiving severance or after the severance period is over.
• Individuals are disqualified from receiving the Health Coverage Tax Credit for any month in
which they receive a premium reduction.
Recapture provisions. While the premium subsidy is excludable from the individual’s income
under §138C, the subsidy is subject to recapture in the following circumstances:
• The premium reduction is provided for COBRA continuation coverage for an individual, the
individual’s spouse or dependent.
This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.
See here for notice 2009-27: http://www.irs.gov/pub/irs-drop/n-09-27.pdf
regarding the 65% COBRA premium subsidy for assistance eligible individuals. The premium
reduction applies for coverage periods beginning on or after February 17, 2009.
Notice 2009-27 provides a Q&A section with examples covering 58 separate questions on a
variety of issues, including:
• What is considered an “involuntary termination”
• Who are assistance eligible individuals
• How the premium reduction is calculated
• Types of coverage eligible for the premium reduction
• The dates and duration of the premium reduction period
• Recapture provisions
Among the issues that have been clarified:
• An involuntary termination may include a lay-off period with a right of recall or a temporary
furlough period if these include a loss of health coverage.
• An involuntary termination may also include a termination elected by an employee in return
for a severance or buy-out package where the employer has indicated that a certain number
of remaining employees in the group will be terminated.
• Whether or not premium assistance is available during a period of severance depends on
whether, under the severance policy, the individual’s COBRA period is considered to start
while receiving severance or after the severance period is over.
• Individuals are disqualified from receiving the Health Coverage Tax Credit for any month in
which they receive a premium reduction.
Recapture provisions. While the premium subsidy is excludable from the individual’s income
under §138C, the subsidy is subject to recapture in the following circumstances:
• The premium reduction is provided for COBRA continuation coverage for an individual, the
individual’s spouse or dependent.
This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.
See here for notice 2009-27: http://www.irs.gov/pub/irs-drop/n-09-27.pdf
Monday, April 6, 2009
Don’t miss these 5 Tax Opportunities!
1) Student loan interest. You can deduct up to $2,500 of interest paid on qualified education loans for college or vocational school. One key point, is that the IRS considers interest paid by your parents to have been paid by you. So, if you parents are paying your student loans for you, you can still take this deduction. The ability to deduct student loan interest pahses out when modified AGI is between $55k and $70k for single ($115k and $145k married).
2) Job Search Expense. Expenses of looking for a new job in a taxpayer’s present line of work are tax deductible, even if a new job is not found. Expenses associated with a search for a job in a new line of work is NOT deductable. For present line of work deductions, you are able to write off:
· Fees paid to employment agencies
· Cost of printing and mailing resumes
· Fees for tax advice relating to employment contracts
· Advertising for a new job in present field
· Transportation costs to job interviews
· 50% of meals and entertainment expenses related to search
· Out of town travel expenses if the trip is to look for a new job
3) Medical Expenses. Medical expenses are deductable in excess of 7.5% of your adjusted gross income. The expenses are deductable in the year paid, regardless of when the expenses were incurred. If you pay with a credit card, the expenses are considered paid when charged, not when the credit card company is paid. You are able to deduct expenses associated with a number of procedures including, acupuncture, air conditioner necessary for relief of allergies, alcoholism, chiropractic care, dentures, exercise program if doctor recommended, eyeglasses, lasik, dental procedures, and smoking cessation programs (nonprescription patches and gum are not deductable).
4) Retirement Saving. There is a credit available called the Retirement Saver’s Credit whereby qualified individuals are allowed a nonrefundable credit of up to $1,000 ($2,000 Married) for eligible contributions to an IRA or to an employer sponsored retirement plan (such as 401(k)). The income limits are lower, but if you qualify it is free money! Single people qualify who earn less than $26,500 and married people under $53,000.
Investment Interest. Interest paid on money borrowed (including margin interest) to buy investment property including stocks, bonds, and mutual funds are deductable. Investment interest is deductable each year up to the amount o f net investment income received. Investment interest form a passive activity, used to purchase tax exempt interest income, or on life insurance policy loans are not deductable.
2) Job Search Expense. Expenses of looking for a new job in a taxpayer’s present line of work are tax deductible, even if a new job is not found. Expenses associated with a search for a job in a new line of work is NOT deductable. For present line of work deductions, you are able to write off:
· Fees paid to employment agencies
· Cost of printing and mailing resumes
· Fees for tax advice relating to employment contracts
· Advertising for a new job in present field
· Transportation costs to job interviews
· 50% of meals and entertainment expenses related to search
· Out of town travel expenses if the trip is to look for a new job
3) Medical Expenses. Medical expenses are deductable in excess of 7.5% of your adjusted gross income. The expenses are deductable in the year paid, regardless of when the expenses were incurred. If you pay with a credit card, the expenses are considered paid when charged, not when the credit card company is paid. You are able to deduct expenses associated with a number of procedures including, acupuncture, air conditioner necessary for relief of allergies, alcoholism, chiropractic care, dentures, exercise program if doctor recommended, eyeglasses, lasik, dental procedures, and smoking cessation programs (nonprescription patches and gum are not deductable).
4) Retirement Saving. There is a credit available called the Retirement Saver’s Credit whereby qualified individuals are allowed a nonrefundable credit of up to $1,000 ($2,000 Married) for eligible contributions to an IRA or to an employer sponsored retirement plan (such as 401(k)). The income limits are lower, but if you qualify it is free money! Single people qualify who earn less than $26,500 and married people under $53,000.
Investment Interest. Interest paid on money borrowed (including margin interest) to buy investment property including stocks, bonds, and mutual funds are deductable. Investment interest is deductable each year up to the amount o f net investment income received. Investment interest form a passive activity, used to purchase tax exempt interest income, or on life insurance policy loans are not deductable.
Subscribe to:
Posts (Atom)
