During tax season, one of the most oft asked questions is – What do the initials in IRS mean?
We offer the following ideas:
Category Archives: For Individuals
The state of estate tax
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The “state” of the Estate Tax is …
… in a state of confusion and that’s putting it mildly!
Originally, for those dying in 2010, there was no estate tax. Then Congress thought you might not be happy with this arrangement. So they created two methods of taxing estates and determining the basis of inherited assets (see our blog post entitled-Could you actually deduct more than you paid for an asset?). You could have picked either method if you chose by mid-September of 2011. There was just one small problem. IRS hadn’t determined the method of selection by September 15; so the deadline was extended. Traditionally, couples would try to equalize the assets so as not to waste any of the estate exemption every US citizen is given. Now Congress has made the unused exemption “portable” (it can be used by the second to die), but only if you file an estate return to claim it. Thus, thousands who didn’t have to file may need to file an estate return to preserve the remaining spouse’s ability to utilize this new and, for the most part, unknown exemption..
At least one thing is crystal clear. The Federal exemption for estate and taxable gifts is scheduled to drop 80% at the end of 2011. If you’ve ever thought about gifting to your children or other heirs – don’t hesitate any longer.
E-Mail us for specific advice on how to go about this.
Filed under Estate Planning, For Individuals
Even Rodney may need an advanced degree to understand this.
Not only are there several different types of tax credits and deductions for education, but
Tax Credit for Education
they can vary according to status within college (Freshman,Senior, etc.) and your level of income.
This article from the Wall Street Journal gives
a basic overview of what’s available.
As always, contact us before acting on this or any tax credit.
A brief explanation of these credits and what they cover is
listed below.
[ Note that with the exception of the student-loan interest deduction, taxpayers are prohibited from "double-dipping," or taking more than one tax break for the same expenses.]
American Opportunity Tax Credit. This is one of the best benefits for those who qualify. It’s a dollar-for-dollar tax offset of up to $2,500 per student per year, for up to four years of undergraduate (but not graduate) education for students enrolled at least half-time in a degree program.
Up to $1,000 of the credit is “refundable,” meaning the family can get a check for that amount from Uncle Sam if no tax is due. If the taxpayer writes a tuition check in December for the spring semester, the credit may be claimed for that year’s taxes.
The credit can be used for books, supplies and equipment as well as tuition, but it can’t be claimed by anyone with a felony drug conviction.
For 2011, the benefit fully phases out at $90,000 of adjusted gross income (AGI) for most single returns and $180,000 for most joint returns. If the family can’t claim the credit and the student has earned income, some advisers suggest running the numbers to see if the student qualifies for the credit on his own.
Lifetime Learning Credit. While less generous than the American Opportunity Tax Credit, this is a useful tax offset of up to $2,000 for tuition and fees per year per family. It applies to graduate as well as undergraduate education, plus continuing-education courses taken to acquire or improve job skills.
The credit fully phases out at $122,000 of AGI for most joint returns and $61,000 for most single returns.
Qualified Tuition Programs (“529 plans”). 529 plans are often the best education benefit for taxpayers who don’t qualify for other breaks, in part because there are no income phaseouts. Individual donors (often parents and grandparents) may put up to $65,000 per beneficiary into a 529 plan once every five years, without gift tax consequences.
Filed under For Individuals
Protected: Tax breaks of C Corporations
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Filed under For Individuals, Tools
IRS announces increased mileage rate for 2011
Business Auto Mileage Rate Increase
The IRS has announced the following increases in the standard mileage rates beginning July 1, 2011:
Mileage Rate Changes
| Purpose | Rates 1/1 through 6/30/11 | Rates 7/1 through 12/31/11 |
| Business | 51 | 55.5 |
| Medical/Moving | 19 | 23.5 |
| Charitable | 14 | 14 |
Prior year's mileage rates
Filed under For Business, For Individuals
What you can learn by adding (and subtracting) 8 zeros
Putting things into perspective by removing 8 zeros
It’s amazing what simple math can show:
A look at the numbers below
reveal why the average household
budget is far better managed than
the budget in Washington!
-Why S&P downgraded the US credit rating
• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000
Now, Let’s remove 8 zeros and pretend it’s a household budget:
• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385
I think we just proved that the average housewife (or husband) is far more fiscally qualified than 90%+ of our Congressmen!
Filed under For Individuals
Beware who defines “your fair share.”
Beware whom you permit to define
what is your “fair share.”
The definition will always be dependent on
just how hungry the croc is when he finds you and your wallet.
Filed under For Business, For Individuals, Tax Humor
What could happen without a Will?
Sadly, this could be the legacy you leave to your heirs. Think about the results this would produce and then email us for some solutions.
What Happens With No Will?
LAST WILL AND TESTAMENT OF JOHN DOE
(WHO DIED WITHOUT A WILL)
I, John Doe, of Nimrod, Missouri, hereby do make, publish and declare
this to be my last Will and Testament.
FIRST ARTICLE
(I) I give my spouse my entire estate unless I have surviving children, parents, brothers, sisters, grandmothers, grandfathers, uncles, aunts, and relatives to the ninth degree. If any of these survive me then my spouse shall receive the first twenty thousand dollars plus one half the balance of my estate. The remaining balance shall be divided among my children or various other relatives depending on which survives me.
(II) If my spouse and I are both deceased and are survived by children under 18 years of age, the Probate Court shall appoint a conservator for my children, and the conservator shall report to the Probate Court each year and render an accounting of how, why and where he or she, spent the money necessary for the proper care of my children.
(III) The Probate Court shall also require a Performance Bond to guarantee that the conservator exercises proper judgement in the handling, investing and spending of my children’s money.
(IV) When my children reach age eighteen they shall have full rights to withdraw and spend their share of my estate. No one shall have any right to question my children’s actions on how they decide to spend their respective shares.
SECOND ARTICLE
If my wife should remarry, her second husband shall be entitled to a mandatory minimum of one-third portion of everything my wife possesses.
(I) Should my children need some of this share for their support, the second husband shall not be bound to spend any part of his share on my children’s behalf.
(II) The second husband shall have sole right to decide who is to get his share, even to the exclusion of my children.
THIRD ARTICLE
Should my wife predecease me or die while any of my children are minors, I do not wish to excercise my right to nominate the guardian of my children. Rather than nominating a guardian of my preference, the Probate Court shall select a guardian.
FOURTH ARTICLE
Under existing tax law, there are certain legitimate avenues open to me to lower death taxes. Since I prefer to have my money used for governmental purposes rather than for the benefit of my wife and children, I direct that no effort be made to lower taxes. There are also some probate costs and procedures I could waive by making a Will, but I elect not to take advantage of those opportunities.
FIFTH ARTICLE
I realize that this Will as written for me by the State of Missouri is not the Will I would have desired. I am truly sorry that I did not have a Will and know that my inaction has made my death a greater tragedy than it already is.
“Deceased – No signature required”
Filed under For Individuals
The one time that it’s good to be average
Here are the average deductions, by level of income, based on the latest available IRS stats.
| Average Itemized Deductions | ||||
|---|---|---|---|---|
| Adjusted Gross Income | Medical Expenses | Taxes | Interest | Charitable Contributions |
| $15,000 to $30,000 | $7,074 | $3,147 | $9,245 | $2,189 |
| $30,000 to $50,000 | $6,153 | $3,830 | $9,055 | $2,189 |
| $50,000 to $100,000 | $7,102 | $6,050 | $10,659 | $2,693 |
| $100,000 to $200,000 | $9,269 | $10,798 | $13,734 | $3,757 |
| $200,000 to $250,000 | $21,554 | $18,164 | $18,570 | $5,895 |
| $250,000 or more | $37,143 | $50,267 | $27,865 | $20,930 |
| Source: CCH, 2011 |
Filed under For Individuals
Planning for the unexpected in the chess game of Life
A Will to Live by
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It’s never too early to make a living will. Have you started one? [Breaking news- The Georgia State Bar has made available a free sample medical directive for your use. E-mail us for a free copy.]
It could happen at any time. Walk across the street and get hit by a truck. Hop into your car and encounter a drunk driver. Suffer a sudden, acute illness and find yourself hospitalized. Any of these could end your life. Or, they could leave you mentally or physically incapacitated. If it happened to you, would you be ready? Would you have your affairs in order so your doctor and family would know what your health care wishes are? If not, perhaps it’s time to consider some sort of advance directive so you can control your own health care even if you can no longer express your wishes. Contrary to what you might think, living wills and other advance health care directives aren’t only for the elderly. Disaster can hit anyone at any age. The time to make your health care decisions for the future is now — while you can. Not only will you assure yourself that your health care wishes will be followed, you will take some of the burden off family members who might be left to make those health care decisions for you. A will to live by A living will is a legal document in which you direct your physician regarding the withdrawal of life support if you become ill and have a terminal condition, are in an irreversible coma or a persistent vegetative state. All states recognize the legality of a living will, though you should check your state for the particulars. In a living will, you can specify exactly what your doctor is to do if you, in his or her opinion, cannot recover from your illness or accident and are no longer capable of making your own decisions. At the very least, your living will should address what your physician is to do about:
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Filed under For Individuals
Can you deduct more than you paid for something?
Most of the time we’re stuck with tax cost being what we paid for a stock, asset, real estate, etc… but sometimes this can change.
Filed under For Individuals
