Estate Planning in an Uncertain Tax Environment (The Impact of Estate Tax Repeal)
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2010 and Beyond: Estate Planning in an Uncertain Tax Environment (The Impact of Estate Tax Repeal) by Lacy Katzen
The federal estate tax was repealed for a one-year period beginning January 1, 2010. It is slated to return in 2011 at the rules in effect before the 2001 Tax Act: 55% estate tax rate on inherited wealth over $1M ($2M for married couples, if planned properly). For 2009, the estate tax rate was 45% on all wealth above $3.5M ($7M for married couples, if planned properly).
Many expected the 2009 rules to be extended to 2010 and possibly thereafter. In fact, Congress could still extend the 2009 rules by changing the rules mid-year or retroactive to January 1, 2010. Any retroactive change will raise issues of constitutionality and likely cause litigation for years to come.
The 2010 year estate tax repeal will not necessarily be beneficial for estates of many taxpayers dying in 2010. In conjunction with the repeal of the estate tax, beneficiaries inheriting assets from an estate of a person dying in 2010 will take a “carryover basis” in the asset equal to the basis the decedent had in that asset rather than a “stepped up basis” equal to the value on the date of death. Upon a subsequent sale of the appreciated asset, the beneficiary will pay income tax on the sale value less the carryover basis. There are two adjustments to the new carryover basis rule: The basis of appreciated property owned by the decedent may be increased by up to $1.3M (but to not more than the fair market value of the assets) as well as by certain loss carryovers. Secondly, in addition to the first adjustment, property passing to a surviving spouse (whether outright or in a certain qualified trust for the spouse) can qualify for up to a $3M increase in basis. In both cases, the basis adjustment is allocated among the assets by the executor of the estate.
So, for the estate of a person dying in 2010, rather than being liable for estate taxes, the estate and its beneficiaries may end up being liable for higher income taxes instead, due to the imposition of the carryover basis rules.
There will be numerous challenges to handling the estates of persons dying in 2010, as well as to preparing estate plans for clients for a future which is so uncertain. For estate planning clients, we will want to establish estate planning documents and asset structures which consider the 2009 and 2011 estate tax rules, as well as the 2010 carryover basis rules, in case the client dies in 2010. The key will be to organize an estate plan that considers all the potential scenarios and provides the executor with the authority and ability to make various elections and choices at the death of the client, when we will know the values and basis of the assets, and hopefully, the rules that apply.
For instance, in the case of a married couple with appreciated assets, we will want to ensure that the spouse who dies first has a Will that creates a trust for the surviving spouse that qualifies for a potential step up in the basis of the assets, yet at the same time ensures if or when the estate tax is back in place, that the trust assets qualify for estate tax exclusion on the death of the surviving spouse.
With the uncertainties of the current estate tax and carryover basis rules, we recommend that you arrange for a careful review of your current estate plan to make sure the plan addresses all the different scenarios that could be applicable, and provides your executor with all the available options and opportunities for saving estate and income taxes.
Please visit www.lacykatzen.com or contact Karen Schaefer, Esq. at (585) 324-5718 or kschaefer@lacykatzen.com
Article Source: http://www.articledashboard.com/Article/2010-and-Beyond:-Estate-Planning-in-an-Uncertain-Tax-Environment-(The-Impact-of-Estate-Tax-Repeal)/1446574
How To Become a Tax Preparer
How To Become a Tax Preparer
Step number one to become a tax preparer is to enroll in an establishment or college that provides coaching in tax preparation. You can seek for the faculties online or within the yellow pages. You have the choice of registering in online faculties or ordinary schools. The benefit of enrolling in an internet college is that it provides convenience. You may study from the comfort of your own home or office. What is more, online faculties permit you to study at your individual pace; you’ll be able to regulate your workload based on your schedule taking as many course units as you’ll be able to handle.
Researching on the different companies that offer tax coaching is the subsequent step to become a tax preparer. Many corporations hire individuals who are concerned about working as tax preparers. In most cases, the businesses hire when the tax season is at its peak. One thing you must realize is that these corporations cost a certain amount of money. You will have to incur this cost if you are all for working as a tax preparer. Nevertheless, considering you will be enhancing your skills and gaining experience at the same time, it is worth it.
The third step to becoming a tax preparer is to practice. You ought to start out training even before your enrollment into a tax-coaching program. It will aid you to enhance your skills. You can for example, be asked to prepare taxes for your close associates and family members for free. You can also buy tax preparation softwares. You should utilize these to coach at home throughout your free time. Nevertheless, it’s good to understand that the softwares do not come cheap. You should be very serious about becoming a tax preparer because buying the software program and failing to make good use of them will simply be a waste of money.
Acquiring a license is the final step to becoming a successful tax preparer. Most if not all states require that individuals wishing to be employed as tax preparers sit for and pass licensing exams. The exams differ from state to state. Understand that becoming a tax preparer is not going to happen overnight. Be ready to put in lots of hard work. It is only through dedication and perseverance you could become a much wanted tax preparer. Nevertheless, if you are excellent with numbers you don’t have anything to worry about.
I hope you enjoyed the article as much as I enjoyed writing it. If you want to read an advanced guide on the same topic, I suggest you read my article How To Become a Tax Preparer
Taxable Investment Income - Where to Report Taxable Income
For the majority of people, investments are pretty easy to report on the tax return. All you need are the 1099-INT and 1099-DIV forms. These forms are sent by the financial institutions and brokerages at the beginning of the year. For 2009 these forms are sent in early 2010.
Which tax forms are used for reporting the investment income ?
Two of the common forms that these investment income is reported in Schedule B of Form 1040 or Form 1040A. The totals from these schedules rollup to the main 1040 form. Its as easy as that.
Many investments however have some specialized rules that need to be followed. These investments include tax free muni bonds, bond funds, Savings bonds, foreign investments, investments from partnerships or corporations, income from trusts, estates etc.
Deductions for Investment Income
There are some deductions that could offset the taxable income from investments. These deductions effectively lower your taxes for investment income. These deductions include :
- cost of a safety locker that you use to store your investments
- cost of investment advice
- custodial fees
- cost of financial publications
- cost of software that you use to manage your investments
Most financial software including online tax preparation sites walk you through the process of capturing and reporting these investment income deductions.
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Overview of California Tax System
With over 35 million residents, California is ranked as the sixth largest economy in the world. It exhibits great demographic and economic variation and has various substantial demands in areas such as health care, education and infrastructure. Similar to other governments, California depends mainly on taxes to fund the public services. The California tax system is composed of a wide range of taxes that are managed and collected by different states and local agencies. Tax plays a significant role in the state and local fiscal system of California.
Taxes levied in California: There are a number of taxes that are levied in California, such as state tax and local tax. The bank and corporation tax, personal tax, sales and use tax along with the major motor vehicle-related levies are the main sources of the own-source revenue of the state. Around 80% of the state expenditure is supported by the sales and use tax, bank and corporation tax and personal income tax. Personal income tax is considered to be the largest single tax that accounts for over half of the entire General Fund revenues.
The remaining 20% of the total expenditure of the state is supported by special funds for certain allotted purposes, including more than half for transportation funded by motor vehicle-related levies. Many taxes such as taxes on tobacco and sales also go into special funds that support health programs and local governments, respectively. In addition to this, local tax revenues come from the property tax that is eventually followed by the local portion of the SUT, utility user charges, business license taxes, as well as other miscellaneous revenues. Local governments, especially counties also depend on the state aid.
Change in the Tax Structure: Over the years, the tax structure of California has changed tremendously. The fundamental elements of the current state tax system were put in place in the late 1920s and early 1930s. Before this, an insurance tax, fuel tax and utility tax used to raise the revenue of the state. Major fiscal disruptions that came along with the depression led to the adoption of both personal income tax as well as the state SUT.
Since then, the tax system in California has remained intact, despite a number of significant statutory and constitutional alterations. By far, the adoption of Proposition 13 in 1978 is considered to be one of the most important of these modifications. It has led to a considerable reduction in the property taxes and changed the state and local fiscal relations.
Adoption of Tax Laws and their modification: Statutory and constitutional are the general types of California tax provisions. Statutory tax provisions reside in the California Revenue and Taxation Code and accounts for a number of tax laws. The legislature or a voter-sponsored initiative can be used to place them on the ballot. A two-thirds vote of the legislature is needed for the application of measures that lead to a net increase in tax revenues. However, in other cases, a plain majority vote suffices. Only the subsequent votes of the people can alter the statutory tax provisions that are approved.
California Tax Help is available with CPA Firm Murray and Young. Get a former IRS agent on your side to protect you, your family and your investments. Visit us at http://www.april15.com
State Income Tax Brackets and Rates
The easiest way to understand federal income tax, state income tax and all those other concepts that come with them is by understanding what the progressive income tax scheme is. Simply put, this scheme tells that the tax charge rate rises as income gets larger. For instance, if you compare federal income tax brackets to state income tax brackets,? you will find lots of trend similarities.
Basically, except for those living in Alaska, Nevada, Florida, Texas, Washington, South Dakota, and Wyoming, every employee in the United States needs to know about state income tax. Majority of the states, 34 actually, impose state income tax aside from federal income tax. There are also cases where? states allow cities to apply an income tax rule above the state income tax and federal income tax. This applies in New York City, for instance. In this city, aside from a state income tax (the maximum from which is 8.14%), there is also a city income tax that reaches to 4.00%. Living in a city that applies two tax rules is definitely more expensive if compared to the cases in “federal income tax only” cities.
The state income tax rates usually range from 1% to 10%.? Although the state income tax rule carries different rates, it works in the same way as the federal income tax rule. California,? has the highest rate of state income tax. It has a maximum tax rate of 10.3%. Illinois, on the other hand, has the lowest. It levies a flat tax of only 3%.
For more information you may need and tips On State Income Tax Brackets and Rates visit, http://stateincometaxbrackets.com
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Tax Procrastinating Cities - The Top 10 !
In our ninth list of Top 10 Procrastinating Cities, Houston takes America’s most tax procrastinating city for the fourth time. Houston, looks like we have a problem. To help Houston residents and tax procrastinators at large, we’ve pulled together some quick and easy tips so you can act fast to file your taxes before the April 15 tax deadline. Like any good procrastinator, if you need a distraction, go ahead and play with this fun interactive visual that shows which cities slacked off on filing their taxes early last year before diving into the tips at the bottom.
Free Tax Filing, Efile Taxes, Income Tax Returns – TurboTax.com
Last-Minute Tax Tips for Procrastinators:
- Even procrastinators can save money on their taxes. For example, taxpayers have up until the April 15 deadline to contribute to an IRA.
- Don’t forget charitable contributions made in 2009. Even mileage to and from volunteering is deductible.
- Go online. Taxpayers can go online to prepare and e-file taxes up to the 11th hour at www.TurboTax.com.
- E-file. Taxpayers can avoid the long lines at the post office and can get their refund back in as little as 8 days with direct deposit.
- Learn what tax breaks are disappearing. Better catch them before April 15.
- In the market for a home? It’s still not too late to get the Homebuyer Credit now rather than having to wait until next year.
- Need more time? Taxpayers will get an extra 6 months to file (to Oct. 15 2010). But remember…an extension to file is NOT an extension to pay taxes. TurboTax Easy Extension allows you to file your personal or business extension online.
Source: Turbotax.com
Tanning Tax ? - Get Tanned And Taxed
When July rolls around, those tanning sessions that you have been going to may be a little more expensive.
Tanners can spend several hundreds of dollars on tanning sessions that last a few minutes.
According to ABC News: “The average indoor tanning patron spends $75 per year on sessions at one of more than 18,000 salons across the country, according to industry statistics. Each small business brings in an average annual gross revenue of $150,000.” An industry expert is quoted as saying that ” an estimated 28 million Americans to lie under indoor ultraviolet rays each year, he said the so-called “tanning tax” caught him by surprise.
The tanning tax could see tanning salons across the country being affected because of the higher costs that these salons would have to pass on to consumers - who in turn might choose not to do it.
The tanning tax comes as part of the nascent Health reform bil, but this tax coming .
Read more about this story at ABC news. .com
W2 Not Received - What Should You Do
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Imagine this scenario: Its tax time and you are getting really anxious to file your tax return and get your tax refund. But lo and behold you still havent received your W2 from your employer. There are several reasons for this - mail delays, you did not update your mailing address with your employer, company went out of business etc. etc.
- Employers are required to mail out the W2s for their employees by Jan 31st.
- It is likely that some people will not get the W2 in time due to various reasons - lost in mail, company closed down etc.
- Here are a few tips you can use if you did not receive your W2 after the second week in February.
- First call the employer and ask them to send you a replacement W2. If the employer does not respond, or if the employer has shut down you can contact the IRS.
- Call the IRS at 1-800-829-1040. The IRS will contact the employer on your behalf and request the missing form.
- IRS will also send you a Form 4852 (PDF), Substitute for Form W-2 or Form 1099-R.
- You can also estimate your W2 based on paychecks and you can report this as ‘income not reported on a W2′. Usually the last paycheck of the year has Year to date (YTD) information eg. YTD Gross, YTD Federal tax etc.
Get a Preview of Your Tax Refund Use an Online Tax Refund Calculator
W2 Not received
Tax Refund Calculator - Calculate Your Refund before Filing
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Calculating Your Tax Refund
Once you get your W2 from your employer. Most people would like to get a quick estimate of the Tax Refund. It would take several hours to calculate your tax refund if you were to do it with pen and paper.
However
Or, will you end up owing money to the IRS. If you knew in advance, you could plan for it.
Tax Refund Calculator
Is there a quick way to do a quick calculation of your tax refund situation in less than 5 minutes ?
Yes. There is.
Its called a Tax Refund Calculator. Its a powerful litle tool that you can use to get an immediate estimate of your taxes.
Not only can you use it to calculate your tax refund, but you can also use it to estimate next years taxes, so you can plan on increasing your W4 exemptions and increase or decrease your take home pay.
Punch in some easy numbers and facts like your income, dependents and other basic info, hit the calculate button, and presto, you have an estimate of your tax refund. No personal information is required.
Try the Tax Refund Calculator for Free!
Making Work Pay Credit - What Is It ?
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Making Work Pay Credit the Impacts Largest Number of Americans in 2009
The Making Work Pay Credit has substantial impact on Americans and is targeted towards lower and middle income taxpayers. This credit is one of many tax changes resulting from the American Recovery and Reinvestment Act of 2009. According to a report from the Tax Inspector General for the Tax Administration dated November 27, 2009, the Making Work Pay Credit is expected to impact 116 million taxpayers.
Basically the credit was designed to provide tax relief for working people. Although the credit is technically claimed by taxpayers when they file their 2009 and 2010 tax returns, most taxpayers have already received the benefit of this credit by reduced payroll withholdings (and larger net paychecks) that went into effect during 2009. Unlike last year’s stimulus payment taxpayers did not receive a check. Taxpayers received this credit almost immediately, through a reduction in taxpayer’s payroll withholdings. Furthermore, this credit is also computed and reflected in the taxpayer’s 2009 tax return. The credit is basically $400 for single taxpayers and $800 for married couples filing joint returns. It is calculated as the lesser of 6.2% of the taxpayers earned income or $400 for single taxpayers and $800 for married couples filing a joint return.
Credit limitations - Income taxpayers with higher incomes are not eligible for the credit. This credit is reduced by 2% of a single individual’s modified adjusted gross income that exceeds $75,000. For married couples filing jointly, the threshold amount is $150,000. The Making Work Pay tax credit, is also subject to a reduction by the amount of any Economic Recovery Payment($250 per eligible recipient of Social Security, Supplemental Security Income, Railroad Retirement or Veteran’s benefits) or Special Credit for Certain Government Retirees($250 per eligible federal or state retiree) that you may have received.
Who can benefit from the credit? The credit is applicable only for taxpayers who have earned income. This means taxpayers must have been gainfully employed and received taxable compensation from wages, salaries and tips. Net earnings from self-employment is considered earned income.
In addition, earned income does not include the following:
- Pension and annuity payments
- Non-taxable compensation
- Parsonage allowance
The following individuals are not entitled to the credit:
- Tax filers without valid Social Security numbers
- Taxpayers who could be claimed as another taxpayer’s dependent
- Nonresident aliens
- Estates and trusts
You may have a potential problem when filing your 2009 tax returns, if you had two jobs during the year and both employers reduced your withholdings. As a result of having improper withholdings from two jobs, you may receive a smaller tax refund or you may have to pay taxes as a result of the reduced withholding that was deducted during the year. Since most employers applied the new withholding tables assuming the income from that employer was the only source of the taxpayer’s income. In this connection, insufficient withholding may result of up to $400 per employer in excess of one for taxpayers who do not file jointly, or $800 per employer in excess of one for joint filers. A potential problem, could occur for taxpayers who had other income in addition to their W-2 wages. The other income could put you into the total or partial phase-out category of the credit, and could result in under-withholding of up to $400 ($800 for joint filers). And finally, this is a new tax credit and may be an easy for taxpayers who prepare their own taxes to miss.
How to report to the Internal Revenue Service ? If you receive less than the full amount of the anticipated credit through decreased withholding, then you may be entitled to the full credit on your return. For 2009, taxpayers are required to use Schedule M to report the tax credit. If you use Form 1040EZ instead of schedule M, there is a worksheet on page 2 of the Form 1040EZ that allows you to compute the credit amount.
To learn more about how we can help you prepare your income tax returns, please visit http://www.sl-cpa.net/form1040taxes.php and register in our secured portal for the 2009 tax season and you will lock into our special pre tax season 1040 pricing, a monthly tax and accounting newsletter and over 50 financial web based calculators at no additional charge.
Sandor Lenner,CPA/MBA has over 35 years of accounting experience and is also a Certified QuickBooks ProAdvisor.He works part-time with Susan Missal Lenner, P.A. http://www.sl-cpa.net
Article Source: http://EzineArticles.com/?expert=Sandor_Lenner
