by NFS | Apr 4, 2011 | Archives
With budget talks at a stalemate and as it is looking more like the government might be shutting down on Friday, President Obama reaches out to Speaker of the House John Boehner and Majority Leader Harry Reid in a phone call. While the IRS plan is to take, but not to give during a shut-down.
Obama made two separate phone calls urging these US leaders to reach a resolution to avoid a government shut-down. The White House reports that Obama conveyed to both Boehner and Reid that a closure of the government would the “harmful to our economic recovery.”
This intervention marks a slight shift of the strategy from the White House in the fight over a plan to fund the government through 2011. Up until these phone calls, Vice President Joe Biden and Budget Director Jacob Lew were the lead men in working towards brokering a deal between the House Republicans and Senate Democrats, as Obama kept his distance.
With just a few days to go to get a budget into play, President Obama says he was encouraged by an agreement to reduce spending by roughly $73 billion from his proposed budget, with $33 billion reduced from currant spending levels. Republicans say that no such deal has been made.
Boehner’s spokesperson, Michael Steel said on Saturday, “The speaker reminded the president that there is no deal or agreement on a final number, and he will continue to push for the largest possible spending cuts.”
The budget deal needs to happen or another stopgap measure needs to be put in place within the next few days to stop the doors of many government offices closing.
What a closing down of the government might look like:
The plan is for the IRS to stop processing tax returns and stop refunds on April 8th, if Congress cannot agree to a plan or avert a halt of the government. The plan set forth in October called for the IRS to continue depositing the checks paid to them, but stop processing the refunds owed to the US citizens, according to Bloomberg’s interview with Commissioner of IRS. So the IRS will take, but not give in a shut-down mode. Again, this is the plan worked out in October when another government shut-down was looming.
Other closings would be the operations of national parks, the processing of many permits, work at Superfund sites, and work by many federal contractors.
If a government shut-down does occur, the government would continue to fund national security and jobs that protect the safety of life and property, as well as air traffic control, law enforcement, food and drug inspections, and the care of people in federal custody.
A day or two of a shutdown, especially if it happens over the weekend, will not present too much impact on the nation, but each day the shut-down continues, the impact grows. A government shut-down will cost more than $100 million a day, according to Bruce Yandle, a professor with George Mason University. “The longer it goes on the more unbearable it will get,” said Yandle. He also said that a government shut-down would be an eye opener for the nation’s citizens about how extensively the federal government is involved in all aspects of life. This sounds as if a government shut-down goes on for any length of time it will pose a hardship.
by NFS | Apr 2, 2011 | Archives
If you give someone money or property during your life, you may be subject to the federal gift tax. Most gifts are not subject to the gift tax, but the IRS has put together the following eight tips to help you determine if your gift is taxable.
- Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
- Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
- Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
- Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
- The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
- Gifts that are not more than the annual exclusion for the calendar year,
- Tuition or medical expenses you pay directly to a medical or educational institution for someone,
- Gifts to your spouse,
- Gifts to a political organization for its use, and
- Gifts to charities.
- Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
- Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
- You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
- You and your spouse are splitting a gift.
- You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
- You gave your spouse an interest in property that will terminate due to a future event.
- You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
For more information see Publication 950, Introduction to Estate and Gift Taxes. I am a Certified Estate Planner and I am here to help. Let me know if I can be of any assistance.
by NFS | Mar 31, 2011 | Archives
Where to Keep Important Documents?
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by NFS | Mar 30, 2011 | Archives
This year, you have a few extra days to make contributions to your traditional Individual Retirement Arrangements. That’s because Emancipation Day, a legal holiday in the District of Columbia, will be observed on Friday, April 15, 2011, which moves the due date for filing your tax return and making contributions to your 2010 IRA to Monday, April 18, 2011.
Here are the top 10 things the Internal Revenue Service wants you to know about setting aside retirement money in an IRA.
- You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit formally known as the Retirement Savings Contributions Credit.
- Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2010 must be made by April 18, 2011. Additionally, if you make a contribution between Jan. 1 and April 18, you should designate the year targeted for that contribution.
- The funds in your IRA are generally not taxed until you receive distributions from that IRA.
- Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for IRA contributions.
- For 2010, the most that can be contributed to your traditional IRA is generally the smaller of the following amounts: $5,000 or $6,000 for taxpayers who were 50 or older at the end of 2010 or the amount of your taxable compensation for the year.
- Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
- You must use either Form 1040A or Form 1040 to claim the Credit for Qualified Retirement Savings Contributions or if you deduct an IRA contribution.
- You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
- You must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment to contribute to an IRA. If you file a joint return, generally only one of you needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements for additional rules.
- Refer to IRS Publication 590, for more information on contributing to your IRA account.
Let me know if you need help with your IRAs.
by NFS | Mar 29, 2011 | Archives
Are you making effective use of corporate dollars to achieve your personal financial security goals?
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by NFS | Mar 28, 2011 | Archives
The IRS wants taxpayers to be aware of tax scams. These scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. The schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.
Here are three important guidelines to keep in mind:
- You are responsible and liable for the content of your tax return.
- Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
- Never sign a tax return without looking it over to make sure it is accurate.
Beware of these common schemes:
Return Preparer Fraud:
Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.
To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN). Later this year, registered preparers will have to pass a competency exam and take continuing education courses.
Identity Theft:
It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic, call 800-829-1040 to confirm it.
Frivolous Arguments:
Promoters have been known to make outlandish claims such as that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.
For more information about these and other tax scams visit the IRS Web site at http://www.irs.gov. Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is http://www.irs.gov/.
