Archive for the ‘General’ Category
Happy 100th Birthday Federal Income Tax?!
Filed under: General, Tax Collections | Tags: 100 years, 16th Amendment, 1913, Abraham Lincoln, apportioned, Civil War, Commissioner of Internal Revenue, Congress, direct taxes, excise taxes, Federal Income Tax, Internal Revenue Service, ratification, Sixteenth Amendment, Supreme Court, tariffs, Tax rates, unconstitutional, Woodrow Wilson
Comments (2) Originally published in the Cedar Street Times
October 18, 2013
On October 3rd, our nation’s federal income tax turned 100 years old. Usually lots of people show up for anyone turning 100, but sadly, for the federal income tax, there was no grand party. In fact, most of its closest friends – the 106,000 employees of the Internal Revenue Service were at home due to the government shutdown! Americans celebrating the federal income tax would be lackluster at best – maybe on par with the excitement of throwing a party for your boss. But let us at least pay some tribute to this system and perhaps gain a little more perspective
The roots of the income tax go deeper than 1913. Abraham Lincoln set up the first income tax in 1862 in order to finance the Union efforts in the Civil War, and he established a position called “Commissioner of Internal Revenue” to handle this job. The tax was a temporary tax and expired in 1872. It provided about 21 percent of the cost of the war efforts, and about 10 percent of Union households were touched by the income tax.
Tariffs and excise taxes were the typical means of generating most revenue before and after the Civil War, but the country was looking for a better system. In 1894, Congress tried to reenact the income tax but it was shot down by the Supreme Court which declared it unconstitutional. The Constitution basically said that direct taxes had to be apportioned to the states based on relative population. An income tax clearly violated that since it was not divided out based on population but different to each person based on each individual’s income.
During the early 1900s, there was a growing movement by the people in support of a permanent income tax that would mainly be levied on wealthy individuals. Tariffs and excise taxes hit low and middle income people squarely on the shoulders since a much higher percentage of their total income was taxed as a result. The only way to have an income tax, however, was by laying the groundwork to make it constitutional via an amendment.
Three main campaign issues defined the election of 1912: monopolies, women’s suffrage, and tariffs. Woodrow Wilson wanted to break up monopolies, he dodged women’s suffrage by saying it should be decided at the state level, and he wanted revenue reform. He was elected with nearly 82 percent of the Electoral College vote and the next year the 16th amendment was ratified which states, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
I have a facsimile on my office wall of the first income tax return in 1913. It was three pages long with one page of instructions (2012 instructions were 214 pages by comparison). Adjusted for inflation in today’s dollars, if you made less than $70,000 as a single individual, you had no income tax liability. If you made between 70,000 and $465,000, you were assessed a one percent income tax! The top bracket was only seven percent, and assessed to those filers making over $11.6 million in today’s dollars.
Compare that to 2013…our bottom tax bracket is 10 percent assessed on single individuals making between $10,000 and $18,925, and our top bracket is 39.6 percent assessed on individuals making over $400,000. In fairness to history, after the first three years tax rates started rising and they skyrocketed during World War I when the top bracket hit 77 percent on earnings over $15 million in today’s dollars.
Since 1975, there have been dozens of court cases from crafty people trying to figure out how they can get out paying income taxes. The cases involve everything from claims that ratification procedures of the sixteenth amendment in certain states were not properly followed right down to claims that differences in punctuation and capitalization marks in versions ratified by the various states means the ratification was null and void. None of the ratification cases have ever been victorious and the courts have ruled ratification arguments are now frivolous or fraudulent.
The federal income tax is quite resilient, and has spent its entire life being pulled in many directions. I am sure it will soon get over any hurt feelings from not having a 100th birthday party as did the Department of Labor, the U.S. Forest Service, and the National Archives. Maybe on its 200th birthday it will get a cake.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
IRS Affected by Government Shutdown
Filed under: General, National Debt | Tags: $800, 000, appeals, audit, Congress, essential employees, Exxon, funding, furlough, GM, Google, government shutdown, income tax, interest, IRS, payroll tax, Penalties, refunds, Target, taxpayer advocate
Leave a comment Originally published in the Cedar Street Times
October 4, 2013
Due to the inability of Congress to come to terms regarding the government shutdown (or just about anything for that matter), I have a pretty good chance that this article will still be worth reading by the time it is published in the newspaper on Friday!
Everyone is aware by now that over 800,000 federal employees are on furlough. I read that this is more than all the employees of Target, General Motors, Exxon, and Google combined. That is a lot of people! Included in these 800,000 are most of the Internal Revenue Service employees.
Many of you may be cheering right now, but certainly not anyone that is waiting on a refund or currently trying to work out any problems with the IRS. Prior to the furlough, telephone wait times to speak with an IRS agent have been 15 – 45 minutes, or sometimes you would get the message that they were too busy to even put you on hold, and then hang up on you. Right now you will have an indefinite wait since the call centers are completely closed. All local IRS offices are also closed to the public as well. The shutdown will of course put even more pressure on wait times when funding is restored, and there is a backlog of problems to resolve.
This is an interesting time to be shutdown considering that extended personal tax returns are due on October 15. The IRS still expects individuals and businesses to file all tax returns on time, keep making income and payroll tax payments, etc. Presumably, they have some essential employees still on-the-clock to let the mailman in and to make deposits! They are encouraging electronic filing since those returns are processed automatically by computers. Paper returns will not be processed, however any payments enclosed will still be processed! All tax refunds are suspended until normal operations resume.
Computer generated IRS notices will continue to be mailed out, but all audits, appeals, and taxpayer advocate cases are suspended. If you had meetings scheduled they will be rescheduled.
The IRS website will still be up and running, but certain services may be unavailable. The IRS automated telephone system will also still be working (800) 829-1040.
I can only assume that penalties and interest will still accrue even if you are waiting on the IRS to resolve an issue.
I called the IRS employee emergency hotline for kicks. They are informing employees that they cannot perform any work, even if they want to volunteer their time to keep certain cases moving, and they cannot use any government computers, equipment, or other resources. If they were en route traveling when the furlough began, they were to immediately return home.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
When Can I Throw Out My Tax Returns?
Filed under: General | Tags: 1099-B, basis, document retention, FTB, how long should I keep my tax returns, installment sale, IRA, IRS, rental property, save tax returns, statute of limitations, throw away tax returns
Leave a comment Originally published in the Cedar Street Times
May 3, 2013
It is time to do some spring cleaning! Do not miss your opportunity as summer is coming quickly, at which point you will be required to keep everything for another year. Perhaps you will find that old pair of muddy tennis shoes in the garage – now the home to three indignant spiders as you turn their palace upside down. Or maybe you will find that half-used bottle of hotel shampoo under the sink – a small, but satisfying entitlement for a $300 room charge. Ah, and then there are those tax returns you filed way back in April – is it time to get rid of those too?!
You can do whatever you want, but my advice is to keep them. In fact, I would say you may want to keep every tax return (and the supporting documents) you have ever filed – I know I have. Record retention is always an interesting debate and you hear a lot of people say three, five, or seven years as a rule of thumb for many types of documents. Regarding tax returns, the real answer is unique to each person depending on his or her tax circumstances and risk tolerance.
Someone that works a W-2 job, has no other sources of income, no investments, contributes to no retirement plans, and files the returns correctly would have little risk if discarding the returns after four years. If you do make retirement plan contributions, depreciate any assets, have an installment sale agreement, or a host of other things, it would not really be wise to discard the returns in accordance with a rule of thumb.
The IRS generally has three years from the later of the due date (or extended due date) or the date you file to audit your returns. The California FTB has four years from the later of the non-extended original due date or the date you file in order to audit. You should never throw out returns or source documents until you are outside of these statutes of limitation. If you have understated your gross income by more than 25 percent (even if by accident), then the IRS has six years to audit you. People can get tripped up on this pretty easily if they fail to report stock sales. I have seen this before with people preparing their own tax returns that ignore the 1099-B issued year-after-year because they did not really understand it. If you filed a false tax return or there was any kind of fraud, there is no statute of limitations.
Even if you are outside the statute of limitations, however, you may still need prior tax returns to support positions you are taking on current tax returns that are inside the statute of limitations. Think about someone that has been contributing to an IRA for many years and was unable to take deductions due to income limitations. Each of these nondeductible contributions would have created basis in the IRA which would lower the taxable amount of distributions while in retirement. If the IRS audited your returns in retirement and questioned your basis, having all the past tax returns showing the nondeductible contributions would be a saving grace.
People that have rental properties or home offices may find tax returns from twenty-five years ago helpful in proving the basis in the property when it is eventually sells due to depreciation deductions taken on each past return. I have also had situations where clients had no idea what their cost basis was for a stock sale, and we were able to help recreate and substantiate the cost basis by reinvested dividends reported on tax returns stretching back several decades.
The safest thing to do is just keep them, or at least scan them and maintain the electronic files through the years.
One other pointer – be sure you do not throw out purchase records, refinance documents, or receipts of improvements to any type of property you own as you will likely need this information if you ever sell it.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Taxes? I’m in Key West!
Filed under: General | Tags: Gardens Hotel, Key West, Peggy Mills, taxes
Leave a comment Originally published in the Cedar Street Times
April 19, 2013
When this paper hits the newsstands, I will hopefully be far from thinking about itemized deductions, dependent exemptions, and the IRS! This tax season tended to be compressed for many tax professionals due to the last minute changes by Congress which delayed the IRS releasing many common forms until early March of this year. Of course we tried to get the information from clients and prepare the returns except for the remaining forms, but it still had an effect of creating additional late night hours! That is now over, however, and it is time to take a breather! My wife and I and one-year-old son are headed for the southern-most point in the United States – Key West, Florida.
When I was 16 my family took a trip to Key West, Florida. My father enjoyed taking us around to go Key lime pie tasting and to show us the sites he was familiar with from his younger days. My grandfather was an architect in Key West for a number of years and both my uncle and my father were “Conchs.” This term, derived from the shell of the large sea snail, is affectionately given to anyone born in Key West.
My dad’s aunt, Peggy Mills, also lived on the island. She was a collector of orchids from all over the world and received special permission to import unusual orchid varieties into her growing gardens. Over the years she tore down over a dozen buildings in the heart of Key West to make room for her gardens and then made them open to the public. She also imported special bricks and four “tinajones” from Cuba. The tinajones are basically large clay pots weighing about 2,000 pounds each and were used for rainwater collection by Spanish settlers They are the only ones in the United States. She was friends with President Batista of Cuba at the time, which was her connection to obtain these artifacts. When she passed away in 1979, my grandfather sold the property with the pledge from the new owners that the gardens would remain. Although the property has changed hands several times, you can now stay at The Gardens Hotel, arguably the nicest spot in Key West!
Perhaps we can get a tour when we go as The Gardens Hotel only accepts guests 16 and over, and I don’t think we can fudge that with our one-year old, even though he is “very advanced” (as all parents like to say)! I remember we went into the reception area during our trip when I was 16. My dad was telling funny stories about how the room used to be his aunt’s dining room and the chandelier had an active bee hive that dripped honey onto the table! She was eccentric, but I think the concierge thought we were nuts!
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Sale of a Residence After Death – Part I
Filed under: General, Residence Sale | Tags: appraisal, basis, community property, death, decedent, fair market value, joint tenancy, personal residence, rights of survivorship, sale, section 121, step-down, step-up, survivor, tenancy in common
Comments (7) Originally published in the Cedar Street Times
March 22, 2013
When a living individual sells a personal residence that results in a gain, many people are familiar with the rules which may allow an exclusion of the taxable gain of up to $250,000 ($500,000 if married filing joint) if the taxpayer lived in the property two out of the last five years as his or her primary residence. In the depressed real estate markets over the past few years, many people have also learned (sometimes to much dismay) that a loss on a personal residence is not deductible.
But what happens when a house is sold after someone passes away?
The first thing we need to do is determine the cost basis. At the date of death, the cost basis of the property changes to whatever the current fair market value (FMV) is (an appraisal is required – not a market analysis by a real estate agent). If the house is held in joint tenancy or tenancy in common, only the decedent’s share of the home gets a step up (or down) in basis to the current FMV, and the basis for the survivor’s original share does not change.
If, however, it is held as community property, the entire interest in the house gets a step in basis to the current FMV. If the property is held “with rights of survivorship” then the house passes immediately to the survivor which in turn inherits the new stepped up (or down) basis of the decedent to add to his or her own basis-in the case of joint tenancy or tenancy in common, or he or she takes the new FMV as the new basis if it was community property.
When the property is sold, the survivor reports the sales price less the new basis and selling expenses. If it was sold soon after death, the survivor often realizes a loss due to sales expenses if they got a full step-up in basis (albeit nondeductible if maintained as a personal residence). If the survivor realizes a gain, then, the survivor is eligible for the $250,000 exclusion assuming he or she meets all the normal rules. If it was a spouse that passed away, then the widow or widower would have two years from the date of death to sell the house and still be eligible for the $500,000 exclusion.
In two weeks we will discuss the more interesting scenarios that play out when the property is not held “with rights of survivorship” and the property goes to the individual’s estate or trust, such as is often the case at the death of a single individual or the death of the second spouse.
Remember, it is always best to seek competent advice as everybody’s tax situation is unique and there are more rules that could affect you than just those mentioned in this article.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Unmarried with Children – Head of Household
Filed under: General | Tags: biological child, Chief Counsel Memorandum, child tax credit, children, dependent, dependent benefits, dependent care expenses, dependent exemption, earned income credit, exemption, head of household, household, income limit, living together, principal residence, qualifying child, qualifying relative, SCA 1998-041, tie-breaker rules, unmarried, unmarried with children
Leave a comment Originally published in the Cedar Street Times
March 8, 2013
Article on Unmarried People Living Together with Children
I cannot write the title of this article without thinking about the 80s and 90s sitcom, Married with Children, about a dysfunctional American family starring Ed O’Neill, Katey Sagal, David Faustino, and Christina Applegate. With all the problems the Bundy family had in its 11 years on television, one thing they did not have to deal with were tax determinations when you are unmarried with children!
When I speak of unmarried people, I am not referring to divorced individuals, but people who have never been married. Different rules apply to divorced and legally separated individuals, and I am not speaking from that perspective.
Many questions arise about who gets to claim dependency exemptions, child tax credits, head of household filing status, dependent care expenses, etc. in situations where unmarried people are living together with children. This article could not begin to scratch the surface of the issues that exist as there are so many situations that could yield different tax results. In this issue I am going to focus on the head of household filing status.
For an unmarried individual to claim head of household, he or she has to maintain a household for more than half the year that is the principal residence of an unmarried qualifying child (or qualifying relative) for dependency exemption purposes.
A qualifying child is someone who must generally be under 19 (24 if full-time student). The person must also be your child, step-child, sibling, step-sibling, or a descendant of any of these, or an adopted or foster child. The child cannot provide over half of his or her own support, and the child cannot file a joint return.
Unmarried parents often both meet the criteria to consider a shared biological child a qualifying child, and then they can decide who will claim the qualifying child for the dependency exemption. (If they cannot decide, tie-breaker rules exist.) Whoever claims the child as a dependent gets the child tax credits, credit for child and dependent care expenses, exclusion for dependent benefits, earned income credit, and the possibility of filing as head of household. You cannot split up the benefits between parents.
If there is more than one shared biological child, one parent may be able to claim one child as a dependent and the other may be able to claim a different child as a dependent. Or maybe one or both have children from prior partners that live with them and could qualify them as well. (Side note: if unmarried person A earned less than $3,800 (2012) and lived for the entire year with unmarried person B in the household maintained by B, then A could be a dependent of B as a “qualifying relative,” as well as any of A’s children that lived with A and B and are supported by B. This also qualifies B for head of household.)
Let us assume both unmarried people living together each have a qualifying child. Can they both claim head of household? If their households are maintained in separate dwellings, the answer is almost always yes. But what if they live under the same roof? Can you maintain separate households in the same house?
The answer to this depends on whether they are acting as a family unit or not. IRS Chief Counsel Memorandum SCA (Service Center Advice) 1998-041 addresses this issue and basically says that all facts and circumstances are considered, and if you are conducting your lives like a single family, then only one individual can file with the head-of-household status, and the other must file single. But if you are basically like roommates sharing dwelling costs (but not bedrooms!), and lead separate lives with your own respective children, then you could be considered as each maintaining your own household, and then both people can file as head of household. If you share a biological child as well, it will be nearly impossible for you to make this argument. But never say never!
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
American Taxpayer Relief Act of 2012
Filed under: General | Tags: $5 million, American Opportunity Tax Credit, American Taxpayer Relief Act of 2012, bypass trust, cancellation of debt, Capital Gains, child tax credit, code section 179, depreciation, estate tax exemption, itemized deduction phaseout, medical expenses, miscellaneous itemized deductions, net investment income, personal residence, Social Security
Leave a comment Originally published in the Cedar Street Times
January 11, 2013
The American Taxpayer Relief Act of 2012 was signed into law January 2, 2013. There was lots in the bill, but I am going to hit on a few that are notable and others that having meaning to a lot of people. I think making the Alternative Minimum Tax patch permanent and indexed for inflation was a huge victory for many taxpayers. That patch has been kicked down the road for years. The indexing will certainly alleviate concerns of a similar problem down the road. Many middle class people do not realize they were on the cusp of paying thousands of dollars more on their 2012 tax returns due in April without this fix.
The estate tax exemption being set permanently at $5 million and also indexed for inflation is huge, especially for Californians that own property. In a lot of ways, this simplifies estate planning for most individuals and will bring into question the need of the typical A-B split for many people that currently have it. Having a B trust, or bypass trust, would require additional tax work in the future, so the ability to eliminate it, could be worth the cost of amending your trust. Family dynamics may of course still dictate a B trust is prudent.
Various other temporary provisions we have been enjoying that were made permanent included marriage penalty relief for joint filers, better rules for student loan interest deductions and dependent care credit rules.
Quite a few things were extended but not made permanent. A big one was extending the exclusion from income of cancelled debt on personal residences for another year. This could be a lifesaver for those still struggling with mortgages that are “underwater.” Deductions for grade school teacher expenses and an above-the-line deduction for qualified tuition and related expenses were other items extended through 2013. More important than the deduction for tuition was the extension of the American opportunity tax credit through 2018 which saves taxpayers up to $2,500 each year as a result of education costs. Enhanced provisions of the child tax credit were also extended through 2018.
Small businesses have had the luxury of writing off high dollar amounts of many capital asset purchases through code section 179. This was slated to return to $25,000, but has been extended through 2013 at $500,000. Bonus depreciation and accelerated expensing of qualified leasehold, restaurant and retail improvements on a 15 year schedule instead of returning to a 39.5 year schedule was also extended.
Bush-era tax rates and capital gains rates have been retained for everyone but the wealthy. For people making over $400,000, their marginal bracket rose from 35% to 39.6%, and their capital gains tax went from 15% to 20%. There is also a new 3.8% medicare tax on investment income for people generally making over $200,000 and a new hospital insurance tax of .9% for people generally making over $200,000. Itemized deduction phaseouts have also returned for high income earners.
Everyday wage earners will be negatively impacted by the return of a 6.2% tax for Social Security rather than 4.2% tax we have had for the past two years, as they will see two percent less in their paychecks as a result. Another negative impact for people with high uninsured medical expenses, is that the threshold for medical itemized deductions has moved from 7.5% of your adjusted gross income to 10%. Individuals 65 and up will still enjoy the 7.5% rate for another three years.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Do You Have Assets or Investments in Foreign Countries?
Filed under: Foreign Reporting, General | Tags: 8938, bank account, due date, FBAR, foreign, foreign assets, foreign country, foreign investments, Form 8938, Form TD F 90-22.1, investment account, investments, June 30, non-willful neglect, Penalties, real estate, Report of Foreign Bank and Financial Accounts, Statement of Specified Foreign Financial Assets, TD F 90-22.1
Leave a comment Originally published in the Cedar Street Times
December 28, 2012
Various reasons including the fight against terrorism and failure to pay tax on foreign income are driving our lawmakers to require more stringent reporting of foreign investment activities. This is important because there have been significant changes in the past two years with the addition of a new reporting form, and the penalties for noncompliance include extremely high monetary penalties or jail time. Even cases of non-willful neglect or ignorance could lead to penalties of $10,000.
Generally this affects people who have opened bank or investment accounts in other countries (or are authorized signers on such accounts) or have an ownership interest in businesses in foreign countries. It generally does not include direct holdings of real estate, personal property, or financial investments made through an account setup here in the U.S. with a U.S. institution that diversifies your money and invests internationally. For instance, holding an international stock index fund through Vanguard would not trigger a requirement because Vanguard has reporting requirements here in the U.S. that would cover you. This additional reporting generally covers the things for which the U.S. would not know about unless you told them.
There are two forms which I feel tax practitioners should touch base with their clients about every year. One is the Foreign Bank and Financial Accounts Form TD F 90-22.1 (FBAR), and the other is the relatively new Statement of Specified Foreign Financial Assets Form 8938 which has only been around for about two years. The FBAR is not a tax return filing document, but is due to the Treasury Department by June 30th of each year (watch out if you are on extension and do your taxes late in the year). The new Form 8938 gets filed with your tax returns.
I suggest you think about any connections you have with money or assets in a foreign country and discuss them with your tax professional this coming year. The laws do get complicated and sometimes you may not think you have a reporting requirement when you actually do. For instance, you would have a reporting requirement if you have a relative or friend in a foreign country that adds you on to their bank account as a signer, simply for the convenience that you could write a check on their behalf if needed, regardless of whether or not you actually do.
You may have a reporting requirement if a foreign relative or friend has named you as a beneficiary in his or her trust; or perhaps you have a pension or deferred compensation plan which you will someday receive for past service with a foreign company or country; or maybe you are an owner or a partner in a business that holds assets that qualify (indirect interest). As you can see, it is not always straight-forward, but I hope you are now more alert to the issue, and that you can identify situations that may need further review.
Seeking qualified professional help continues to grow in importance as we continue to move in a direction towards increased complexity.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Thanksgiving
Filed under: General | Tags: gender, health, Kennedy, national debt, politics, race, tax systems, Thanksgiving
Comments (3) Originally published in the Cedar Street Times
November 16, 2012
With less than a week to go before Thanksgiving, I would like to take the opportunity to give some gratitude. I am of course grateful for my family – my wife of 13 years, Joy, who has been my best friend since we were freshmen in college together. She is sure and steady, she is efficient, she forgives me for being an accountant and working crazy hours for a third of the year, and she is well…full of joy! I am grateful for my seven-month old son, Elijah, who brings such happiness, activity, and wonder to our lives. It’s awesome being a dad!
I am grateful for my in-laws that make us dinner or pick up milk and juice at the store, or help with projects when we need an extra hand. I am grateful for my brother, Justin, even though he lives in Washington D.C. and hasn’t set up a Skype account yet to visit with his nephew! He is the most ethical and moral person I know, and he is always there to help me think through issues critically using his attorney mind. I am grateful for the understanding, qualities, and grounding I received from my parents – there is no greater inheritance than that.
I am also grateful to be living in the beautiful town of Pacific Grove. Growing up in Atlanta, I never really thought I would live near an ocean – what an opportunity! We are blessed to have such wonder friends and neighbors, a great church community, and organizations that help us find ways to give back to our community.
I am also grateful to be living in the United States of America. Although it is easy to point out all the faults we seem to have with politics, race issues, gender issues, health systems, national debt and tax systems, our military presence around the world, or whatever you feel is unfair, this country is still a beacon of light and hope for people all over the world that are struggling with far greater issues. What other country are people clamoring to get into like the United States? What country would you rather live in, and why are you here? We do have some big challenges ahead, and it is going to take right action, as a result of our gratitude to solve these challenges. If we are truly grateful for what we have, then we will take responsibility for preserving the good for ourselves and others, even when it seems we may have to sacrifice.
I think this passage from President Kennedy’s Inaugural Address from 1961 rings true for us as well: “I do not believe that any of us would exchange places with any other people or any other generation. The energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it — and the glow from that fire can truly light the world. And so, my fellow Americans: ask not what your country can do for you — ask what you can do for your country.”
God bless you and your family and God bless America.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Your Future Tax Return: Romney Versus Obama
Filed under: General, Tax Rates | Tags: American Opportunity Credit, Buffett Rule, candidate, Capital Gains, child tax credit, corporate rates, dividends, earned income credit, Education, election, Estate Tax, FICA, foreign earnings, health insurance, HSA, income exclusions, interest, itemized deductions, Medicare, MSA, net investment income, Obama, retirement plans, Romney, student loan interest, Tax brackets, tax positions, tax-exempt interest, territorial tax system
Comments (2) Originally published in the Cedar Street Times
November 2, 2012
If tax positions would sway your Tuesday vote, here is what Obama and Romney would like to see. Keep in mind, however, you don’t always get what you want!
Tax brackets: Romney reduce to 80% of current levels. Obama keep the same as 2012 except allow top bracket to split into two higher brackets like pre-2001. (Romney, Current 2012 Rates, Obama, 2013 rates if no congressional action ) (8%, 10%, 10%, 15%), (12%, 15%, 15%, 15%), (20%, 25%, 25%, 28%), (22.4%, 28%, 28%, 31%), (26.4%, 33%, 33%, 36%), (28%, 35%, 36% and 39.6%, 39.6%)
Capital gains, interest, dividends: Romney reduce tax rate to zero for AGI below $200K. 15% max if AGI above $200K. Obama increase long-term capital gains rate to 20% max and up to 39.6% on dividends – leave interest taxed at ordinary bracket rates.
2013 3.8% Medicare surtax on net investment income and existing 0.9% medicare surtax for married filers over $250K AGI and others over $200K: Romney repeal. Obama keep.
Itemized deductions: Romney cap itemized deductions (maybe $17,000-$50,000 cap) and maybe eliminate completely for high income. Obama reduce your itemized deductions by 3% of your AGI in excess of $250K married, $225K HOH, $200K single, and $125K MFS (up to 80% reduction of itemized deductions) and limit the effective tax savings to 28% even if you are in a higher bracket.
Income exclusions: Romney keep as is. Obama cap the effective tax savings to 28% on exclusions from income for contributions to retirement plans, health insurance premiums paid by employers, employees, or self-employed taxpayers, moving expenses, student loan interest and certain education expenses, contributions to HSAs and Archer MSAs, tax-exempt state and local bond interest, certain business deductions for employees, and domestic production activities deduction.
AMT: Romney repeal. Obama keep but set exclusion to current levels and index for inflation.
2009 expanded Child Tax Credit, increased Earned Income Credit, and American Opportunity Credit: Romney – Allow to expire as scheduled 12/31/12. Obama – Make permanent.
Buffett Rule: Romney “Not gonna do it.” Obama households making over $1 million should not pay a smaller percentage of tax than middle income families. This is accomplished by raising the rates on capital gains and dividends as discussed earlier.
Temporary two percent FICA cut you have been enjoying in 2011 and 2012: Both candidates favor allowing to expire at 12/31/12.
Estate tax: Romney repeal. Obama set at $3.5 million and index for inflation with top rate of 45% on excess.
Top corporate tax rates: Romney 25%. Obama – keep at 35% for 2013 but maybe reduce to 28% in the future.
Corporate international tax: Romney don’t tax U.S. companies on income earned in foreign countries. Obama discourage income shifting to foreign countries.
Corporate tax preferences: Romney extend section 179 expensing another year, create temporary tax credit, expand research and experimentation credit. Obama increase domestic manufacturing incentives, impose additional fees on insurance and financial industries, reduce fossil fuel preferences.
Prior articles are republished on my website at www.tlongcpa.com/blog.
IRS Circular 230 Notice: To the extent this article concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
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