Well, it’s Thanksgiving week – time to think to about everything we are thankful for -  even tax deductions!  As tax time draws nearer, now is the time to be gathering information and thinking about what deductions you will take this year and how you will take them.  The biggest question is whether you will take the standard deduction amount or whether you will itemize your deductions – and the difference often confuses people.  So here’s a basic explanation of standard vs. itemized deductions so you can decide for yourself which will be of most benefit to you.

1. Standard deduction – the standard deduction may be taken by any taxpayer who cannot be claimed as a dependent on someone else’s return.  The standard deduction amounts for 2009 are as follows:

• Married filing jointly – $11,400
• Head of household – $8,350
• Single (unmarried) - $5,700
• Qualifying widow(er) (surviving spouse) – $11,400
• Married filing separately – $5,700

2. There are deductions you can add to the standard deduction this year – real estate taxes ($500 or $1000 for join filers), state and excise taxes on new vehicle purchases, and net disaster losses.

3. You may find that itemizing your deductions results in a larger deduction amount than the standard.  Itemized deductions include things such as:

• Medical expenses
• Taxes – sales, etc. (if you choose to itemize sales tax you cannot take an additional deduction for the new vehicle taxes)
• Interest payments
• Charitable contributions
• Theft and casualty losses
• Unreimbursed employee business expenses
• Investment expenses
• Legal fees to earn income
• Gambling losses
• Estate tax payments on income in respect of descendents

4. Most people find that the standard deduction gives them a better tax break than itemizing deductions.  However, if you are subject to the AMT (Alternative Minimum Tax) it may benefit you to itemize deductions because the standard deduction cannot be used to lower income but certain itemized deductions can. 

5. Itemized deductions do have limits and certain deductions have income limits as well.  Also, itemizing deductions can put a flag on your return for audit, especially if the amount is significantly larger than the average for your income level.  Tax experts agree that you should take every deduction you are entitled to – just make sure you have the documentation in case your return is chosen for review.

More more information, check out J.K. Lasser’s great tax books or contact our office.

Do you own a small business?  Are you concerned about how the upcoming tax season and how this year’s tax changes will affect your business?  Here are some things to consider as you plan the end of the year and prepare for the 2009 tax season.

1. If you run a small business, there is a special estimated tax rule for 2009 – if your 2008 AGI was less than $500,000 and more than half your gross income came from a business with 500 or fewer employees, your pay-ins can be based on your 2008 or 2009 tax liability, whichever was less.

2. Shifting your income around can help you save big – delay year-end bonuses so they aren’t taxed until 2010 and  postpone your end of year billing to collect in 2010.  But be careful – the IRS will get suspicious if there is too much income distortion.

3. Charge any needed assets and supplies on a credit card in December and write off those expenses for 2009 (but not pay for them until 2010).  However, this does not apply to store specific cards, like Home Depot or Lowes cards.

4. Pay your bills early – pay before the end of year for things like utilities, phone, rent, insurance, any needed maintenance or repairs to include them in 2009 expenses.

5. Place new vehicles and other assets in service before Dec. 31 for additional write-offs, depending on the asset and its use.

6. Update your records, gather details like home office information and mileage and make sure you have receipts for things like business travel, meals and entertainment expenses, supplies and asset purchases, etc.

There are other issues to consider depending on your business type and income.  Contact our office if we can help you prepare your 2009 business tax information.

Thinking of purchasing a new home for Christmas (or before the end of the year)?  Wish you were a first time home buyer so you could qualify for the tax credit?  Well, guess what?  Congress has heard your plea and just passed this week a new bill that extends and expands the home buyer credit to include a $6500 credit for previous home owners (those who have owned their current home for at least 5 years) who purchase a new home.  The time limit has also been extended – closing has to be completed by June 30, 2010.  The credit does have limits, however – it is available for the purchase of principal homes only costing $800,000 or less, meaning vacation homes are ineligible. The credit would also be phased out for individuals with annual incomes above $125,000 and for couples with incomes above $225,000.

The days are flying by, the end of the year is in sight, and you are thinking about ways you can save on your taxes for 2010.  Money Magazine and CNNMoney.com recently shared a list of tax breaks you can take advantage of for next year if you act soon.  There are deadlines involved, but if you can get all the paperwork processed in time, these can help make a big difference on your return for 2009.  Here, from CNNMoney.com,  are some of the things you might want to consider looking into:

1. BUY, BUY, BUY – considering purchasing a new car or home?  Purchase the car before December 31 or close on the home before November 30 and you can qualify for special tax deductions – the sales and local taxes on the vehicle and $8000 credit for first time homebuyers.

2. UPGRADE – replace old, inefficient appliances with greener, more energy-efficient ones and qualify for various tax credits.  But the money is limited and like the “cash for clunkers” program, may run out, so make your purchases as soon as possible.

3. LOSE BIG? – the IRS will let you deduct $3000 from ordinary income of losses from a stock, fund, or bond in a taxable account.

4. PREPARE FOR THE AMT – if you are usually an AMT payer, you probably will be again in 2009, but there are some year-end strategies that can help.  Limit what you plan to write off, since big deductions can put you into the AMT level.  Reduce your income – max out 401Ks, wait to send out year-end invoices until January.  The stimulus package does allow for some previously unallowed exemptions, such as child and dependant care credits, so that should help as well.

4. GIVE GENEROUSLY – charitable donations given through the end of December can be deducted.  You can give up to $13,000 individually or $26,000 as a couple.

 So now it’s November and tax time is creeping up on us quickly.  Before you know it, it will be January, all those forms will be coming in, and you be up to your neck in tax time stress.  Don’t worry!  Over the next two months we will posting new information from the IRS about tax filing, tax breaks and credits, and other developing news that can help you prepare for and get through tax time as easily and painlessly as possible.    We’ll also give you tips and advice on future financial planning that can help you face coming tax years with confidence.  So let’s get started today with some recent reminders from the IRS about new tax benefits that are available.

1. Winterize Your Home, Save Energy and Get a Tax Credit – just in time for the fall and winter seasons, the IRS is reminding folks that the American Recovery and Reinvestment Act, passed earlier this year, expanded two home energy tax credits, non-business energy property credit and the residential energy-efficient property credit.

• The non-business energy property credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years.  Energy saving improvements can include efficient heating and air conditioning systems, energy efficient windows and doors, qualifying insulation and roofs, water heaters and stoves that burn biomass, and some labors costs involved in installing some of the improvements.  You could spend as little as $5000 before the end of year, reap the cost benefits in saving energy, and get a $1500 tax credit in 2010!
• The residential energy-efficient property credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.  Property that qualifies should have an IRS certification that you will receive at the time of purchase.  Some labor costs involved in installation can also be included.

2. Ordering Tax Transcripts Easier – need to order a transcript of past tax returns for a mortgage application in order to qualify for that new home buyers credit before the end of the year?  As part of the Making Homes Affordable Program, the IRS announced recently that a new form in available online that will allow you to order a 1040 transcript free of charge.  This transcript includes most of the lines from the original 1040 and usually has all of information needed for an application.  To access the form, visit Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript.

For more information on these and other IRS updates, visit the IRS website and this blog frequently as updates will be added often during the coming months.

Buying a home brings about a sense of financial security and integrity. It doesn’t matter if you are looking for a bigger home for a growing family, an investment opportunity, or just a place to call your own the home buying process is an exciting time. One of the biggest reasons to purchase a home is for financial security. There are a number of reasons why this is true.

Equity:
You can gain equity when you buy a house by making your mortgage payments monthly. Equity is your ownership interest in a property that can be turned into cash by borrowing against it or by selling your house. Renters don’t have the opportunity to build equity. When you become a homeowner you can build towards finacial freedom just by paying your mortgage.

Consistent payments:
If you have obtained a fixed rate mortgage you benefit by having a monthly mortgage payment that remains unchanged over the life of the loan regardless of any cost of living increases due to inflation. As a renter you are often faced with inevietable rent increases.

Appreciation:
Typically, homes will increase in value over time. This is known as appreciation. As time goes on appreciation is like money in the bank to homeowners. As a renter you don’t have the benefit of appreciation in the home you live in.

Tax Benefits:
There are different tax beneifts for homeowners. The most important benefit is the interest you pay for your mortgage, it is usually tax deductible. This benefit can save you a lot of money in your federal income taxes.

For more information on buying a home drop me an email and I’ll respond quickly.

New tax code changes create benefits for owners of a Jersey Shore home. For years, many people have usually turned away from considering taking on the financial responsibilities of being a homeowner. Renters and prospective home owners are well aware of all the financial stress that comes with owning a home, which makes them hesitant to make the big step and commitment. What might not be known is that homeowners are receiving more tax benefits now than ever before. The Internal Revenue Services, known as the IRS, has made owning a Jersey Shore home a more favorable option in several ways. 

Monthly house payments bring the biggest tax benefit to home owners. The interest included in the monthly mortgage payments is tax deductible as long as the loan is for less than a million dollars. IRS guidelines also allow deductions for interest on refinancing and home equity loans. However, they do put limits on how much is actually allowed to be deducted. Borrowing against the equity of your Jersey Shore home is an option renters do not have. Renters also do not have the ability to file federal tax deductions on their monthly rental payments. 

Homeowners are also allowed to deduct the points paid in order to purchase their home. If the deductions are itemized, points can be deducted the same year the home is purchased. Every point is equal to 1% of the entire loan amount. When the seller pays certain fees during the purchase, points are also deducted. 

Depending on the state, homeowners who meet specific criteria may qualify for real estate tax exemption. A portion of capital gains may also be deducted. When selling the property, the IRS allows a certain portion of the profit made to be excluded. Single taxpayers are allowed to exclude up to $250,000 in capital gains, and $500,000 for married couples. 

In 2007, the government added more to the miscellaneous tax credits receivable by homeowners. For example, the Energy Credit allows homeowners to receive $200 for home improvements that make the property more energy efficient. 

There are many benefits to owning a Jersey Shore home. Renters and hesitant prospective homeowners should take advantage of the tax breaks that are now available.

Learn more about owning a Jersey Shore home.

Search all Jersey Shore homes for sale.

There are many benefits to remodeling your home; at the top of the list is pride of homeownership.  But for so many of us, we have to remodel our home in stages – we don’t have unlimited funds to changes everything at once.  If you do not have an urgent need to remodel a particular space over another (ie. leaking roof, structural damage, etc.), how do you decide what takes priority?  If you are looking for tax deductions, then you may want to consider these remodeling projects first.

Current Tax Breaks

Cash for Clunker Appliances

Starting this fall, as part of the economic stimulus plan under the American Recovery and Reinvestment Act, the “Cash for Clunkers” extends to Appliances.  Basically, purchase a new energy efficient appliance and get a tax credit of $200.  Just like the “Cash for Clunker Automobiles” there is a set dollar amount set aside for this program and once the money is gone, the program is over.

Appliance companies should have available to you the list of products they carry that qualify.  You may have to surrender your existing appliance in order to receive the benefit.

Energy Efficiency Tax Break

Install a solar panel to provide your home energy and not only will you see a substantial tax credit and your electric usage drop, but you may even be able to sell energy back to the electric company. 

For those of us who are less adventurous – upgrade your boiler, heater, furnace, air conditioner, windows, roof, or insulation and you will not only see savings on your gas and electric bills.  

The credit covers 30% of the energy saving improvements, capping at $1,500 for 2009 and 2010.  The credit will no longer be available after 2010.  When you complete your tax return be sure to include Form 5695.  The IRS website gives more information.

Potential Future Tax Breaks

The Home Improvements Revitalize the Economy (HIRE) Act of 2009

Provides a tax deduction of up to $2,000 per family, or a tax credit of $500, for the purchase of certain materials and home furnishings.  If you use green products that meet LEED (or other recognized standards) the tax deduction would actually double.  Purchases excluded from the HIRE Act are major appliances, housewares and electronics.

The lead sponsors of the HIRE Act are Rep. Henry Johnson and Rep. Nathan Deal from Georgia.  (Be sure to contact them and your local representatives if you feel this benefit would have a positive effect on the American economy.)

Canada has had a similar program in place since January and has seen a positive effect in stimulating the home improvement industry with one in three Canadians planning to take advantage of the program. (Home Channel News, 9/21/09, pg 35)  For more information visit the HIRE Act of 2009.

Like the auto industry, the home improvement industry is huge.  This is a service industry rooted in American workers and the US economy.  In the past couple years over 270,000 Americans have lost their jobs in the building products and home furnishings sector, and a loss of over 290,000 jobs are expected for 2009.  Keeping Americans working is not only a short term tax relief for homeowners, but it is a way to help us all weather the long term effects of this stormy economic climate.

Whatever you do, when you remodel your home, keep documents of everything.  Think of each contract not as a receipt of purchase but a proof of investment.  Give a copy of what you did for the year to your accountant.  When you sell your home, have these documents on hand, you may be able to deduct these expenses from any capital gains.

* Consult your accountant to see what tax benefits you qualify for before you start a remodeling project.

Written by Imperial Kitchens and Baths Designer, Stephanie Bullwinkel, CBD.

Eight Steps To Buying Your Home

Eight steps to buying your home

1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

• If you are paying rent, you very likely can afford to buy
• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
• The lack of a substantial down payment doesn’t prevent you from making your first home purchase
• A less-than-perfect credit score won’t necessarily stop you from buying a home
• The best way to get closer to buying your ultimate dream home is to buy your first home now
• Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

Get 7 More Questions Answered just like this by click here.  You will learn the following:

1. Hire your agent.
2. Secure Financing.
3. Find Your Home
4. Make An Offer
5. Perform Due Diligence
   
6. Close
7. Protect Your Investment

Eight Steps To Buying Your Home

Eight steps to buying your home

1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

• If you are paying rent, you very likely can afford to buy
• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
• The lack of a substantial down payment doesn’t prevent you from making your first home purchase
• A less-than-perfect credit score won’t necessarily stop you from buying a home
• The best way to get closer to buying your ultimate dream home is to buy your first home now
• Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

Get 7 More Questions Answered just like this by click here.  You will learn the following:

1. Hire your agent.
2. Secure Financing.
3. Find Your Home
4. Make An Offer
5. Perform Due Diligence
   
6. Close
7. Protect Your Investment

Eight Steps To Buying Your Home

Eight steps to buying your home

1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

• If you are paying rent, you very likely can afford to buy
• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
• The lack of a substantial down payment doesn’t prevent you from making your first home purchase
• A less-than-perfect credit score won’t necessarily stop you from buying a home
• The best way to get closer to buying your ultimate dream home is to buy your first home now
• Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

Get 7 More Questions Answered just like this by click here.  You will learn the following:

1. Hire your agent.
2. Secure Financing.
3. Find Your Home
4. Make An Offer
5. Perform Due Diligence
   
6. Close
7. Protect Your Investment

Eight Steps To Buying Your Home

Eight steps to buying your home

1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

• If you are paying rent, you very likely can afford to buy
• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
• The lack of a substantial down payment doesn’t prevent you from making your first home purchase
• A less-than-perfect credit score won’t necessarily stop you from buying a home
• The best way to get closer to buying your ultimate dream home is to buy your first home now
• Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

Get 7 More Questions Answered just like this by click here.  You will learn the following:

1. Hire your agent.
2. Secure Financing.
3. Find Your Home
4. Make An Offer
5. Perform Due Diligence
   
6. Close
7. Protect Your Investment

Eight Steps To Buying Your Home

Eight steps to buying your home

1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

• If you are paying rent, you very likely can afford to buy
• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
• The lack of a substantial down payment doesn’t prevent you from making your first home purchase
• A less-than-perfect credit score won’t necessarily stop you from buying a home
• The best way to get closer to buying your ultimate dream home is to buy your first home now
• Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

Get 7 More Questions Answered just like this by click here.  You will learn the following:

1. Hire your agent.
2. Secure Financing.
3. Find Your Home
4. Make An Offer
5. Perform Due Diligence
   
6. Close
7. Protect Your Investment

Eight Steps To Buying Your Home

Eight steps to buying your home

1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

• If you are paying rent, you very likely can afford to buy
• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
• The lack of a substantial down payment doesn’t prevent you from making your first home purchase
• A less-than-perfect credit score won’t necessarily stop you from buying a home
• The best way to get closer to buying your ultimate dream home is to buy your first home now
• Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

Get 7 More Questions Answered just like this by click here.  You will learn the following:

1. Hire your agent.
2. Secure Financing.
3. Find Your Home
4. Make An Offer
5. Perform Due Diligence
   
6. Close
7. Protect Your Investment

Buying A Home, ownership, investment, homes, real estate, tax benefits, rent, afford to buy, credit, real estate agent, realtor, secure financing, financing, find a home, make an offer, protect my home, due diligence

1.4 million Americans so far have benefited from the first time homebuyer tax credits available this year – have you?  If you are considering purchasing a home for the first time this year, you can deduct part of the purchase on your 2009 return as long as your purchase is made before December 1.  Check out this information from the IRS website:

• The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $80,000 or more.
• The credit reduces the taxpayer’s tax bill or increases his or her refund, dollar for dollar. Unlike most tax credits, the first-time homebuyer credit is fully refundable. This means that the credit will be paid to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
• Only the purchase of a main home located in the United States qualifies. Vacation homes and rental properties are not eligible.
• A home constructed by the taxpayer only qualifies for the credit if the taxpayer occupies it before Dec. 1, 2009.
• The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on the taxpayer’s modified adjusted gross income (MAGI). MAGI is adjusted gross income plus various amounts excluded from income—for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the range is $75,000 to $95,000. This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.
• The credit must be repaid if, within three years of purchase, the home ceases to be the taxpayer’s main home. For example, a taxpayer who claims the credit based on a qualifying purchase on Sept. 1, 2009, must repay the full credit if he or she sells the home or converts it to business or rental use at any time before Sept. 1, 2012.

For more info, check out the First Time Homebuyer Credit, Form 5405.

New tax code changes create benefits for owners of a South Central Vermont home. For years, many people have usually turned away from considering taking on the financial responsibilities of being a homeowner. Renters and prospective home owners are well aware of all the financial stress that comes with owning a home, which makes them hesitant to make the big step and commitment. What might not be known is that homeowners are receiving more tax benefits now than ever before. The Internal Revenue Services, known as the IRS, has made owning a South Central Vermont home a more favorable option in several ways. 

Monthly house payments bring the biggest tax benefit to home owners. The interest included in the monthly mortgage payments is tax deductible as long as the loan is for less than a million dollars. IRS guidelines also allow deductions for interest on refinancing and home equity loans. However, they do put limits on how much is actually allowed to be deducted. Borrowing against the equity of your South Central Vermont home is an option renters do not have. Renters also do not have the ability to file federal tax deductions on their monthly rental payments. 

Homeowners are also allowed to deduct the points paid in order to purchase their home. If the deductions are itemized, points can be deducted the same year the home is purchased. Every point is equal to 1% of the entire loan amount. When the seller pays certain fees during the purchase, points are also deducted. 

Depending on the state, homeowners who meet specific criteria may qualify for real estate tax exemption. A portion of capital gains may also be deducted. When selling the property, the IRS allows a certain portion of the profit made to be excluded. Single taxpayers are allowed to exclude up to $250,000 in capital gains, and $500,000 for married couples. 

In 2007, the government added more to the miscellaneous tax credits receivable by homeowners. For example, the Energy Credit allows homeowners to receive $200 for home improvements that make the property more energy efficient. 

There are many benefits to owning a South Central Vermont home. Renters and hesitant prospective homeowners should take advantage of the tax breaks that are now available.

Learn more about owning a South Central Vermont home.

I am really excited to be talking to you today about 6 ways to reduce your risk of being audited. I’ve spoken in my shows before about IRS audits being on the rise. I want to tell you 6 key things that you can make sure you reduce the chances of your tax return being audited. So go ahead grab a pen, piece of paper, cup of coffee, a little something to drink and let’s talk about 6 ways to reduce your chances of being audited.

Tip #1 - File your tax return on time, including through the extension dates. Many taxpayers do not file their returns on time, they will file their returns after the final extension due date which is just around the corner here. October 15 is the final extension due date for individual returns. Please file your return on time, avoid those penalties associated with filing a late return or issues that may come up later.

Tip #2 – file your return using the correct mailing address for the IRS and your service center. That’s correct, depending on where you are in our country, United States, you need to make certain that you are filing your tax return utilizing the correct service center. When this doesn’t happen your return gets rerouted and a lot of times your return is considered late especially if you are filing at the end of the filing season. So let’s make sure we are filing our return utilizing the correct filing address. On that same not let’s make sure you notify the IRS when you change your address. So addresses are very important, use the correct IRS address and yes please give the IRS your correct address if you move or change your mailing address.

Tip #3 - please report all your income. Sometimes we fail to do this, not necessarily intentionally, but the tax year is 365 days long. Often times we may have made transactions in the first quarter of the year that we actually forget about at the end of the year when it is time to file our tax return. Please keep a diary of different things that transpire during your tax year and let’s make sure that you report all of your income. That is the biggest way to trigger an audit is for IRS to find more income then you have reported on your tax return, and we certainly don’t want to go through that scenario.

Tip #5 – make sure your return is signed by your tax preparer. If you have someone preparing your return, make sure this person actually signs your tax return. I also want you to know I was reading last night the latest IRS statistics on who gets audited and what the percentages and chances are being audited. Self-prepared returns have the highest risk of being audited. It’s not worth you self-preparing your tax return, especially if you don’t have the expertise in the area for which your return needs that additional help.

Tip #6 – I want you to know who your preparer is. Who is preparing your tax return? A lot of times people have gone to the same preparer for years assume that the preparer is a licensed tax preparer. Perhaps they are not, ask to see their license, ask for their credentials. Are they a licensed tax preparer through their state, are they a licensed CPA certified public accountant, are they a tax attorney, or are they an enrolled agent. Enrolled agents are licensed through the US Treasury Department and they are allowed to prepare tax returns in all fifty states. They take a rigorous exam over two days on all areas of the tax law in order to become certified to prepare your taxes.

So again I want you to reduce your risk of being audited. Follow the tips that I have given you, give yourself the best opportunity possible. And I would like to leave you with this quote “You must do the thing you think cannot do. You must do the thing you think you cannot do.” by Eleanor Roosevelt.

This is Karla Dennis with COHESIVE Tax talk saying farewell.

Tax Planning | Tax Code | Tax Preparation | Accounting | Bookkeeping |Solving Tax Problems | Tax Help

Q: When my father died, we found out that most of his assets were set up in trusts that focused on growth rather than on income. As a result, my mother is now receiving less than what she needs to live on. What can we do to preserve these investments and still provide for our mother?

A: As often happens, a well-meaning investor unknowingly agrees to put assets into a boilerplate trust that promises to take care of his/her survivors. However, without knowing how the trust is managed, your assets could deprive your loved ones of income of deplete the principal in a matter of years.

What can be done to avoid this is a relatively new concept called the Total Return Unitrust (TRUT™). Unlike many conventional trusts that focus on investing to preserve the trust principal, the TRUT™ was designed under the “Prudent Investor Rule” (adopted by most states), which means that the trustee has a duty to consider more than just the remainder beneficiaries’ interests. In fact, the trustee’s investment and management decisions must be evaluated in the context of the entire trust portfolio and as a part of the overall investment strategy with risk and return objectives reasonably suited for all beneficiaries.

The TRUT™ trustee will invest trust assets using the Modern Portfolio Theory, which emphasizes diversification and asset allocation. Using this method will maximize the trusts total return and safeguard the trust principal while providing a more steady and reasonable revenue stream to the income beneficiary over the long term.

The TRUT™ gives the income beneficiary a right to receive a fixed percentage of the trust assets each year. (Payouts generally range from 3 % to 5 %). When the income beneficiary’s interest terminates, the remaining trust assets vest with the remaindermen (a secondary beneficiary that receives distributions only after the primary income beneficiary’s interest terminates). Thus, the income beneficiary’s only concern is that the trust grows at a reasonable rate and that the investments are not too risky. Likewise, the remaindermen favor steady growth without undue risk.

While it may seem like this is the ideal trust, the TRUT™ is not appropriate for all investors. For example, a trust intended to qualify for the federal estate tax marital deduction must provide for the distribution of all income to the surviving spouse. For these trusts, the TRUT™ concept can be modified to require the distribution, at a minimum, of all income. And in trusts designed to provide income for the care of young beneficiaries, payments based on a percentage of assets may not equal the needs of the child.

For more information on utilizing a TRUT™, email mike@kilbournassociates.com

At almost every investor mind a question is generally cropped up: “What is the difference between a ULIP and a Mutual Fund?”

The reason, perhaps for the wide extent of confusion, lies largely in the way ULIPs have been sold by agents. As just another mutual fund.

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning.

As is the case with mutual funds, investors in ULIPs is allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few.

Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component.

Mutual Fund is a body corporate that pools the money from individual/corporate investors and invests the same on behalf of the investors /unit holders, in various investment avenues like equity shares, Government securities, Bonds, Call money markets etc., as per the pre-specified objective and distributes the profits earned from such investment.

In India, Mutual Funds are registered with the Securities and Exchange Board of India (SEBI).

ULIPs are a mix of investment and insurance.

But very long term investment, not even medium term.

Insurance companies themselves admit, that if your investment horizon is anything less than 7 years, don’t even consider a ULIP.

Charge structure in a ULIP is vastly different from a mutual fund.

ULIP investors also have the flexibility to alter the premium amounts during the policy’s tenure.

The freedom to modify premium payments at one’s convenience clearly gives ULIP investors an edge over their mutual fund counterparts.

In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority.

ULIPs also allow you to switch from debt to equity within the same scheme, at no extra charge.

So if you want to get the benefits of long term investment and risk cover in one single product, ULIP is the product for you.

So it is not an issue, of whether a mutual fund is better or a ULIP. It is about your need.

Both can co-exist in your basket of needs.

So identify your needs with a financial planner and then pick the product suitable for you.

Liabilities are essentially obligations; these can include financial and social matters. We usually accept liabilities due to our preferences. Financing the purchase of your dream car, student loans, and credit card debt are all liabilities that expose us to risk. Liabilities however can be used in combination with assets to engage leverage. This can be useful to maximize potential investment power.

An asset can be anything that has value. The term is used to differentiate from liability, which is the alternative. Assets are the things we should try to create because over the long run they themselves with generate income for us. Liabilities are debt obligations and cost us money. A savings account is one of the first assets that most individuals develop. Unfortunately for most that is the extent of their assets. If you own a home it could be considered an asset even if you had to finance the purchase. Homes are a unique asset and if purchased and financed correctly can provide an inexpensive line of credit. There are many ways to benefit from holding assets.

Hi this is Karla Dennis enrolled agent with COHESIVE Tax Talk. Our topic today is about the tax benefits of owning a business. Often times you have heard me say that business owners are given great deductions whereas W-2 is only given certain deductions. This is very true. In our country we have two tax systems.

We have one system for W-2 wage earners and we have another system for business owners. Anyone who owns a business is going to get greater tax write-offs then a W-2 employee. I highly recommend whether you are a W-2 or have ever given thought to owning a business, that everyone should own a business. If you own a business you are going to be able to write your taxes down to a legal minimum and that is very important. You are going to be able to take advantage of several deductions in the tax code that a W-2 employee may not be able to take advantage of. Many of us like that safety net that benefit of being employed by somebody else knowing that they are going to be able to get that guaranteed pay check. In our times today there are no more guarantees. We have large employers laying individuals off work; we have people who have been on their job for years receiving their pink slips. It is more important then ever that you think about owning your own business, whether you turn something you love to do, a hobby, soccer coaching into coaching and actually earning money for it, is a wonderful idea and you can start your own home based business and take advantage of these tax deductions.

People get rich by owning their own business and that is because they can take the legal write offs that are in a tax code. Several write offs that are in the tax code you can take advantage of as a business owner you with the proper documentation I always want you to know that you want to document making sure that you keep the proper documentation in the event that you are ever audited. IRS likes to see canceled checks, credit card statements, the actual invoice, and they want a business reason for the documentation. With the proper documentation you can minimize your taxes legally. So again as a business owner you can deduct your house, you can actually deduct your spouse, meals with your colleagues you can take great advantages of owning a car, you can deduct your children believe it or not, you can deduct the cost of your children’s wedding, you can deduct the cost of your children’s college and you can do all of this legally when you own a business. That’s why big business wins in the tax arena and W-2 employees lose because they don’t think about the tax benefits of owning a business.

Anything that you enjoy you can turn into a business and turn it into what I like to call a cash cow, some people like to call it a cash machine either way if you are making money on that business you are earning extra money, if you are not making money on your business and you are in a growing mode of your business that loss can be used to offset other earnings on your tax return. So owning a business has great benefits to it.

Let me give you some great ideas in regards to owning your business just to recap. You can employee your children, you can employee your spouse, and you can write off your house, you can maximize your car deductions. Who would not want to own a business? Remember if you plan to go nowhere you will definitely end up somewhere; plan to minimize your taxes by owning a business.

This is Karla Dennis enrolled agent again with COHESIVE Tax talk.

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Economics and Me

Every day we are faced with more and more opportunities. As these options expand so does the difficult task of deciphering the information about each and making a selection. It is the roll of the economist to comprehend these situations and deduce verdicts using reasoning.  The science of economics is Unique because the experiments that economists conduct have a person as a variable of their equation. Any need or want that the individual expresses should be considered. This can have profound effects on the dynamics of any study.

Economics can be big (Macroeconomics) or small (Microeconomics) these two branches use similar fundamentals to conduct and express situations and experiments. Microeconomics focuses on the individual and their market interactions. This can represent a firm, individual person, or household. Macroeconomics in contrast focuses on the market as a whole. It is most commonly applied to the study of countries and their income or GDP. Either form of the term economics can be defined as the allocation of scarce resources. Both use tools and theory to answer questions.

One of those tools that economists use is Game theory. Most people use this principal on a daily basis. If you consider your time to be valuable it can be though of as a resource. You and I can only be in one place at a point in time we are confronted with such decisions. Left or right, work or home, bowling or golfing. We make our decisions based on what economists call utility. Each individual decision has an amount of utility.  These preferences for whatever reason influence our decisions.  For most people in common situations once a path has been chosen little consideration is given to the alternative. Economists however give consideration to those untraveled paths. First they are given the term Opportunity costs.

Think of some resources that are scarce. Most people will mention money and many people associate economics with money for perhaps that reason. Using the Keynesian economics we can understand the impact that money and spending has on the overall economy. Well review topics as the micro/macro trap and how it affects the markets today. Topics such as the stimulus bill, Government spending, and Taxes can be easily understood using the tools the economists have developed. You will be able to better understand the trade deficit and national debt and what effect they have on the individual.

With a solid understanding of how economics works anyone is capable of increasing his or her overall satisfaction. There are many economic pitfalls along the way I would like to use my knowledge to help others avoid them. The fore mentioned topics are a good understanding to expand upon. I will be publishing periodic writings this fall and winter and encourage your questions and comments.