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Posts Tagged ‘tax’

How To Manage Your Net Worth

April 23rd, 2010 admin No comments

It is all well and good to start a plan for a solid financial future. We have all heard the sound advice. Buy shares, buy properties, land, precious metals, businesses, so long as you buy something worthwhile, your future financial stability is assured. But is it?

There are three factors that can significantly threaten your net worth, and wealth. These are easily identified by the acronym PIT:

1. Procrastination

2. Inflation and

3. Taxes

The first phase of any financial plan is accumulation. But how many of us put this off until the last minute? Procrastination is an interesting psychological behaviour that we all employ to varying degrees. We often know what we should be doing even though we may not have done it yet. Being aware of procrastination can become the beginning of doing something about it.

Truth be told, until you save, you cannot accumulate. The earlier you start planning, the sooner you will save, and the faster your assets will grow. Remember, it is not about getting it right, it is more about getting going.

When most successful people were asked what they would have done differently, their unanimous answer was, ?I wish I?d started sooner.? Do not be afraid of making ?mistakes?. Think of them as part of learning.

Find yourself a good wealth coach and start taking small steps. Save to invest a minimum of a tenth of your income, regardless. You do not need hundreds, or even thousands to start investing. I know many investments that you can start with as little as ?50 per month. Learn as you go and build your understanding and confidence gradually.

The next biggest threat to your financial future is inflation. Inflation is the fall in the market value of your money and is closely linked to the cost of living. Ten years from now, you will still have to purchase goods and services that will cost much more than they do today. Invariably, your pension plan (if you are lucky enough to have one then) that seems like so much today will most likely be a pittance then. You only have to look at how much our parents bought their homes for to realise what impact inflation can have.

The last, but by no means least threat to your financial future is the taxman. Learn to manage your relationship with him for he plans on becoming your financial partner for many years. What inflation does not wipe out, the taxman patiently will. In trying to avoid the taxman, be careful not to evade him. There is a marked difference between tax avoidance and tax evasion.

There are legal strategies and vehicles to avoid paying excessive taxes on your investments. A good tax advisor or accountant can help you with your plan.

In the UK, the greatest tax avoidance vehicle is the Individual Savings Account (ISA). With an ISA, you can save and/or invest up to ?7,000 each tax year, and not pay any tax whatsoever on the income Read more…

5 Key Advantages Of A Roth IRA

April 15th, 2010 admin No comments

1. No age limit on contributions. Assuming you have taxable income, you can continue to make contributions to a Roth IRA after you turn age 70 ?.

2. No required distributions. The Roth IRA does not require you to take distributions from the account at age 70 ?. You may leave the assets in the account for as long as you live, allowing the account to continue to grow and, if you wish, pass on a larger tax-free account to your heirs.

3. Tax diversification. The Roth account allows you to hedge against the possibility of higher tax rates in the future. Just as the Federal Government has lowered tax rates over the past several years, it?s conceivable they could raise them later on. After all, we do have a sizeable budget deficit.

4. Lower the tax on your Social Security benefits. Many retired people have income that is just below the level that would trigger a tax on their Social Security benefits. A Roth IRA may make it easier for you to stay below that level, because the withdrawals will not be included in taxable income.

5. Reduce estate taxes. If you plan to pass an IRA on to Read more…

How To Choose The Right Bank

April 12th, 2010 admin No comments

Financial institutions are located all around the world. If you are looking to open a bank account, whether that bank account is a checking account or a savings account, you have a number of banking options. In fact, you have so many options that choosing the right bank may seem like an overwhelming process. To make that process easier, you will need to know what to look for in a bank.

Location is the key to many. If you are interested in having easy access to a bank, you may want to consider doing business with a local bank or a national bank that has a local office in your area. These banks are ideal for those with checking accounts or debit cards. You may find that using an ATM machine, other than the one provided at your bank, results in extra fees. This is one of the many reasons why banking with a local institution is popular, because you will have easy access to your money.

When finding the perfect bank for you to do business with, it is also important to determine what you want and need from a bank. Whether you are interested in opening a savings account or a checking account, it is important to examine the fees that each bank will charge. If you are interested in opening a savings account for someone under the age of eighteen, you may find that you are able to receive a free account. Adults, on the other hand, are often required to pay a monthly fee or maintain a certain balance in their account.

If you are interested in opening a checking account, there are also a number of fees that you should be on the lookout for. It is possible to obtain a free checking account, but many of these accounts come with specific requirements. You are likely to come across a number of financial institutions that require you to have a set amount of money in your account at all times. It is also possible to find banks that grant you free checking as long as you have your paychecks directly deposited into your account.

There are a large number of banks that will allow you to carry a debit card. These debit cards Read more…

IRS And Private Debt Collectors

March 23rd, 2010 admin No comments

The terror of most Americans is to be hunted by the IRS for overdue taxes. Well, the terror has evolved a bit as the IRS is now using private debt collectors to do much of the work.

IRS and Private Debt Collectors

If you get behind on your taxes, you undoubtedly worry about the IRS hunting you down. Many people develop a false sense of security because nothing much seems to happen at first. There is no denying the IRS is a huge bureaucratic institution. It takes the agency a while to figure out you haven?t paid and get the collection ball rolling. At least, this used to be the case.

Regardless of your political affiliation, there is no denying that all politicians like to spend money. Of course, this means they need money. In 2004, our beloved leaders decided to speed up the collection process on delinquent taxpayers. In passing the American Jobs Act of 2004, the politicians gave the IRS the ability to hire third parties to collect the back taxes. Apparently, ?American Jobs Act? referred to keeping debt collectors employed!

As you might imagine, debt collectors used by the IRS failed to follow most of the rules when attempting to collect back taxes from delinquent payers. To be honest, they ran roughshod over nearly every right guaranteed to taxpayers often threatening liens, judgments and even jail terms. Objections started being raised and politicians started getting an earful. Despite passing the law, the politicians immediately blamed the IRS and instructed the agency to Read more…

Categories: Taxes Tags: , ,

Dealing With Scam Artist Pretending To Be IRS Debt Collectors

March 22nd, 2010 admin No comments

In 2004, the IRS was given the authority to use third party debt collectors to hunt down taxes owed by delinquent taxpayers. Scam artists knew an opportunity when they saw one.

Dealing with Scam Artist Pretending To Be IRS Debt Collectors

In an effort to track down delinquent taxpayers, the federal government gave the IRS the right to hire private debt collectors in 2004. You know, those annoying people that call during dinner. The reason for this change in policy actually made some sense. With as much information as the IRS is forced to deal with, it simply took forever for the IRS to start collection actions. By using the third parties, the IRS would be able to get the process moving without taking up employee time.

As you might imagine, the private tax debt collector program sounded like a good idea, but proved to be problematic. There were two primary problems. First, the legitimate debt collectors were threatening taxpayers. Second, scam artists started posing as debt collectors to collect money from na?ve tax collectors or perform identify theft on them. It is this second problem that we focus on here.

The central problem with the new debt collector program is how does a taxpayer know if they are dealing with a legitimate company or a scam artist trying to rip them off? Well, the IRS has instituted a new program in an effort to clarify matters. Here are the highlights:

1. If the IRS is going to use a private debt collector to come after you, the agency will first send Read more…

Categories: Taxes Tags: ,

Going Online- Why Accountants And CPAs Should Have Websites

March 22nd, 2010 admin No comments

The Tax Software Revolution

The most common service that accountants and CPAs provide to the public at large is tax preparation. That tradition has had a large hole blown in it by the arrival of software packages that allow individuals to prepare their own tax returns with an on-screen guide walking them through the process. The states and the federal government have cooperated by making online filing available and, furthermore, an attractive option because it will get you your tax refund quicker than a traditional paper filing.

Millions of Americans have opted for this method, and for many of them it’s a good choice. Large numbers of them did not use accounting services in the first place, as they had simple tax returns. However there is also a large class of people who are utilizing the yearly software option when perhaps they would do better with professional service. A good accountant can find tax breaks or prepare itemized lists that help your tax situation where you may not see the opportunity or may not be willing to dedicate the time to itemizing.

Why Professionals are Better than Software

The individuals that are caught between the “simple return” pool and the group of people who have to use professional help every year because of complicated personal financial situations are the group that accountants and CPAs need to recapture. The best way to convince someone that paying for professional services will save them money in the long run is to spell it out for them, and the best tool for that is the internet.

Large firms like H

Structured Sale Tax Issues

March 21st, 2010 admin No comments

Recently investors have begun to explore the concept of a “structured sale” as a way to defer taxes without the constraints of finding a replacement property. This article looks to see what structured sale tax issues may need to be considered with this new twist on owner financing and installment sales of real estate.

Many real estate investors have tried a 1031 exchange as a real estate repositioning, or real estate exit, strategy. But, they have often been frustrated because they can’t seem to find an appropriate replacement property. Recently, investors have been introduced to the concept of a “structured sale” as a 1031 alternative means to defer taxes without the replacement property issue. That’s great potential news for many investors. The question is: will the IRS share their enthusiasm? We will try to answer this question by looking at the concept of structured sale tax issues through the eyes of the IRS.

First, a structured sale, while a new term, is not necessarily a new concept. In its essence, it is a combination of two long-standing IRS codes: installment sales, and structured settlements.

Under an installment sale, a taxpayer has long been permitted by section 453 of the IRS code to arrange a sale of property so the proceeds are taxable as received across several years, without fear that the stream of payments will be accelerated and taxed in the year of sale.

The “structured settlement”, and indeed the whole Structured Settlement Industry, was created in the 1970’s because of Internal Revenue Service rulings. These rulings made it clear that periodic payments to claimants in personal physical injury cases were free of federal taxation as long as certain conditions were met. This IRS acknowledgment made the concept of using periodic payments to help injured parties and defendants resolve claims popular. Before this time, U.S. common law promoted lump sum payments to claimants.

Listed below are the structured sale tax issues that had to be overcome in trying to combine these two separate concepts into this new unified concept.

The first basic issue is by virtue of the “structured sale” technique the buyer cannot be released from liability in the transaction. In other words the IRS is saying that when the buyer “assigns” its payment obligation to a third party in the structured sale agreement, this assignment cannot alter or otherwise affect the terms of the buyer’s original obligation. The IRS will look to see that the sole effect of the assignment under suggested structured sale agreement is to impose a payment obligation on the third party that is in addition to, not in substitution for, the original payment obligation of the buyer under the agreement.

Next, the structured sale cannot be at odds with either the “constructive receipt” or the “economic benefit” doctrines.

In this context, constructive receipt and economic benefit can be simplified to mean that if the seller has access (of any similar rights) to the funds then they are taxable at that time. IRS Code Section 453 has very specific rules on this and as long as they are followed the taxpayer should have no problems. The question is: does adding the structured settlement feature of the assignment Read more…

Who Else Wants To Know What The IRS’s CP 2000 Notice Is?

March 21st, 2010 admin No comments

There are three types of IRS audits; correspondence, office and field.

Depending on which audit IRS selects for you can produce very different results. This article is about the IRS Correspondence (CP2000) Audit. If you have been notified about a field or office audit it would be best to look in the yellow pages for an Enrolled Agent if you don’t have a year round Tax professional.

If you have received a CP2000 in the mail, the first thing to do is breath deep, not to worry, prepare a cup of tea or coffee, sit down and READ the CP-2000. This form looks very intimidating, however, once you actually read the pages you will understand exactly what must be done. But WAIT.

It is our strong suggestion that you contact your Tax Professional. The reason is simple. A CP2000 is a Correspondence Audit. This is when IRS request that you mail information or documents instead of meeting with you. This method of auditing is used to verify such things as real estate sales, itemized deductions and other information concerning deductions. It may have been a small error in the preparation of the taxes that resulted in a big adjustment or it may be a mistake on IRS’s part concerning your deductions and or dependents.

If IRS is Read more…

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IRS Sets Telephone Tax Refund Amounts

March 21st, 2010 admin No comments

In a recent decision, a federal court overturned a telephone tax that has been charged for years. Given the result, the IRS has decided to issue refunds for past collected taxes.

IRS Sets Telephone Tax Refund Amounts

In 1898, the federal government passed a law assessing taxes on long distance phone use in the United States. The tax was so relatively small, ranging from one to three percent, that it was never questioned. Last year, that changed. The tax was challenged in court and found to be invalid. After a few challenges, the IRS agreed to stop collecting the tax. It even went so far as to agree to issue refunds on some of the taxes collected.

Given the fact the 1898 law covers just a bit of time, the issue of telephone tax refunds is potentially a complicated one. Simply put, how do you figure out how much tax you have paid on phone bills for this specific assessment through the years? At one to three percent, it certain is not much. Further, how do you prove the tax payments if you are audited? Anyone have phone bills from 1898? Probably not. In truth, the refund amount only looks back 41 months, but you get the idea.

To overcome these issues, the IRS is proposing a flat rate refund for taxpayers. The refund amounts are proposed to be $30 to $60 depending on specifics. More importantly, taxpayers will not be required to dig through old phone bills to substantiate the deduction. To claim the tax refund, you will need to fill in a yet undeclared area on your 2006 tax return. Just to be clear, Read more…

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IRS Fast Track Settlement Program For Businesses

March 21st, 2010 admin No comments

The tax code is insanely complex. If you are a business having a dispute with the IRS, the fast track settlement program may present you with an option for resolving it quickly.

IRS Fast Track Settlement Program For Businesses

Whether an audit or general dispute, dueling with the IRS is expensive and no fun. The expense often arises not from the dispute itself, but from the length of time it takes to resolve it. Simply put, the IRS tends to move slowly when dealing with these issues. For businesses, this means the dispute hangs over you for years with all the accompanying stress and professional expenses you would expect.

The IRS has made an attempt to address this issue through the Fast Track Settlement program. Fast Track is an alternative dispute resolution service approved and arranged by the IRS. The goal of the program is to provide resolutions to issues through a dispute administrator while cutting out the bureaucracy of the agency. From the IRS side of the equation, Fast Track represents a quicker and more efficient method for dealing with disputes, a necessity given budget cutbacks.

The Large and Mid-Sized Business Management and Office of Appeals divisions of the IRS manage the Fast Track program jointly. The program is available for businesses in a dispute with the business management division. It is designed to take place and reach a resolution in 120 days, a very fast pace for Read more…

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