| Plan | Limit |
| 401(k) | $15,500 (up $500) $20,500 if born before 1958 |
| SIMPLE plans | $10,500 (up $500) $13,000 if born before 1958 |
| Keoghs, profit sharing | $45,000 (up $1,000) |
Monday, October 23, 2006
Retirement Contribution Limits for 2007 Announced
The IRS has issued the latest limits on retirement plan contributions for 2007. While past years increased because of changes in the law, the 2007 increases are due to inflation adjustments.
Friday, October 20, 2006
Another Tax Scam Sniped
Folks, we'd love to tell you you've got a $12 million refund coming to you. But when you hear things like that about your tax situation, take them with a
Snipes bought into a scam that claimed only income earned outside of the United States is taxable under the Internal Revenue Code. Obviously, the scam and its purveyors were full of, well, hot air (this is a family-friendly blog!)
Snipes and his (former) CPA have been indicted on eight counts of tax evasion. With his current career status, I'm just trying to figure out how many decades it will take him to pay back the $12 million.
New Installment Payment System from the IRS
The IRS announced that they have a new, easier system for arranging payments on delinquent taxes. Taxpayers can now go online and arrange for a free 120 day extension of time to pay (interest and penalties will still apply), or for $43, can request to pay their balance on a monthly payment plan (again, with interest and penalties).
While this simplifies the process of applying for an installment payment arrangement, the fact remains that the IRS is not a low-cost lender. Between the interest and late payment penalties, you're going to pay over 13% finance charges. The best bet is always to pay the Service as quickly as you can, and let us help you avoid situations where you would have a delinquent balance in the first place.
Bottom line is, paying the IRS late is bad...almost as bad as paying your CPA late!
While this simplifies the process of applying for an installment payment arrangement, the fact remains that the IRS is not a low-cost lender. Between the interest and late payment penalties, you're going to pay over 13% finance charges. The best bet is always to pay the Service as quickly as you can, and let us help you avoid situations where you would have a delinquent balance in the first place.
Bottom line is, paying the IRS late is bad...almost as bad as paying your CPA late!
Tuesday, September 26, 2006
Check Your Credit for Free
AnnualCreditReport.com
Thinking about applying for a loan or refinancing your house? Make sure you know what the bank will see before you go. Federal legislation requires Experian, Equifax and TransUnion to allow you to get a free copy of your credit report each year.
The site is sponsored by the three companies, easy to use, and will give you your information without subjecting you to a hard sell for some kind of credit monitoring service. (You know the kind--"you can cancel in the next 30 days, but it's $40 if you don't"!)
You're eligible for a report from each agency each year, which means you can receive three free reports. If you want the FICO score, which many mortgage lenders use to evaluate you, it's a small charge.
Thinking about applying for a loan or refinancing your house? Make sure you know what the bank will see before you go. Federal legislation requires Experian, Equifax and TransUnion to allow you to get a free copy of your credit report each year.
The site is sponsored by the three companies, easy to use, and will give you your information without subjecting you to a hard sell for some kind of credit monitoring service. (You know the kind--"you can cancel in the next 30 days, but it's $40 if you don't"!)
You're eligible for a report from each agency each year, which means you can receive three free reports. If you want the FICO score, which many mortgage lenders use to evaluate you, it's a small charge.
Friday, September 01, 2006
Refunds for Everyone!
That's right, everybody's getting a refund! And they could be as much as ... (drum roll) ... sixty dollars!
Okay, maybe that's not much to get excited about.
The federal government has had its hand slapped in court over collecting a tax on telephone service since 1898. The courts decided that the Treasury Department should not have been collecting this tax on long distance service, just on local service. As a result, the IRS will refund $13 billion of the collected tax to taxpayers.
The refund will be claimed on your 2006 tax return, where it will be treated as a payment towards your tax bill. Individuals will receive a refund ranging between $20 and $60, based on the number of exemptions they claim on the return.
Businesses will also receive a refund, but right now, the IRS says businesses must prove the amount of tax paid based on phone bills since 2003. It's likely that they will come up with a method of estimating this amount instead, so you business owners don't need to go digging through your old invoices just yet.
Okay, maybe that's not much to get excited about.
The federal government has had its hand slapped in court over collecting a tax on telephone service since 1898. The courts decided that the Treasury Department should not have been collecting this tax on long distance service, just on local service. As a result, the IRS will refund $13 billion of the collected tax to taxpayers.
The refund will be claimed on your 2006 tax return, where it will be treated as a payment towards your tax bill. Individuals will receive a refund ranging between $20 and $60, based on the number of exemptions they claim on the return.
Businesses will also receive a refund, but right now, the IRS says businesses must prove the amount of tax paid based on phone bills since 2003. It's likely that they will come up with a method of estimating this amount instead, so you business owners don't need to go digging through your old invoices just yet.
Wednesday, August 16, 2006
No Receipt? No Contribution!
Contribution documentation will be tightened down in 2007 under the new tax bill passed by congress. To claim a deduction, a donor will be required to have a canceled check, bank record or receipt listing the name of the charity, the date and the amount of the contribution.
Current rules require a receipt from the donor only for contributions exceeding $250. Contributions for less than that amount have been documented in some instances by taxpayers keeping logs of their contributions. That's not going to cut it under the new rules.
Current rules require a receipt from the donor only for contributions exceeding $250. Contributions for less than that amount have been documented in some instances by taxpayers keeping logs of their contributions. That's not going to cut it under the new rules.
Thursday, June 15, 2006
Low Capital Gains Rates Extended
Taxes on capital gains and dividends have been locked in at their current low rates in the recent tax bill, at least for another two years.
Capital gains on assets held more than one year and dividends received from qualified corporations have been taxed at a maximum rate of 15% since the 2003 tax bill was passed. However, these rates always had an expiration date of 2008. With the recent changes, the rates are good through 2010.
One other interesting provision of the 2003 capital gains rate changes that will soon take effect: a 0% rate on low-income individuals. Between 2008 and 2010, these individuals will be allowed a certain amount of capital gain with no tax whatsoever! A planning opportunity may exist here...giving appreciated assets to your children (18 or over), who may have low enough income to take advantage of the 0% rate.
Capital gains on assets held more than one year and dividends received from qualified corporations have been taxed at a maximum rate of 15% since the 2003 tax bill was passed. However, these rates always had an expiration date of 2008. With the recent changes, the rates are good through 2010.
One other interesting provision of the 2003 capital gains rate changes that will soon take effect: a 0% rate on low-income individuals. Between 2008 and 2010, these individuals will be allowed a certain amount of capital gain with no tax whatsoever! A planning opportunity may exist here...giving appreciated assets to your children (18 or over), who may have low enough income to take advantage of the 0% rate.
Tuesday, June 13, 2006
Kiddie Taxes Increased in New Tax Bill
The 'Kiddie Tax', which taxes children's unearned income over $1,700 at the parents' rate, has been extended to apply to children up to the age of 18. Until 2006, the additional tax only applied through the age of 14.
One consideration of this new law will be educational savings accounts. Custodial accounts (such as UTMA accounts) typically have the child named as the owner, and may result in income being subject to the Kiddie Tax. However, other college savings vehicles such as Section 529 plans are sheltered from current taxation, and may be a better option.
This is one of the provisions of the new tax bill signed in May. We'll provide more details on other facets of the bill over the next few weeks.
One consideration of this new law will be educational savings accounts. Custodial accounts (such as UTMA accounts) typically have the child named as the owner, and may result in income being subject to the Kiddie Tax. However, other college savings vehicles such as Section 529 plans are sheltered from current taxation, and may be a better option.
This is one of the provisions of the new tax bill signed in May. We'll provide more details on other facets of the bill over the next few weeks.
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