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Wednesday, December 11, 2013

Year End Tax Tips

·        Review your portfolio.  Consider taking a loss if you have substantial capital gains. 

·        Review tax refunds.  Are you loaning your money to the government tax free?

·        If you owe state income taxes, consider contributing to a 529 College Savings Plan for your grandchildren.  NY allows a deduction up to $5,000 (or $10,000 for married filing joint filers) for contributions made by an account owner to an account belonging to NY’s 529 plan.

·        Plan your itemized deductions.  If you are on the border for itemizing deductions focus on bundling.  Time deductible expenses to produce lean and fat years.  The goal is to surpass the standard deduction amount. Standard deduction rates for 2013 are $12,200 for married taxpayers filing joint and $6,100 for single taxpayers.  The additional standard deduction amount for the aged or blind is $1,200.   

Monday, September 9, 2013

Internet Sales Tax

In May 2013, the US Senate passed the Marketplace Fairness Act which would require online retailers to collect sales tax for the states to which they ship goods.  The act has to be passed by the House before it becomes law.   The discussion is quite heated.  When it will be passed or if it will be passed is difficult to call.

The issues…
As online commerce grew, shoppers often did not pay sales tax.  Online retailers were required to collect taxes only in those states where they had a physical presence: a retail store, a distribution center (brick & mortar).  It wasn't that sales tax wasn't due, but that it was too complicated to collect. States, counties, and other municipalities have varying rates and tax different items.  Keeping track of all the tax details was considered a burden for businesses. Most states require shoppers to keep track of online purchases and report and pay sales tax through their state income tax filings. Many taxpayers are either not aware of this requirement or choose to ignore it.  Online commerce has grown exponentially.  Uncollected sales tax is estimated to be in the tens of billions of dollars; revenue sorely needed by the states.

Wednesday, July 24, 2013

Supreme Court Ruling on DOMA


Back in 2011, when New York passed the Marriage Equality Act, we discussed the issues particularly as they related to the Federal law, Defense of Marriage Act (DOMA).   For Federal purposes, DOMA defined marriage as between a man and a woman and allowed states which do not allow same sex marriage to not recognize same sex marriages performed in other states.  On June 26, 2013, the Supreme Court decided that much of DOMA is unconstitutional, since same sex married couples were not being treated equally under the law. Specifically, Section 3 of DOMA, which allowed the Federal government to deny benefits to same sex couples, was invalidated.  However, Section 2, which allows states to decide who may marry and which marriages to recognize, is still law.
This means that same sex couples married in New York and living in New York can expect the same rights as heterosexual married couples.  However, some issues remain murky, particularly for those same sex couples married in one state and now living in a state that does not recognize same sex marriage.  Benefit eligibility is often governed by the state in which a couple lives as opposed to the state in which the couple was married.

Tuesday, July 9, 2013

Nearing Retirement

If you are hoping to retire in two to five years, what should you be doing now to make it happen?  As in all things financial, you must have a plan.  In retirement, especially in the later years, there is little you can do to increase income.  Additionally, there are significant expenses over which you’ll have little control (medical costs).  An assessment now will help toward understanding if you will be financially prepared for retirement.

Wednesday, June 5, 2013

The Marriage Penalty

June is wedding month.  When planning to marry, the happy couple has many things to consider.  Very likely, not on that list are the tax implications of their new tax status “married filing jointly”.  But perhaps they have heard of the “Marriage Penalty” as regards taxes.  Certainly, the decision to marry should not be based on US tax law.  But knowledge of the consequences is important for planning.

What is the Marriage Penalty?  The marriage penalty refers to higher taxes levied when a couple is married then the total of the taxes they would have paid as individuals.  In fact, filing a joint tax return can have a negative effect, penalty, or a positive effect, bonus, depending on the income and deductions for the individuals getting married.  Generally, lower and middle income individuals do not get hit with the penalty.  Higher income couples usually will pay more taxes filing jointly then if they remained single and filed individually. This occurs because the tax code is progressive, with marginal tax rates rising as income rises and because the tax brackets for married are less than twice the span of the brackets for single filers.   For 2013, the rates go up to 39.6%.  Remember the marginal rate applies to the income within the bracket. A married couple must file “married filing jointly” or “married filing separately”.  Married filing separately has the highest tax; the brackets are narrower than single status.