1. IRA or Pension Plan Conversion to Roth IRA- in 2010 everyone is allowed to convert their IRA’s and pension plans to Roth IRA’s. For 2010 conversions you can choose to pay the tax 50 % on 2011 and 50 % on 2012 tax returns. If for some reason you decide you don’t want to do the conversion you can change your mind and put the investments back into your traditional IRA or 401(k) if you do it by October 15, 2011.
2. Charitable Contributions- If you are planning to donate to your favorite charity, do it by year end. If you do a Roth IRA conversion, think of offsetting the extra income with a charitable contribution. And don’t forget to clean out your closets for Goodwill- but keep a detailed list and proof like photos that the items were in good or better condition.
3. Nonbusiness Energy Property Credit- This 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. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass, energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs all qualify, along with labor costs for installing certain items.
4. American Opportunity Credit Helps Pay for First Four Years of College- More parents and students can use a federal education credit to offset part of the cost of college under the American Opportunity Credit. This credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Income guidelines are expanded and required course materials are added to the list of qualified expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
5. Residential Energy Efficient Property Credit- This nonrefundable energy tax credit will help individuals pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. Changes to the law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.
Tuesday, December 21, 2010
Thursday, November 18, 2010
5 Things To Do Before Year End To Reduce Taxes
1. Purchase equipment for your business- You can take a deduction of 50% of the cost of furniture, fixtures & equipment purchased & placed in service in your business before 12/31/10. This provision may disappear next year!
2. Start a Business- If you don’t have a business- start one! Even if you have a W-2 job, you can have a business on the side. It must be a valid business that you spend time on. Then you can deduct expenses related to that activity to offset wage income. See article below for more information.
3. Charitable Donations- Yes, the age old idea of cleaning out your closets and donating to Goodwill before the end of the year. But now you must be able to prove the items were in “good” condition. Take pictures, keep detailed lists and get receipts.
4. Incorporate Your Business- If you are going to receive a lot of income before the end of the year think of incorporating and transferring the income to either a C corporation or an S corporation. Both have ways to save you taxes. Call us for help.
5. Pay Both Installments of Your Property Taxes In December- Remember the only way this will help is if your income is going to be lower next year than this year. If you have high income this year due to bonuses or commissions, pay all of the property tax and take the deduction on 2010.
2. Start a Business- If you don’t have a business- start one! Even if you have a W-2 job, you can have a business on the side. It must be a valid business that you spend time on. Then you can deduct expenses related to that activity to offset wage income. See article below for more information.
3. Charitable Donations- Yes, the age old idea of cleaning out your closets and donating to Goodwill before the end of the year. But now you must be able to prove the items were in “good” condition. Take pictures, keep detailed lists and get receipts.
4. Incorporate Your Business- If you are going to receive a lot of income before the end of the year think of incorporating and transferring the income to either a C corporation or an S corporation. Both have ways to save you taxes. Call us for help.
5. Pay Both Installments of Your Property Taxes In December- Remember the only way this will help is if your income is going to be lower next year than this year. If you have high income this year due to bonuses or commissions, pay all of the property tax and take the deduction on 2010.
Tuesday, November 2, 2010
I Paid My Taxes But The IRS Says I Didn’t!
Sometimes people pay their taxes on time but the IRS says they didn’t. This is a result of the IRS not “posting” the payments correctly on their computer. You should always write on your checks your name(s) as they appear on your tax return, Social Security number(s), form you are paying for, i.e. “1040” if paying with your return or “1040ES” if making estimated tax payments, and the year you are paying for, i.e. “2009” if paying with your 2009 return or “2010” if making estimated tax payments with the 2010 voucher. That’s probably the biggest error in posting that occurs- the payment is applied to the wrong year.
So if you receive a notice from the IRS saying you owe taxes that you think you paid here’s what you do:
Call the IRS right away and tell them. Get the cancelled checks showing all of your payments. Make copies of the front and back of each check. Then send them to the IRS with a letter explaining what happened.
So if you receive a notice from the IRS saying you owe taxes that you think you paid here’s what you do:
Call the IRS right away and tell them. Get the cancelled checks showing all of your payments. Make copies of the front and back of each check. Then send them to the IRS with a letter explaining what happened.
Friday, October 15, 2010
What Is Incapacity? And What To Do If Your Parent Has It?
As our loved ones get older they may start to lose some of their mental capacity. When is forgetfulness just “senior moments” and when does it become dementia? How do you know if your parents are suffering from a dangerous debilitating disease like Alzheimer’s? You may not know for sure unless you have them tested. However, doctors, in general, do minimal cursory tests that may not give you enough information to make important decisions for the care and safety of your parent. These are hard questions.
One way to protect your parent is to make sure they have a durable power of attorney for asset management and an advance health care directive signed and notarized before they become incapacitated. When you use documents like these the definition of incapacity can be written in to the document. Like many legal provisions you can alter the standard legal definition by writing your own definition in your document.
The legal definition of incapacity provided by the California Probate Code provides:
A person is of unsound mind or lacks the capacity to make a decision or do a certain act when there is a deficit in at least one of the following mental functions and the deficit significantly impairs the person's ability to understand and appreciate the consequences of his or her actions with regard to the act or decision in question:
(1) Alertness and attention:
(A) Level of arousal or consciousness.
(B) Orientation to time, place, person, and situation.
(C) Ability to attend and concentrate.
(2) Information processing:
(A) Short- and long-term memory, immediate recall.
(B) Ability to understand or communicate with others, either verbally or otherwise.
(C) Recognition of familiar objects and familiar persons.
(D) Ability to understand and appreciate quantities.
(E) Ability to reason using abstract concepts.
(F) Ability to plan, organize, and carry out actions in one's own rational self-interest.
(G) Ability to reason logically.
(3) Thought processes:
(A) Severely disorganized thinking.
(B) Hallucinations.
(C) Delusions.
(D) Uncontrollable, repetitive, or intrusive thoughts.
(4) Ability to modulate mood and affect: a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual's circumstances.
These are the areas of cognizance that are tested to determine if a person is legally incapacitated, such as when a conservatorship is in question. You can write in your parent’s power of attorney that they are considered incapacitated if you get a letter from 2 doctors saying so. This makes it much easier to take control of your parent’s financial affairs when it becomes necessary. For more information please contact us Law Offices of Patricia Rowe (925) 256-1000.
One way to protect your parent is to make sure they have a durable power of attorney for asset management and an advance health care directive signed and notarized before they become incapacitated. When you use documents like these the definition of incapacity can be written in to the document. Like many legal provisions you can alter the standard legal definition by writing your own definition in your document.
The legal definition of incapacity provided by the California Probate Code provides:
A person is of unsound mind or lacks the capacity to make a decision or do a certain act when there is a deficit in at least one of the following mental functions and the deficit significantly impairs the person's ability to understand and appreciate the consequences of his or her actions with regard to the act or decision in question:
(1) Alertness and attention:
(A) Level of arousal or consciousness.
(B) Orientation to time, place, person, and situation.
(C) Ability to attend and concentrate.
(2) Information processing:
(A) Short- and long-term memory, immediate recall.
(B) Ability to understand or communicate with others, either verbally or otherwise.
(C) Recognition of familiar objects and familiar persons.
(D) Ability to understand and appreciate quantities.
(E) Ability to reason using abstract concepts.
(F) Ability to plan, organize, and carry out actions in one's own rational self-interest.
(G) Ability to reason logically.
(3) Thought processes:
(A) Severely disorganized thinking.
(B) Hallucinations.
(C) Delusions.
(D) Uncontrollable, repetitive, or intrusive thoughts.
(4) Ability to modulate mood and affect: a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual's circumstances.
These are the areas of cognizance that are tested to determine if a person is legally incapacitated, such as when a conservatorship is in question. You can write in your parent’s power of attorney that they are considered incapacitated if you get a letter from 2 doctors saying so. This makes it much easier to take control of your parent’s financial affairs when it becomes necessary. For more information please contact us Law Offices of Patricia Rowe (925) 256-1000.
Monday, October 4, 2010
6 Things To Do If You Get Audited By The IRS
1. Don't panic- if you get a letter from the IRS or California Franchise Tax Board- it may not be an audit- it may be something specific they're asking for that can easily be provided to settle the issue quickly. Call us, send us the letter and we'll let you know.
2. Figure out what they want- sometimes it's just some of your tax payments that have been misposted on their computer- if you didn't write your Social Security number, the year and the form number, i.e. "1040" on your check then your payments may have been recorded incorrectly. (See next page for solutions)
3. Get help- Sometimes the issues can be resolved with a letter. Sometimes it calls for a field audit (at your place of business) or an office audit (the IRS office). In any case you don't have to talk to the IRS by yourself. Actually you don't have to talk to them at all. You can get someone to represent you. Then the IRS must talk to your representative. Our clients never talk to the IRS. As with any adverse legal proceeding- you might say something that can be used against you. For a client who admitted to the IRS, before coming to us, that he shouldn't have deducted travel expense to his job, we presented evidence that he was on a temporary assignment and therefore, could deduct it.
4. Gather your records- Look at the notice and see what year it's for. Then get your records that you used to prepare that year's tax returns. Work with us or another tax professional to determine exactly what information you will give the IRS and how it will be presented. Start early in case you have to request copies of bank or investment account statements.
5. Don't Ignore the IRS- It is never a good idea to ignore the IRS or other taxing authority. You or your representative should contact them as soon as possible and notify them that you are gathering your information. Usually you will be able to get a "hold on collection efforts" while you obtain your records and prepare your response. Again- it's better to have a tax professional contact them for you.
6. Present As Much Information As You Can- Even ifyou're missing some of your records present what you have to the auditor. Oftentimes he or she will let it slide that you are missing some of your documentation, especially if it appears that you have the majority of your records to support your deductions.
2. Figure out what they want- sometimes it's just some of your tax payments that have been misposted on their computer- if you didn't write your Social Security number, the year and the form number, i.e. "1040" on your check then your payments may have been recorded incorrectly. (See next page for solutions)
3. Get help- Sometimes the issues can be resolved with a letter. Sometimes it calls for a field audit (at your place of business) or an office audit (the IRS office). In any case you don't have to talk to the IRS by yourself. Actually you don't have to talk to them at all. You can get someone to represent you. Then the IRS must talk to your representative. Our clients never talk to the IRS. As with any adverse legal proceeding- you might say something that can be used against you. For a client who admitted to the IRS, before coming to us, that he shouldn't have deducted travel expense to his job, we presented evidence that he was on a temporary assignment and therefore, could deduct it.
4. Gather your records- Look at the notice and see what year it's for. Then get your records that you used to prepare that year's tax returns. Work with us or another tax professional to determine exactly what information you will give the IRS and how it will be presented. Start early in case you have to request copies of bank or investment account statements.
5. Don't Ignore the IRS- It is never a good idea to ignore the IRS or other taxing authority. You or your representative should contact them as soon as possible and notify them that you are gathering your information. Usually you will be able to get a "hold on collection efforts" while you obtain your records and prepare your response. Again- it's better to have a tax professional contact them for you.
6. Present As Much Information As You Can- Even ifyou're missing some of your records present what you have to the auditor. Oftentimes he or she will let it slide that you are missing some of your documentation, especially if it appears that you have the majority of your records to support your deductions.
Wednesday, November 25, 2009
What Is A Durable Power of Attorney For?
A durable power of attorney is used to give another person certain legal powers to manage your assets. It can give someone all powers to do everything you could do if you were able or it can give limited powers. Oftentimes we use a general power of attorney that gives someone complete power over our assets but it does not become effective until and unless we become incapacitated. This kind of power of attorney is part of your complete estate plan. See article below for definition of “incapacity.”
Even if you have a trust you will need a power of attorney to give someone control over basic things such as, changing your mailing address, transferring money from accounts that are not in your trust, talking to an institution regarding your affairs, like, the IRS, Social Security Administration, Veteran’s Administration, life insurance company, pension plan administrator, etc. Because of the privacy laws, if you don’t have the power of attorney for someone, like your parents, none of these institutions will divulge any information to you. Even your parents’ doctors cannot give you any information unless you have this document. This power is not always included in a medical power of attorney or “advance health care directive.”
Many times we see an elderly person, whose son or daughter helps with paying their bills and checking their bank balances. The son or daughter can do this because they sign on the bank account. But if they need to help with anything else not in the bank account they can’t. Many times the parent gets dementia or Alzheimer’s, becomes incapacitated and then it’s too late to have them sign a power of attorney form. At this point the child will have to go through the probate court process of getting a conservatorship for their parent, which takes many months and costs anywhere from $ 3,000 to $ 6,000. Again, with a little planning you can avoid this by getting a durable power of attorney now before your parent becomes incapacitated.
Even if you have a trust you will need a power of attorney to give someone control over basic things such as, changing your mailing address, transferring money from accounts that are not in your trust, talking to an institution regarding your affairs, like, the IRS, Social Security Administration, Veteran’s Administration, life insurance company, pension plan administrator, etc. Because of the privacy laws, if you don’t have the power of attorney for someone, like your parents, none of these institutions will divulge any information to you. Even your parents’ doctors cannot give you any information unless you have this document. This power is not always included in a medical power of attorney or “advance health care directive.”
Many times we see an elderly person, whose son or daughter helps with paying their bills and checking their bank balances. The son or daughter can do this because they sign on the bank account. But if they need to help with anything else not in the bank account they can’t. Many times the parent gets dementia or Alzheimer’s, becomes incapacitated and then it’s too late to have them sign a power of attorney form. At this point the child will have to go through the probate court process of getting a conservatorship for their parent, which takes many months and costs anywhere from $ 3,000 to $ 6,000. Again, with a little planning you can avoid this by getting a durable power of attorney now before your parent becomes incapacitated.
Monday, November 2, 2009
What Is a Durable Power of Attorney?
What Is a Durable Power of Attorney and How Does It Work?
A Durable Power of Attorney is a legal document giving certain powers to another person to act as your attorney in fact or as your agent with regards to your assets. That is, it enables the person you appoint to make decisions about your assets and liabilities and to sign documents, contracts, agreements, leases, etc. for you. The power of attorney is used like a trust, except you’re not dead. So when does it take effect and for how long does it last?
What Is a Durable Power of Attorney and How Does It Work?
A Durable Power of Attorney is a legal document giving certain powers to another person to act as your attorney in fact or as your agent with regards to your assets. That is, it enables the person you appoint to make decisions about your assets and liabilities and to sign documents, contracts, agreements, leases, etc. for you. The power of attorney is used like a trust, except you’re not dead. So when does it take effect and for how long does it last?
When does it take effect?
It takes effect and it ends when you say it does. You define the time limits and other terms in the document. Usually we use these powers of attorney for asset management to protect the family in case the creator (you) becomes disabled or incapacitated. That means you are not able to take care of your financial affairs. It can also mean that the creator, perhaps your parent, is not able to resist “undue influence.”
This can happen when an elderly person can’t say “No” when someone asks them for money. Or a caregiver or someone else may find out that your parent has some savings and uses their position as a friend to influence your parent to give them money. This is financial elder abuse. It happens more often than we want to admit. The scary part is that the county agencies in California that were helping to protect seniors against elder abuse have all been cut back and have let go most of their staff.
You may also use a power of attorney if you just don’t want to handle your affairs and want to appoint someone else to do it. The document usually includes terms providing that you will get your powers back if you regain capacity. So if you are temporarily ill and someone has to pay your bills for you, you will take back your powers when you recover.
Sometimes you want the power of attorney to take effect immediately even if you’re not a senior or disabled, such as, when you travel out of the country a lot. One of our clients who travels to South East Asia on a regular basis gave a power of attorney to her brother with whom she owns rental property. That way if anything happens while she’s gone her brother can handle it and sign any necessary documents to maintain the property.
What is Incapacity?
The document includes a definition of incapacity which you can tailor to your own needs. The standard definition is:
(1) The person is unable to provide properly for that person's own needs for physical health, food, clothing, or shelter; to manage substantially that person's own financial resources; or to resist fraud or undue influence.
(2) A medical doctor or psychiatrist, not related by blood or marriage to any trustee or beneficiary, examines the person and declares under penalty of perjury that the person is temporarily or permanently incapacitated, according to medical definitions.
(3) The person already has a conservator who has been appointed by the court.
(4) The court makes a finding that the person is either temporarily or permanently disabled.
However, you can define it any way you want by removing any of these items or adding some of your own.
When Does It End?
The power of attorney can end on a specified date, when the person regains capacity or under any other circumstance you describe in the document. Estate planning documents are to protect you and your family. So you decide what you want to include.
For more information call the Law Offices of Patricia Rowe at 925-256-1000 or go to our website at www.PatriciaRowe.com and sign up for our monthly newsletter. Or you can ask questions here in the comment section or email your questions to prowe@patriciarowe.com.
A Durable Power of Attorney is a legal document giving certain powers to another person to act as your attorney in fact or as your agent with regards to your assets. That is, it enables the person you appoint to make decisions about your assets and liabilities and to sign documents, contracts, agreements, leases, etc. for you. The power of attorney is used like a trust, except you’re not dead. So when does it take effect and for how long does it last?
What Is a Durable Power of Attorney and How Does It Work?
A Durable Power of Attorney is a legal document giving certain powers to another person to act as your attorney in fact or as your agent with regards to your assets. That is, it enables the person you appoint to make decisions about your assets and liabilities and to sign documents, contracts, agreements, leases, etc. for you. The power of attorney is used like a trust, except you’re not dead. So when does it take effect and for how long does it last?
When does it take effect?
It takes effect and it ends when you say it does. You define the time limits and other terms in the document. Usually we use these powers of attorney for asset management to protect the family in case the creator (you) becomes disabled or incapacitated. That means you are not able to take care of your financial affairs. It can also mean that the creator, perhaps your parent, is not able to resist “undue influence.”
This can happen when an elderly person can’t say “No” when someone asks them for money. Or a caregiver or someone else may find out that your parent has some savings and uses their position as a friend to influence your parent to give them money. This is financial elder abuse. It happens more often than we want to admit. The scary part is that the county agencies in California that were helping to protect seniors against elder abuse have all been cut back and have let go most of their staff.
You may also use a power of attorney if you just don’t want to handle your affairs and want to appoint someone else to do it. The document usually includes terms providing that you will get your powers back if you regain capacity. So if you are temporarily ill and someone has to pay your bills for you, you will take back your powers when you recover.
Sometimes you want the power of attorney to take effect immediately even if you’re not a senior or disabled, such as, when you travel out of the country a lot. One of our clients who travels to South East Asia on a regular basis gave a power of attorney to her brother with whom she owns rental property. That way if anything happens while she’s gone her brother can handle it and sign any necessary documents to maintain the property.
What is Incapacity?
The document includes a definition of incapacity which you can tailor to your own needs. The standard definition is:
(1) The person is unable to provide properly for that person's own needs for physical health, food, clothing, or shelter; to manage substantially that person's own financial resources; or to resist fraud or undue influence.
(2) A medical doctor or psychiatrist, not related by blood or marriage to any trustee or beneficiary, examines the person and declares under penalty of perjury that the person is temporarily or permanently incapacitated, according to medical definitions.
(3) The person already has a conservator who has been appointed by the court.
(4) The court makes a finding that the person is either temporarily or permanently disabled.
However, you can define it any way you want by removing any of these items or adding some of your own.
When Does It End?
The power of attorney can end on a specified date, when the person regains capacity or under any other circumstance you describe in the document. Estate planning documents are to protect you and your family. So you decide what you want to include.
For more information call the Law Offices of Patricia Rowe at 925-256-1000 or go to our website at www.PatriciaRowe.com and sign up for our monthly newsletter. Or you can ask questions here in the comment section or email your questions to prowe@patriciarowe.com.
Subscribe to:
Posts (Atom)
