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Rental Income: Here Is The Bad News

Attention owners of rental homes and properties . . . You aren’t going to like one of the tax changes that appears to be on the horizon for 2011 as part of the revenue offset of the recent Small Business Jobs and Credit Act of 2010. The legislation would require an IRS Form 1099 for rental property expense payments.  The provision would subject all recipients of rental income from real estate to the 1099 reporting requirement, with the exception for taxpayers that rent their principal residence on a temporary basis, receive minimal amount of rental income, or would experience a hardship under this provision.  This provision would give the Department of Treasury the authority to determine what constitutes a “minimal amount” of rental income and what constitutes a “hardship.”  According to JCT, this provision would increase revenue by $2.546 billion over 10 years.  (source:  www.gop.gov/bill/111/2/hr5297senateamendment) In simple terms, the bill makes recipients of rental income fall underneath the same information ...

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Major Tax Change To Life Insurance And Annuities

As people in their 40’s, 50’s, and 60’s, consider their overall retirement plan, a recent tax change may affect the way they think about their retirement strategy.   It may also affect other decisions about managing the risk of needed long term care down the road.   This is one change for the positive that you absolutely will want to pay attention to for your retirement, risk management, and overall financial plan. According to Jessie Stone of the American Association Of Long Term Care, the approved changes to the Pension Protection Act included some key provisions that took effect January 1, 2010. The changes provide significant enhancements to nonqualified annuities that are coupled with tax-qualified long-term care riders. Starting with the New Year, benefits paid out of these plans are received income tax-free when used for long term care. This is unprecedented, and is expected to make long-term care planning highly attractive for an increased number of individuals. Prior to the new ...

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Is it smart to get tax refund?

Around tax time, we often hear the question, “Is it smart to get a tax refund?”  The answer really falls into the ‘it depends’ category. In general, I am not a big fan of getting refunds.  Anytime in today’s world that you give the Government an interest free loan of your money for a year is probably not a good idea.  When you get a refund, you withheld too much money out of your paycheck over the course of the year.  When your actual tax calculation is done at year end, you will receive the excess withholding back in the form of a refund.   This means that you should really sit with your accountant, CPA, or financial advisor and adjust that withholding number for the current tax year.   If you are going to put more money back into your paycheck, make sure you have those dollars systematically saved into some type of savings or investment vehicle so you don’t spend ...

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What Tax Deductions Could Go Away In The Future?

All of us know that the United States is in a massive federal deficit. Most pundits on television are letting us know that taxes in some way, shape, or form will have to up. That seems reasonable. Any business that is losing money will eventually have to cut expenses, and figure out how to generate more revenue. We couldn’t cut expenses near enough to solve our problem, so the certainty of some form of increased taxation is an inevitability we will face in the future in my opinion. The one thing that I don’t hear much talk about is that increasing taxes isn’t the only way to generate additional revenue, but you could certainly choose to reduce overall tax deductions that we take today as another source for increasing additional revenue. According to a recent study done by the Joint Committee On Taxation (source: Fiscal Year 2010 Budget: Analytical Perspectives. OMB./Table 19-3), here are the top 5 potential sources of ...

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Tax Changes For 2010

With 2010 rapidly approaching, you should take some time to review your tax management strategy and get your financial plan in place. Here is a list of some of the important changes that could have an effect on your bottom line. Estate Tax Repealed The federal estate tax is scheduled to be eliminated for estates of individuals who die in 2010. We expect Congress to act in 2009 to keep the tax alive. Roth IRA Conversions Starting in 2010, individuals with more than $100,000 of modified Adjusted Gross Income are free to switch a traditional IRA to a Roth IRA. For conversions in 2010, taxpayers can spread the tax due over two years. Half the tax will be due in 2011, and the remaining half will be payable in 2012. Removing the limit on conversions effectively eliminates the income limit on contributions to Roth IRAs. A taxpayer with income too high to use a Roth will be able to contribute ...

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