One of the key Estate Tax decisions in the new tax law passed by Congress this month.
Questions or Comments? You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
From Investment News , the Alternative Minimum Tax (AMT) fix is now permanent.
Questions or Comments? You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week
While most of the tax law changes that were recently passed effect 2013 and future years, there are a couple of items that can impact your 2012 taxes.
One of these items relates to what is commonly known as the Qualified Charitable Distribution (QCD) for IRA distributions.
The QCD is the IRA Charitable Rollover provision of the tax law that allows a tax-free distribution to charity, up to $100,000, from your IRA if you are 70 ½ or older. This distribution also counts towards your Required Minimum Distribution (RMD). This provision in the tax law expired at the end of 2011.
However, with the passage of the American Taxpayer Relief Act of 2012, this provision is extended through 2013. Additionally, there is a special provision that allows you to make a contribution in January 2013 that will be treated as a QCD for 2012!!
Therefore, if you are 70 ½ or older and have taken your 2012 Required Minimum Distribution from your IRA in cash during 2012, you can treat up to $100,000 of your 2012 RMD as a QCD if you make a cash contribution to a qualified charity by January 31, 2013!
Additionally, if you did not take your 2012 Required Minimum Distribution, you now have until January 31, 2013 to make a QCD and have it count as your 2012 RMD.
So if you are 70 ½ or older, you may benefit from this new provision. Give us a call to discuss.
Mark Vitek, CPA/PFS, CFP®
…until next week.
From The Journal of Accountancy, the fiscal cliff as been averted with the passing of a new tax law.
Congress Passes Fiscal Clifff Act
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
From The Wall Street Journal, see how valuable a CPA can be.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
We thank all of our clients and referral sources for their business this past year.
Hope everyone is having a Merry Christmas/Happy Holiday and has a Happy New Year!
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
This is the time of year in our CPA practice that I work with small business owners and individuals to perform tax checkups to help them project their tax liabilities for 2012 and make tax saving recommendations of moves they can make between now and year-end. Frequently, just defining the amount of taxes they owe via these planning services helps manage their cash flow so the businesses and individuals don’t have a big amount due and/or surprise each Spring when we prepare their tax returns.
For the business owner and individuals, one of the largest expenses can be taxes. For this reason alone, this expenditure requires planning and monitoring as any other major expense. A year end planning meeting with your CPA should include a discussion of:
This planning meeting should prepare the business owner or individuals to anticipate the amount of taxes that will be owed on March 15th (or April 15th if the tax burden flows through to the personal return). To be effective, tax planning needs to be done prior to New Year’s Eve.
Use our experience in year-end tax planning to enhance your bottom line. Give us a call if you would like to discuss your personal tax situation and see how we can save you taxes.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Last week, we talked about the risk that inflation plays in the bond market. Continuing on that line, I wanted to provide you with a quick example of how rising interest rates due to inflation can have an effect on the value of bonds (and bond funds).
The table below illustrates how future increases in interest rates effects the value of a $100,000 bond purchased today.
Bond Bond Value Bond Value
Maturity with 1/2% rate with 1% rate
increase in 1 year increase in 1 year
1 YR $99,500 $99,035
2 YR $99,020 $98,060
5 YR $97,825 $95,700
10 YR $96,175 $92,500
15 YR $94,900 $90,150
20 YR $93,950 $88,400
30 YR $92,650 $86,125
With this quick example, you can see how even minor rate increases can erode the value of a bond.
The reason for this is that in a rising interest rate environment, new bonds would pay better yields; therefore when you sell your older bonds, you would lose money as buyers could obtain newer bonds with higher yields.
So, as I said last week, while bonds may appear to be that “safe” investment, remember that even bonds have risks that should be considered.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
With recent volatility of the stock market, along with the uncertainty of the real estate market since the “crisis”, some investors have been considering a shift to the bond market.
However, while bonds (and bond funds) do pay regular interest, bond yields are currently very low. Additionally, bonds come with a risk that is often forgotten about today – inflation risk.
Nobody has worried too much about inflation lately. But, between the massive amount of the national debt and the impending “fiscal cliff”, higher inflation is possible.
Inflation is bad for bondholders for 2 reasons –
– Low yielding bond payments won’t allow you to keep up with the rate of inflation, meaning the interest earned on your bonds will buy less
– Inflation causes interest rates to rise, so new bonds would pay better yields; therefore if you sold your older bonds, you would lose money as buyers could obtain newer bonds with higher yields
So while bonds may appear to be that “safe” investment, remember that even bonds have risks that should be considered.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Reverse mortgages can be tempting to people whose retirement savings and home values have dropped significantly in the last couple of years. However, if you are in your 60s, you may want to carefully consider the pros and cons.
While reverse mortgages are available to homeowners who are at least 62 years of age, they are questionable for anyone younger than 70.
– Up front closing costs (including mortgage insurance of approximately 2% of appraised value) on reverse mortgages are generally higher than conventional mortgages.
– Since no payments are required to be made on loan, interest is treated as an additional advance on the loan and can balloon quickly.
– Mortgage insurance is required annually, normally 1.25% of loan balance
– Taxes and insurance must be kept current, or else loan could be considered in default
Even if you are in your 70s, consider a reverse mortgage as a “last resort”.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP® …until next week.
taxandmoneyblog.com 