Action Tax Service

THE TAX ATTIC with Jerry Coon

May 26, 2011 // 0 Comments

IRS, Congress crack down on assets in foreign institutions Over the past many years, we have seen a concerted effort by Congress and the Internal Revenue Service to force United States citizens to disclose whether they have financial assets in foreign countries. The basis for wanting to know this information is very straightforward: as tax-paying citizens of the USA, according to Section 61 of the Internal Revenue Code, we are responsible for paying taxes on income from all sources “without regard to geographic location or source.” Since the IRS is in the business of not trusting people to report all income from all sources and, therefore to pay all of their tax due, it’s totally understandable why they would want to know who has what assets in which foreign countries. We saw the fruits of their labors in the newspapers last year when UBS, the Swiss bank, turned over the names of thousands of U.S. citizens who had upwards of at least $50,000 in the Swiss bank. It has to be noted that it is not illegal to have $50,000 or $150,000 or $1,500,000-plus in a Swiss bank or in a Canadian bank or in an Australian bank or in a Cayman Island bank. It is illegal, however, not to report the income that is generated by the money in the bank. There might also be a question of just how a taxpayer might have accumulated that $50,000 or $150,000 or $1,500,000 in the first place. The accumulation of that money might have created some taxable income. That’s what happened to Al Capone, the Chicago gangster, back in the depression. He ended up in jail because he didn’t report income earned or how he accumulated income. It didn’t matter how Capone accumulated income. The fact is he accumulated assets and did not report how he accumulated those assets nor did he pay tax on the income from those accumulated assets. To find out about these assets and the income associated with those assets, in 1972, Congress passed the Bank Secrecy Act. The Act requires U.S. persons to disclose if they have accounts in foreign financial institutions in which they have an interest or over which they have signature authority or are owners of a foreign […]

THE TAX ATTIC with Jerry Coon—April 28, 2011

April 28, 2011 // 0 Comments

Start thinking about your 2011 tax return I started reading Rob Bell’s new book, “Love Wins,” over the weekend. It’s a very interesting book. Bell has some interesting thoughts on heaven and hell. I’m sure there will be many rebuttals, because he sure has gotten a lot of people thinking about how God interacts with each of us at the end of this short life. That seems to be particularly important in light of the Easter holiday that we just celebrated. Jesus died on Good Friday and then arose on Easter expressly for the forgiveness of each of our sins. Traditional Christian teaching says our sins will be forgiven only if we ask for that forgiveness and believe they are forgiven through Jesus’ death and resurrection and that’s how we end up going to heaven. No ask, no believe, no heaven. It is a very straightforward teaching. Hell is the alternative, and it’s either heaven or hell forever based on whether we ask for forgiveness in this short lifetime. I wouldn’t say Rob Bell questions that teaching in its entirety but he certainly does bring up some interesting points about God’s love for all people. A point he makes, and I’m roughly paraphrasing here, is that God does love all people and does want all of them to spend forever in heaven with Him. Since all things are possible for God, does He find a way for them to ask and believe that is beyond our ability to understand and perhaps even beyond the grave? Hmm. Now that’s a real question to ponder, isn’t it? No ask, no believe, no heaven is tough. I don’t think Rob Bell has an answer to that question any more than I do, but it is definitely something to think and talk about. Taxes are another topic that we should be thinking and talking about all year long. Right now is the perfect time to think about the 2011 tax return while the 2010 tax return is still fresh in your mind. What are the tax breaks that will affect, either positively or negatively, your 2011 tax return? What are the income events that will affect the 2011 tax return? Will some property be sold that creates some capital […]

THE TAX ATTIC with Jerry Coon, April 21, 2011

April 21, 2011 // 0 Comments

Filing an extension? Most everyone has a favorite day of the year. To deer hunters, it’s either October 1, the opening day of bow season, or November 15, the opening day of gun season. To many trout fishermen, the last Saturday of April is almost a national holiday. To baseball fans, it’s opening day for the Tigers at Comerica Park. To NASCAR fans, it’s the green flag dropping on the Daytona 500 in February. To golfers, it’s the Masters Golf Tournament in April. There has to be some students somewhere who really like the first day of school in September. Christmas Eve is a favorite of many. Come to think of it, I like all of those days. Well, maybe the first day of school was not so high on my list, but I enjoy all of the others. However, my personal favorite day of the year is the day after the end of the tax season. The last day of the tax season is my second most favorite day because it’s the day before my favorite day. Tax professionals all across the land were preparing to sleep in on Tuesday morning for the first time in three months. I know two area tax professionals who are in warmer climates even as I write this article. I’m sure my wife, Deb, has a nice list of items for me to get started on. I wonder how many of those I can start on this coming weekend instead of on my favorite day of the entire year. President Obama signed into law a significant piece of legislation on Thursday, April 14. The provision of the Health Care Reform Act (HCRA) that was going to force business taxpayers to send in 1099 forms to anyone and everyone to whom they paid $600 was repealed, as if it did not exist. It was simply stricken from the law. This provision was going to take effect for payments made as of January 1, 2012. It was going to result in business taxpayers sending in 32,000,000 Form 1099s above the projected 2011 figures. At least twice the law to repeal had been passed through the House but did not make it through the Senate. Even if it had made it […]

THE TAX ATTIC — with Jerry Coon

April 7, 2011 // 0 Comments

Changes not always fair It must be baseball season. Even George Will, the conservative columnist, devoted his Sunday column to baseball trivia. I don’t always agree with Mr. Will, but I make it a point to read his column. I am one of those life-long baseball fans, but when George said trivia, he wasn’t kidding. They were very tough questions. A couple of them did involve the Detroit Tigers and I did get those right. Ernie Banks, Hank Aaron, and Dave Winfield were answers to three questions that I knew, but the other questions all would have required me to get out the latest edition of Baseball Digest to get the answers correct. Right now, as we close in on April 18, I don’t have the luxury of time, so I just looked at George’s answers. That is one reason I love baseball. The rules haven’t changed so much that a Lefty Grove, who was a dominant pitcher in the 1920s and 1930s, can be compared to a Bob Gibson, who was a dominant pitcher in the 1960s, and they both can be compared to a Randy Johnson, who is of recent vintage. Pitching is still throwing a ball 60 feet, 6 inches over the home plate and trying to either get the hitter to swing and miss or get him to hit the ball to a fielder. All the hitter wants to do is hit it where the fielders aren’t. Hitting it hard where the fielders aren’t feels better than blooping it where they aren’t, but it’s a hit in the record books all the same. Not that much has changed in the 100-plus years of baseball other than the games take a whole lot longer to finish and the players make a whole lot more money today. A hitter like Ty Cobb, one of the Detroit Tigers from early in the 1900s, can be statistically compared to a Ralph Kiner of the 1950s, to a Wade Boggs of the 1980s and to a Joe Mauer of today. That’s what makes the game fun. Sitting around and talking baseball with some guys while perhaps drinking a beer is my idea of heaven down here on Earth. It’s something I’m convinced will happen in the […]

THE TAX ATTIC with Jerry Coon

March 31, 2011 // 0 Comments

Rules for owning two residences It’s time to review the rules for taxpayers who are unlucky enough to own two residences at the same time. Dating back to when Proposal A passed, we voted that every homeowner can designate one principal residence for the Principal Residence Exclusion (PRE). The advantage of having the PRE designation is that the 18 mills of school operating millage is waived. For taxpayers who have a home with a taxable value of $80,000, the PRE saves the taxpayers 18 times 80, or $1,440. For taxpayers with a house with a taxable value of $125,000, the tax savings are 18 times 125, or $2,250. Needless to say, for all of us homeowners, that PRE designation is extremely important. In normal times, because the PRE does save so much tax money, we are only allowed to have one home at a time designated as a PRE. Sell one home and lose the PRE on that home. At the sale, one of the many pieces of paper that gets signed is a Form 2602, Rescission of Principal Residence Exclusion. The closing company passes that form on to the local assessor. Buy another home and at that closing, one of the many pieces of paper signed is the Form 2368, Application for a Principal Residence Exclusion. The closing company also passes that form on to the local assessor and the buyers get the PRE on the new home. I do recommend that taxpayers check with the local assessor to ensure the PRE application was received. Some things are important enough to follow up with a telephone call and it may be a $1,440 or $2,250 telephone call. We also all know we are not living in normal times. For example, a Grand Rapids job for a Rockford resident that was thought to be secure on Friday afternoon is eliminated on Monday morning. A replacement job, after a lengthy search of a year, is found in the Port Huron area. The taxpayer rents an apartment in Port Huron while the family stays in Rockford just to make sure the job is going to work out. After two months, it is apparent the job is going to work, so they look for a home there and […]

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