Action Tax Service

THE TAX ATTIC with Jerry Coon

December 2, 2010 // 0 Comments

Out with old, in with new GM The deer season got monumentally better for me on Saturday, Nov. 20. I was able to forget all about my escapades of the opening two days. My split lip is mostly healed up and my flat tire was an easy, albeit $125, fix. I could afford to move those bad memories to the back of my mind because at about 10:30 a.m. I found myself in a position to shoot a spike horn buck. Where I am hunting, you don’t get much time to dawdle. It’s not like those television shows where the shooter has an eternity to line up the deer and seems to take forever to shoot. Through experience, we have concluded we get about five seconds from the time you hear or see a deer coming to the time it’s gone. The first three seconds you determine if it’s a buck or a doe, calculate how big you think it is, and determine if you are going to shoot at it. Then you have two seconds to make the shot. That’s not much time. It all happens so fast that there is really not even enough time to catch a case of buck fever. Fortunately, I was able to put the five seconds to good use this time and made a good shot. Other times, I have not been so fortunate. I either missed the shot or didn’t even get a shot off. Of course, those memories go to the same place as the above-mentioned opening two days memories—into the far recesses of my mind. Happy thoughts are always better. Last week was Thanksgiving. We celebrated and gave thanks to God for all that we have. There is a group of people, however, who may have found their thankfulness tempered by a dose of reality. They are the common share stockholders of the “old” General Motors Corporation. When our federal government agreed to inject approximately 50 billion dollars into General Motors (GM) in exchange for an equity position in the “new” GM, every person who owned shares in the old GM saw the value of their shares go to zero. They are allowed a tax write-off for the cost of the shares, but a tax […]

The Tax Attic with Jerry Coon

October 21, 2010 // 0 Comments

RAL a thing of the past   Recently, I wrote an article publicizing that the Internal Revenue Service, starting next January, is not going to provide something called the “debt indicator” to tax preparers and financial institutions. This is a big thing because the “debt indicator” is the one item that tax preparers and financial institutions use when they are writing a Refund Anticipation Loan (RAL) for taxpayers. In an RAL, the taxpayer is given a check by the tax preparer or financial institution immediately for the amount of his refund minus the cost of tax preparation and loan fees. “Immediately” has come to mean: as soon as the IRS provides to the preparer the information, via the debt indicator, that the taxpayer does not have outstanding debts that will redirect some or all of the taxpayer’s refund to a third party. The debt indicator gives the writer of the RAL the security that the refund will not be sent to a credit card company, the friend of the court, a mortgage company, the state of Michigan, or kept by the IRS itself. Thus, the RAL is a short-term loan with the taxpayer’s coming refund as the security. The loan is then paid off when the IRS issues the taxpayer’s refund directly to the tax preparer or financial institution. Congress and the IRS have long thought that RALs are not necessary and are somewhat of a rip-off because of the exorbitant fees that some tax preparers and financial institutions charge for an extremely short-term loan. The IRS has gotten very efficient in the last few years in processing returns and issuing refunds. For example, if a return gets into their system by Thursday, Oct. 21, the refund will be direct-deposited into the taxpayer’s account on Friday, Oct. 29. So, if the fee for the RAL was $100, that’s a pretty stiff fee for what is in reality an eight-day loan. By ceasing to issue the debt indicator, the IRS has effectively eliminated the RAL market. That is what they planned to do but, as always, there is more to the story. I prefer to call this the theory of unintended consequences. In this case, the unintended consequence is that there are millions of taxpayers who do […]

The Tax Attic with Jerry Coon — October 14, 2010

October 14, 2010 // 0 Comments

Integrity is a way of life My minister at Rockford Reformed Church, Rick Tigchon, sometimes hits a “grand slam” of a sermon. Since the baseball playoffs are in full swing, I thought I would borrow one of its terms to describe his wonderful sermon given to us this last Sunday. Since the Lions finally won a game, I know I should be using a football term. But I love baseball, while I just like football, so I’m sticking to the baseball term. The sermon dealt with the subject of “integrity.” One of the examples he cited involved a father and son buried close to each other. The father had a very lengthy list of accomplishments on his gravestone detailing his life’s accomplishments. He must have been quite the fellow. The son, however, had only five words inscribed on his grave marker: “A man of unquestioned integrity.” Now that’s my kind of guy. Those words are powerful and say as much as we need to know about the son. It doesn’t say that his middle name was Solomon and he was the wisest man of the day. It doesn’t say he was a great athlete, or the best man at his job, or the best businessman in the area. It doesn’t say he was a great family guy, or the wealthiest man in the region, or even the nicest of guys. What it does say is that he dealt with people on an honorable basis and with “unquestioned” integrity. He was a man of his word. Oh, he could have been wise, probably was a great family man, perhaps was someone who could hit a curveball, and may have operated a successful business. Those characteristics and abilities are items that his dad would have listed on his tombstone. Those accomplishments in and of themselves don’t tell the whole story. The son took it all one step further and let integrity be his guide. Those who knew him honored him with that five-word inscription: “A man of unquestioned integrity.” What a different type of world this would be if everyone followed the son and let integrity be their guide. Rick and I are members of the Reformed Church, but integrity is much greater than the Reformed Church. It […]

The Tax Attic with Jerry Coon — October 7, 2010

October 7, 2010 // 0 Comments

Three new provisions to help small businesses In a previous article, I stated that our present Congress is not a “do nothing” Congress. They have shown that they are not afraid to pass bills and make laws. Not everyone agrees with the bills they have passed and laws they have instituted, but they do keep trying. For example, just last Thursday Congress passed the Small Business Jobs and Credit Act of 2010. This bill has some provisions that will help many small businesses such as self-employed sole proprietors, partnerships and small corporations. Of course, it also has a myriad of provisions that seem to be written to affect about one person or entity in the entire United States. I will highlight the provisions that affect many of my tax clients. First, and perhaps best, there is a provision that will allow self-employed taxpayers to deduct premiums paid for health insurance for the owner and owner’s family when calculating the taxpayers’ self-employment tax. In light of the cost of health insurance today and where those costs are heading, this is huge. This provision only affects the 2010 tax year, but one year is better than no years. Making this change is perceived as leveling the playing field between employees and self-employed taxpayers. Currently, if a taxpayer works for a company and the company supplies health insurance for the taxpayer, this is a totally tax-free fringe benefit. The company deducts the premiums paid and the taxpayer does not have to claim the premium as a taxable benefit. However, up until now that has not been the case for self-employed taxpayers. The self-employed taxpayer has always been allowed to deduct the premium as an adjustment to income so they don’t pay any regular tax on the premium. But they have never been able to deduct the premium when calculating the amount of Social Security tax due on their profit. Social Security tax is calculated at 15.3% of the taxpayer’s profit. So while the employees of the world don’t tax regular tax or Social Security tax on their tax-free fringe, the self-employed taxpayers of the world have been forced to pay a 15.3% tax on their almost tax-free fringe. That has always been perceived as not being fair and […]

The Tax Attic with Jerry Coon — September 23, 2010

September 23, 2010 // 0 Comments

Bush tax cuts set to expire Congress is really making it difficult to tax plan. Eventually, they will have to make decisions on a number of tax issues. Complicating the matter is that Congress can make a decision by doing nothing. The Bush tax cuts are all set to expire on December 31, 2010. If Congress does nothing, we will revert to the tax laws that were in effect before President Bush and a Republican-controlled Congress enacted them at various times during his presidency. Most of them came into being when the Economic Growth and Tax Reconciliation Act was passed in 2001. It is highly unlikely that Congress will do nothing. This is not a do-nothing Congress. They have passed a mammoth Health Care Reform bill. The American Recovery and Reinvestment Act, i.e. the Stimulus Bill, seemed to spend more money than existed in the world in total before about 1900. (Just kidding. I don’t know the real statistic. The real year could be only before 1800.) They recently passed a Small Business Jobs Act that will spend a paltry $42 billion dollars. No, they are not afraid to spend money or to pass bills. They are just reluctant to do something immediately before the coming election that could and would influence the election. Raising taxes, even if it is for 2011, could and probably would influence the election. The Tea Party is just hoping that a Democrat-controlled Congress passes a bill that dramatically increases taxes. I will go as far as to say that they are praying for a dramatic tax increase. I would also be shocked if that happens. What is highly likely is they will pass a bill after the election that will pick and choose what to do with each of the tax cuts. Some will be modified, such as the tax brackets with the 10% tax bracket disappearing. Some will be extended, such as keeping the child tax credit at $1,000 instead of it reverting to $500. Some will be allowed to sunset and go away such as the capital gains in the 15% tax bracket getting taxed at 0%. It will be interesting to see how this all turns out. By not extending any of the relief provisions that […]

1 11 12 13 14 15