Action Tax Service

The Tax Attic with Jerry Coon — September 16, 2010

September 16, 2010 // 0 Comments

Tax school begins I may end up buying my salmon this fall at Meijer or D&W. In past years, I could depend on going fishing a few times throughout the summer and catching a few fish each time. Then, to finish off the summer, over Labor Day, my brother-in-law Don and I could always count on coming home with some nice salmon fillets. We are far from experts, but we have good equipment and we are persistent. That strategy got off to a slow start this summer. Every time I had plans to go Lake Michigan fishing, it was either raining or there were small-craft warnings on the big lake. I did convince Deb to go once, but there were two-to-three-footers with white caps and, under those conditions, it’s tough fishing. The boat can take the waves, but it’s tough to steer a boat when it’s rocking and rolling that much. It also takes about twice as much time to get the lines into the water. We stuck it out for a while and did catch one small one, but that’s not exactly what I envisioned when we left Rockford. As of Friday morning on Labor Day weekend, I still had great hopes for catching our self-calculated quota—after all, we had never failed on Labor Day. Those hopes went by the wayside when we drove into Muskegon State Park and took one look at Lake Michigan. You have all seen the pictures; seeing those huge waves in person was truly impressive. Fishing in Lake Michigan was out of the question and would remain out of the question for the entire weekend. We still had the channel and Muskegon Lake. Being an optimist, in my mind success was still possible. I was wrong. There were white caps on the channel off and on, gale warnings much of the time, and white caps on Muskegon Lake most of the weekend. We fished for about two hours the whole weekend and caught no fish. The weather was so bad we went bowling on Saturday. We had fun bowling, but pulling in a 15-pound salmon would have been fun, too. We always have a great time camping and, despite the lack of fish, this Labor Day was no different. […]

The Tax Attic with Jerry Coon

September 9, 2010 // 0 Comments

NKSC donations now qualify for Michigan tax credit The Michigan Treasury Department works year round. It may be a slimmed-down version compared to the tax season, but those working seem to be working hard. Those of us in the professional tax business see evidence of their efforts from time to time. Usually a taxpayer will receive a letter or some correspondence from Treasury, requesting verification of a transaction or requesting that the taxpayer send Treasury some money for an error on a tax return. That is the type of effort that we could really live without. However, once in a while, we get some really good news from Treasury. Recently, the North Kent Service Center (NKSC) received a letter determining that it qualifies as a certified Homeless Shelter/Food Bank. This is extremely good news for NKSC. As a certified Homeless Shelter/Food Bank organization, monetary contributions made direct to NKSC qualify for a credit on the Michigan tax return. This particular credit is one of the best credits known to mankind. On a joint Michigan tax return, 50% of a contribution up to $400 qualifies as a credit against income tax liability. Give $400 to NKSC and receive $200 of tax credit. On a single return, the limit is 50% of up to $200, which generates $100 of tax credit. This is a non-refundable credit, so the taxpayer has to have some liability. But for those with a tax liability, this is a wonderful way to reduce that tax liability and help out a local organization. A further advantage of making contributions is that they are also allowable on the federal Schedule A as a charitable contribution. For taxpayers who do itemize their deductions, this really reduces the final net out-of-pocket cost. For example, taxpayers in the 25% federal income tax bracket make a $400 contribution to NKSC. They will receive a $200 tax credit on their Michigan tax return. They will also receive a $400 deduction on their Schedule A. This deduction, since they are in the 25% tax bracket, saves them $100 in taxes ($400 times 25%). They will save $200 of Michigan tax and $100 of federal tax for a total tax savings of $300. Their net out-of-pocket cost for writing a $400 […]

The Tax Attic — by Jerry Coon — August 26, 2010

August 26, 2010 // 0 Comments

Business federal tax rules revised  The Internal Revenue Service is keeping busy this summer. In a previous article, I discussed various court cases that involved the IRS and taxpayers. Auditing taxpayers is one way the IRS keeps busy. Those audits from time to time develop into court cases. Another manner of staying busy is by revising the various rules under which businesses operate. They recently issued Proposed Regulation Number 153340-09 that revises, effective January 1, 2011, how businesses deposit and pay federal taxes. Currently, businesses have four choices to pay federal taxes. First, they can take a paper coupon, a Form 8109, and a check to a federal bank. The bank processes the check and scans in the coupon. The money and the coupon are then forwarded to the IRS. Unfortunately, errors occur in this system. Taxpayers complete the Form 8109 by hand, writing in the amount of the check and filling in a box that indicates the type of tax being paid. Anytime anyone handwrites anything, there are opportunities for error. Most people are dyslexic to some extent, and it’s very easy to write a check for $1,019.25 and enter $1,109.25 in the Form 8109 amount box. It’s also very easy to fill in the wrong box indicating the type of tax to be paid. Making either one of these errors causes all types of problems at a later time when the IRS tries to match the tax paid with the amount paid and type of tax paid on the coupon. It can and is a real mess. Second, the business can mail the Form 8109 and a check directly to a federal reserve bank. That brings a whole new set of problems into play. It’s called the United States Post Office. In this area, we mail our checks and coupons to the Federal Reserve bank located in St. Louis, Mo. If a tax payment is due on the 15th of the month, how many days before the 15th must the check and coupon be mailed for it to make it to St. Louis by the 15th? It should be three or four days, but it could be eight or nine days. It’s better to be safe than sorry. I know the Post Office […]

The Tax Attic with Jerry Coon — May 20, 2010

May 20, 2010 // 0 Comments

Final discussion on long-term care insurance I have a few final items to cover this week concerning long-term care insurance policies. Specifically, there are three areas I want to discuss. This week, I am using a quote Deb and I received from Genworth Life Insurance Company. First, instead of Deb and I buying individual policies, should we take the alternative of buying a joint policy? Second, should we buy a survivorship rider that will pay up all future premiums should Deb or I pass away? Third, should we buy a rider that will return our unused premiums if we die before making a claim? First, it does appear to be cheaper to buy a joint policy than Deb and I each buying individual policies. The joint policy annual premium for the quote was $2,415 for a total of 72 months of coverage. That compares to a total annual cost of $2,815 for individual Deb and Jerry policies that covers 36 months for each of us. On the joint policy, we do get a little more flexibility, because it doesn’t make any difference which one of us uses the 72 months. I could use two months, for example, and the other 70 months would be available for Deb, or vice versa. The minimum months of coverage on joint policies does appear to be 48 months of insurance coverage, while individual policies can be purchased for as short a period as 36 months. It might make sense for Deb and I to purchase a joint policy for 72 months rather than individual 36-month policies. Of course, that presumes we will never let the policy lapse. If we have two individual policies, we could let one lapse, mine for example, and keep Deb’s in force. We would not have this option available to us if we had just one policy. Dropping that policy would drop everything. It can’t be a snap decision to buy the joint policy. Second, the question becomes should we buy a rider that pays up all future premiums should Deb or I pass away? As part of this particular policy, and at no extra cost, should we pay in for 10 years without making a claim, and then Deb or I pass away, and […]

The Tax Attic with Jerry Coon — March 25, 2010

March 25, 2010 // 0 Comments

New bill creates more complex tax system I did something on Sunday evening that I have not done previously. I watched C-Span for a solid three hours. I don’t think I have watched C-Span for three total hours in my entire life before Sunday. I would rather do just about anything than watch C-Span. However, on Sunday, a train wreck was occurring in Washington that I just couldn’t keep myself from watching. The House of Representatives was debating and voting on health care reform. The majority of Americans want health care reform. They want insurance companies to be reined in. It should be illegal to throw people off the rolls because they get sick. People with pre-existing conditions should be able to get insurance. Insurance companies should not be able to raise rates like Anthem Insurance did last month by 36%. We should be able to buy health insurance anywhere we want, if we want to buy health insurance, and insurance companies should be able to conduct business in any state they want. A child should be able to stay on his/her parent’s insurance plan until age 26. There are plenty of reasons to reform the health care system. I happen to be one of those people, however, who thinks the federal government, with the sheer magnitude of these bills, is overstepping its bounds this time. In the few hundred pages that I scanned, I did find the one five-line paragraph that prohibits insurance companies from dropping people because of a health issue. I’m sure that somewhere else within those several hundred pages was another paragraph that keeps insurance companies from unilaterally raising rates by 36% at a time or, even though I couldn’t find it, I would hope that it does. I am concerned about the potential mandated funding of abortions, but that is found in the bill. From a professional point of view, I am in the business of preparing tax returns, and this bill will be good for the tax preparation business. The bill creates new excise taxes and credits and penalties on taxpayers and businesses that will tend to make our tax system more complex. Changes, credits and new taxes tend to be good for my type of business. The bill […]

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