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

November 24, 2010 // 0 Comments

Be thankful This has not been the greatest of deer seasons. One good thing is that I get to spend some time with two of my Central Michigan University (CMU) roommates, Gary McCrimmon and his brother Grant, along with Gary’s son Jason, Grant’s son Scott, and another long-time friend, Jim Melvin. As far back as the 1970s, Gary, Grant and I have gone fishing and hunting together. Fishing usually occurs up in Canada. Hunting usually happens up near Marion, between Cadillac and Clare. We seem to always get deer, some with horns and some without, but some years it takes longer than others to bring home the venison. Since I have only seen two deer in two full days of hunting so far, this year is shaping up to be one of the “longer than others” years. Regardless of seeing or not seeing deer, in other ways it has been an interesting deer season. On the second day of deer camp, Tuesday morning, one of the guys noticed that my truck had a flat tire. I must have hit a branch or something that punctured my right rear tire Monday night while driving back to camp. When we took the tire off, it was slightly more than a puncture—about a four-inch gash in the inside sidewall. From the size of the gash, I was fortunate to make it back to camp before the tire went flat. My spare was good, but it’s still a $125 tire that wasn’t so good. The second piece of bad luck involves my face meeting up with my scope. We hunt in woods surrounding a cedar swamp. When things are really slow, someone volunteers to walk through the swamp, hoping to stir up some lazy deer. We call it “making our own luck.” It was my turn to volunteer. A few years ago, a high wind storm went through the area and blew down many of the cedars in this swamp. They are twisted every which way, making it very difficult to get through. That’s why the deer are in there hiding. It’s quite an effort, but we are often successful at getting the deer moving. As I was picking my way through, I came to a spot where I […]

THE TAX ATTIC with Jerry Coon — November 18, 2008

November 18, 2010 // 0 Comments

Interesting time for taxes Now that we know the make-up of the House and Senate in Washington, we can make some educated guesses as to what is going to happen to our tax system in 2011. We will find out if the politicians really do listen to the voters. Based on their hearing capacity, the conclusions reached by each person may be drastically different. Health Care Reform is an excellent example. Most people were in agreement that the system was broken and that it needed fixing. Congress and the President heard this and agreed. The point at which people disagreed is this: Was a total revamping necessary or could the system have been selectively fixed? Insurance companies should not have been able to deny insurance coverage because of pre-existing conditions. Could that have been fixed in one or two pages of legislation as opposed to 2,700 pages? Perhaps. Non-dependent children living at home should be able to buy insurance as part of their parent’s plan. I bet some smart technical writer in Washington could have written that up in a page or two. Ditto for insurance companies canceling a taxpayer’s policy because the insurance company was spending too much money on that person. Of course, the biggest controversy of all seems to be: Does the federal government have the right to force taxpayers to buy insurance? Congress will now be trying to answer this question: Did the American public vote to have Health Care Reform repealed or do they want it further reformed to keep the good things and repeal the other 2,690 pages? I guess we will see what they heard in a very short time. It appears that Congress and the President did hear that the public would very much like to see the Bush Tax Cuts extended. There is some negotiating going on, but it appears that the majority of the cuts will be extended at least through 2011. I know it is hard to figure out where a politician is coming from, but if a Democrat-controlled Congress is going to extend the tax cuts for a year after the election, why would they not have extended them before the election? By acting before the election, it might have saved them a […]

The Tax Attic with Jerry Coon — October 28, 2010

October 28, 2010 // 0 Comments

Some tax cuts not well known Next week’s election is one of the more important elections that we have had recently. I won’t over-dramatize the situation, but this election may mean much to you and me in a variety of matters. Since I’m a tax person, I will concentrate on just the potential tax consequences of the election. I say “potential” because no matter who gets elected next Tuesday, Congress has to be prepared to either extend or not to extend the many tax breaks lumped under the title known as the “Bush Tax Cuts.” As of this December 31, most of the income tax breaks that we have come to enjoy will disappear. Congress can choose to extend all of the cuts or they can pick and choose which ones to modify or extend. Here are some of tax cuts I sincerely hope they extend, because these particular tax cuts affect not just the taxpayers earning more than $200,000 but every taxpayer who pays income tax. I have written previously about some of the more prominent Bush Tax Cuts such as the Alternative Minimum Tax and Capital Gains, but I would like to point out some of the ones that are not as well-known that nevertheless will have an effect on many taxpayers. In fact, these provisions are quite important to all taxpayers, but they have gotten practically zero publicity. First, under the Bush Tax Cuts, for taxpayers in the 10%, 15% and 25% tax brackets, there is no penalty for filing as married-joint as opposed to filing single. The married-filing-joint tax rates were exactly twice the single. For example, two single taxpayers with total incomes of $50,000 would pay exactly the same tax that two married-joint taxpayers earning $50,000 would pay. There is no incentive to file single or disincentive to be filing joint. There is no marriage penalty. If we go back to the pre-Bush Tax Cut days, there was a drastic marriage penalty that started in the 15% tax bracket and continued upward throughout the higher brackets. In addition, there was no 10% tax bracket. Without some adjusting of the tax brackets, all jointly filing taxpayers will pay more tax than two single taxpayers with the same income. The marriage penalty will […]

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 […]

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