Archive for the ‘Asset Protection Planning’ Category
Tuesday, April 2nd, 2013 by Moore McLaughlin
Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.
1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate
2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.
3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event or other goods and services.
4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.
5. Fair market value is generally the price at which someone can sell the property.
6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.
7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.
9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.
For more information on charitable contributions, see Publication 526, Charitable Contributions. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property. Forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
- Publication 526 , Charitable Contributions
- Publication 561 , Determining the Value of Donated Property
- Schedule A , Itemized Deductions
- Form 8283 , Noncash Charitable Contributions
IRS YouTube Videos:
- Fair Market Value of Charitable Donations – English | Spanish | ASL
Tags: asset protection, Asset Protection Planning, Capital gains tax, Charitable Contributions, charitable organization, charity, corporate tax, Estate Planning, Form 8283, income tax, internal revenue code, Internal Revenue Service, IRS, mclaughlin & quinn, Moore McLaughlin, Noncash Charitable Contributions, Providence, Publication 526, Rhode Island, Rhode Island Division of Taxation, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Elderlaw/Law For Life, Estate Planning, Self-directed IRAs, Tax Current Events and News, Tax planning
Friday, March 29th, 2013 by Moore McLaughlin
If you are self-employed, the IRS wants you to know about a tax deduction generally available to people who are self-employed.
The deduction is for medical, dental or long-term care insurance premiums that self-employed people often pay for themselves, their spouse and their dependents. The insurance can also cover your child who was under age 27 at the end of 2012, even if the child was not your dependent.
You may be able to take this deduction if one of the following applies to you:
- You had a net profit from self-employment. You would report this on a Schedule C, Profit or Loss From Business, Schedule C-EZ, Net Profit From Business, or Schedule F, Profit or Loss From Farming.
- You had self-employment earnings as a partner reported to you on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.
- You used an optional method to figure your net earnings from self-employment on Schedule SE, Self-Employment Tax.
- You were paid wages reported on Form W-2, Wage and Tax Statement, as a shareholder who owns more than two percent of the outstanding stock of an S corporation.
- There are also some rules that apply to how the insurance plan is established. Follow these guidelines to make sure the plan qualifies:
- If you’re self-employed and file Schedule C, C-EZ, or F, the policy can be in your name or in your business’ name.
- If you’re a partner, the policy can be in your name or the partnership’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the partnership must reimburse you and include the premiums as income on your Schedule K-1.
- If you’re an S corporation shareholder, the policy can be in your name or the S corporation’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the S corporation must reimburse you and include the premiums as wage income on your Form W-2.
For more information, see Publication 535, Business Expenses. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
- Publication 535, Business Expenses
- Publication 225, Farmer’s Tax Guide
- Schedule C, Profit or Loss From Business
- Schedule C-EZ, Net Profit From Business
- Schedule F, Profit or Loss From Farming
Tags: asset protection, Asset Protection Planning, Capital gains tax, collection, corporate tax, health insurance, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, Publication 535, Rhode Island, S corporation, schedule C, self-employed, tax, tax deduction, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Current Events, Elderlaw/Law For Life, Estate Planning, IRS and state tax collections, Self-directed IRAs, Tax Current Events and News, Tax planning
Wednesday, March 27th, 2013 by Moore McLaughlin
The end of the tax filing season is almost here. Even though your tax return is not due until April 15, you can make tax time easier on yourself by starting now. Here are 10 important tips to ensure a smooth process.
1. Gather your records. Round up any documents you will need when filing your taxes, including receipts, canceled checks and other documents that support income or deductions you will be claiming on your tax return. Store them in a safe place.
2. Report all your income. You will need all your Forms W-2, Wage and Tax Statements, and 1099 income statements to report your income when you file your tax return. To ensure you don’t misplace them, add them to your other records.
3. Get answers to questions. Use the Interactive Tax Assistant tool available on the IRS website to find answers to your questions about tax credits and deductions.
4. Use Free File. There is at least one option available for everyone to prepare and e-file a tax return at no cost. Let IRS Free File do the work for you with brand-name tax software or online fillable forms. It’s available exclusively at IRS.gov. If your income was $57,000 or less, you qualify to use free tax software. If your income was higher, or you are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic version of IRS paper forms. Visit IRS.gov/freefile to review your options.
5. Try IRS e-file. IRS e-file is the best way to file an accurate tax return. It’s safe, easy and the way most taxpayers file their return. Last year, more than 80 percent of taxpayers used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have the option to file early and pay by April 15.
6. Weigh your filing options. You have several options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free, face-to-face help at a volunteer site. Weigh your options and choose the one that works best for you.
7. Use direct deposit. Combining e-file with direct deposit is the fastest and safest way for you to get your refund.
8. Visit the IRS website. The IRS website at IRS.gov is a great place to find everything you need to file your tax return. This includes many online tools, filing tips, answers to frequently asked questions, the latest tax law changes, forms and publications.
9. Remember number 17. Check out Publication 17, Your Federal Income Tax, on the IRS website. It’s a complete tax resource that includes information such as whether you need to file or how to choose your filing status.
10. Review your return. Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all Social Security numbers and math calculations on your return as these are the most common errors. If you run into a problem, remember the IRS is here to help. Start with IRS.gov.
Additional IRS Resources:
- Interactive Tax Assistant tool
- IRS Free File
- E-file Options
- Free Tax Return Preparation for You by Volunteers
- 1040 Central
- Publication 17, Your Federal Income Tax
IRS YouTube Videos:
- Record Keeping – English | Spanish | ASL
- Do Your Taxes for Free: Taxes Made Less Taxing – English | Spanish
- All About IRS.gov – English | Spanish | ASL
IRS Podcasts:
- File Your 1040EZ Using Free File – English | Spanish
- Do-It-Yourself Free Tax Preparation – English | Spanish
- New Online Tools – English
- Tax Return Errors – English | Spanish
Tags: 1031 exchange real estate investment, April 15, asset protection, Asset Protection Planning, business tax, Capital gains tax, collection, corporate tax, Estate Planning, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, Jill E. Sugarman, Jill Sugarman, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, IRS and state tax collections, Tax Current Events and News, Tax planning
Wednesday, March 13th, 2013 by Moore McLaughlin
If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.
Here are 10 key facts from the IRS about mortgage debt forgiveness:
1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.
2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.
3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.
4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.
5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.
6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.
7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.
8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.
9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.
10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.
Use the Interactive Tax Assistant tool on IRS.gov to check if your cancelled debt is taxable. Also, see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. IRS forms and publications are available online at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
- Interactive Tax Assistant tool
- Publication 4681 , Canceled Debts, Foreclosures, Repossessions and Abandonments
- Mortgage Forgiveness Debt Relief Act and Debt Cancellation
- Form 982 , Reduction of Tax Attributes Due to Discharge of Indebtedness
IRS YouTube Videos:
- Mortgage Debt Forgiveness – English | Spanish | ASL
Tags: 1031 exchange real estate investment, asset protection, Asset Protection Planning, business tax, cancellation of indebtedness income, Capital gains tax, COD income, collection, corporate tax, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, mortgage debt forgiveness, Providence, Rhode Island, Rhode Island Division of Taxation, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in 1031 Exchanges, Asset Protection Planning, Bankruptcy, Current Events, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning
Friday, March 8th, 2013 by Moore McLaughlin
The term “capital asset” for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.
Here are 10 facts from the IRS on capital gains and losses:
1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.
2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.
3. You must include all capital gains in your income.
4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.
5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.
6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a ‘net capital gain.’
7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains.
8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.
9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year.
10. Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses. If you e-file your tax return, the software will do this for you.
For more information about capital gains and losses, see the Schedule D instructions or Publication 550, Investment Income and Expenses. They are both available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
- Form 8949, Sales and Other Dispositions of Capital Assets
- Schedule D, Capital Gains and Losses and instructions
- Publication 550, Investment Income and Expenses
- Publication 544, Sales and Other Dispositions of Assets
Tags: 1031 exchange real estate investment, asset protection, Asset Protection Planning, business tax, capital asset, Capital gains tax, corporate tax, Estate Planning, income tax, internal revenue code, Internal Revenue Service, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in 1031 Exchanges, Asset Protection Planning, Estate Planning, Self-directed IRAs, Tax Current Events and News, Tax planning
Monday, February 25th, 2013 by Moore McLaughlin
The IRS receives thousands of reports every year from taxpayers who receive emails out-of-the-blue claiming to be from the IRS. Scammers use the IRS name or logo to make the message appear authentic so you will respond to it. In reality, it’s a scam known as “phishing,” attempting to trick you into revealing your personal and financial information. The criminals then use this information to commit identity theft or steal your money.
The IRS has this advice for anyone who receives an email claiming to be from the IRS or directing you to an IRS site:
- Do not reply to the message;
- Do not open any attachments. Attachments may contain malicious code that will infect your computer; and
- Do not click on any links in a suspicious email or phishing website and do not enter confidential information. Visit the IRS website and click on ‘Identity Theft’ at the bottom of the page for more information.
Here are five other key points the IRS wants you to know about phishing scams.
1. The IRS does not initiate contact with taxpayers by email or social media channels to request personal or financial information;
2. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts;
3. The address of the official IRS website is www.irs.gov . Do not be misled by sites claiming to be the IRS but ending in .com, .net, .org or anything other than .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on their site and report it to the IRS;
4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. Forward a suspicious email to phishing@irs.gov ;
5. You can help the IRS and other law enforcement agencies shut down these schemes. Visit the IRS.gov website to get details on how to report scams and helpful resources if you are the victim of a scam. Click on “Reporting Phishing” at the bottom of the page.
Tags: 1031 exchange real estate investment, asset protection, Asset Protection Planning, Capital gains tax, collection, corporate tax, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, phishing, Providence, Rhode Island, tax, Tax planning, Thomas P. Quinn, www.irs.gov
Posted in Asset Protection Planning, Tax Current Events and News
Monday, February 18th, 2013 by Moore McLaughlin
Direct deposit is the fast, easy and safe way to receive your tax refund. Whether you file electronically or on paper, direct deposit gives you access to your refund faster than a paper check.
Here are four reasons more than 80 million taxpayers chose direct deposit in 2012:
1. Security. Every year the U.S. Postal Service returns thousands of paper checks to the IRS as undeliverable. Direct deposit eliminates the possibility of a lost, stolen or undeliverable refund check.
2. Convenience. With direct deposit, the money goes directly into your bank account. You will not have to make a special trip to the bank to deposit the money yourself.
3. Ease. It’s easy to choose direct deposit. When you are preparing your tax return, simply follow the instructions on the tax return or in the tax software. Make sure you enter the correct bank account and bank routing transit numbers.
4. Options. You can deposit your refund into more than one account. With the split refund option, taxpayers can divide their refunds among as many as three checking or savings accounts and up to three different U.S. financial institutions. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to divide your refund. If you are designating part of your refund to pay your tax preparer, you should not use Form 8888. You should only deposit your refund directly into accounts that are in your own name, your spouse’s name or both if it’s a joint account.
Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.
Check the instructions in your tax form for more information about direct deposit and the split refund option. Helpful tips on both are also available in IRS Publication 17, Your Federal Income Tax. Publication 17 and IRS Form 8888 are available on IRS.gov or by calling the IRS at 1-800-TAX-FORM (1-800-829-3676).
Additional IRS Resources:
- Form 8888 , Allocation of Refund (including Savings Bonds Purchases)
- Publication 17 , Your Federal Income Tax
- What to Expect for Refunds in 2013
IRS YouTube Videos:
When Will I Get My Refund? English | ASL
Tags: 1031 exchange real estate investment, asset protection, Asset Protection Planning, business tax, Capital gains tax, collection, corporate tax, direct deposit, elder law, elderlaw, Elderlaw/Law For Life, Estate Planning, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, Moore McLaughlin, Providence, Rhode Island, tax, Tax planning, tax refund, Thomas P. Quinn
Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Thursday, February 7th, 2013 by Moore McLaughlin
When you’re looking for tax information, you want to find it as quickly and easily as possible. That’s why the IRS redesigned its website. It’s now even more user friendly. Here are the top 10 reasons to visit IRS.gov:
1. Get 24/7 Access. Whether you do your taxes during the day or burn the midnight oil, IRS.gov has the tax forms and answers you need when you need them. It’s accessible all day, every day. The Interactive Tax Assistant is a helpful tool that will answer many of your tax law questions. Several tax forms, publications and information are also available in Spanish.
2. Use Free File. Anyone can prepare and e-file their taxes for free with IRS Free File. Offered exclusively at IRS.gov, Free File’s brand name software or fillable forms do the work for you. If you made $57,000 or less, you qualify to use free tax software. If your income is more than $57,000 or you feel comfortable preparing your own tax return, use Free File Fillable Forms. This option provides the electronic versions of IRS paper forms.
3. Try IRS e-file. Whether you do your own taxes or hire a preparer, IRS e-file is the safest, easiest and most popular way to file a complete and accurate tax return. Since 1990, taxpayers have e-filed more than one billion returns. If you owe taxes, e-file gives you options to file early and pay by the tax deadline. If you are due a refund, you should receive it in less than 21 days.
4. Check Your Refund Status. You can track your refund using the enhanced “Where’s My Refund?” tool. It’s quick, easy and secure and has a new look this year. You can start checking on the status of your refund within 24 hours after the IRS has received your e-filed return. You can check your refund status four weeks after you mail a paper return. The tool includes a tracker that displays the progress of your return in three stages while it is processed. Once IRS approves your refund, “Where’s My Refund?” will give a date to expect your refund.
5. Make Payments Electronically. E-payment options are a convenient, safe and secure way to pay taxes. You can authorize an electronic funds withdrawal, use a credit or debit card or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System.
6. Use the EITC Assistant. The Earned Income Tax Credit is a tax credit for working people who earned less than $50,270 in 2012. The credit can be worth as much as $5,891. Check your eligibility using the EITC Assistant tool. You may be among the millions of eligible workers who get the EITC this year.
7. Get Tax Forms and Publications. You can view and download tax forms and publications any time. It’s the easiest way to get IRS forms and publications.
8. Figure the Right Withholding. The IRS Withholding Calculator will help to ensure you don’t have too much or too little income tax withheld from your pay.
9. Request a Payment Agreement. Paying all your taxes on time avoids penalties and interest. However, if you cannot pay your taxes in full you may be eligible to use the Online Payment Agreement Application to request an installment agreement.
10. Get the Latest Tax Law Changes. Learn about tax law changes that may affect your tax return. Special sections of the website highlight changes that affect individual and business taxpayers.
The address of the official IRS website is www.irs.gov . Don’t be misled by sites that claim to be the IRS but end in .com, .net, .org. Some thieves use phony websites to gain your personal and financial information. They then use this information to commit identity theft or steal your money.
Additional IRS Resources:
- 1040 Central
- IRS Free File
- IRS E-file
- Where’s My Refund?
- EITC Assistant
- Withholding Calculator
IRS YouTube Videos:
- All About IRS.gov – English | Spanish | ASL
- File Your 1040EZ Using Free File – English | Spanish | ASL
- How to Get 1040 Forms – English | Spanish | ASL
- Earned Income Tax Credit – English | Spanish | ASL
IRS Podcasts:
- File Your 1040EZ Using Free File – English | Spanish
- How to Get 1040 Forms – English | Spanish
- Earned Income Tax Credit – English | Spanish
Tags: 1031 exchange real estate investment, asset protection, Asset Protection Planning, Capital gains tax, collection, corporate tax, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, IRS.gov, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, Rhode Island Division of Taxation, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in 1031 Exchanges, Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Tuesday, January 15th, 2013 by Moore McLaughlin
In an eleventh hour agreement to avert the fiscal cliff, Congress passed the American Taxpayer Relief Act of 2012 (American Taxpayer Relief Act) which modifies and makes permanent many of the Bush-era tax cuts, and extends other popular, but temporary, taxpayer-friendly incentives. The “Bush-era” tax cuts refer to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).
Overall, the American Taxpayer Relief Act makes changes that affect almost all taxpayers. As a taxpayer with college age dependents, or who has reported tuition expense in the past, you may be interested in the education incentives covered under the American Taxpayer Relief Act.
American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) rewards qualified taxpayers with a credit of 100 percent of the first $2,000 of qualified tuition and related expenses and 25 percent of the next $2,000, for a total maximum credit of $2,500 per eligible student. Additionally, the AOTC applies to the first four years of a student’s post-secondary education. The AOTC is an enhanced, but temporary version of the permanent HOPE credit. The HOPE credit, in contrast, is less generous than the AOTC and applies only to the first two years of post-secondary education. Fortunately, the American Taxpayer Relief Act extends the AOTC through 2017.
Deduction for Qualified Tuition and Related Expenses
The American Taxpayer Relief Act extends until December 31, 2013 the above-the-line deduction for qualified tuition and related expenses. The bill also extends the deduction retroactively for the 2012 tax year.
The above-the-line deduction for higher education tuition and related expenses expired after 2011. The higher education tuition deduction was created by EGTRRA and extended by subsequent laws, most recently by the 2010 Tax Relief Act, but only through the end of 2011. In 2011, the last year in which the deduction was available under current law, the deduction reached a maximum of $4,000 for taxpayers whose modified AGI did not exceed $65,000 ($130,000 for joint filers), and $2,000 for taxpayers whose modified AGI exceeded $65,000 but did not exceed $80,000 ($160,000 for joint filers).
Taxpayers cannot claim the higher education tuition deduction in the same tax year that they claim the AOTC or the Lifetime Learning credit. A taxpayer also cannot claim the education tuition deduction if anyone else claims the AOTC or the Lifetime Learning credit for the student in the same tax year.
Student Loan Interest Deduction
The American Taxpayer Relief Act permanently suspends the 60-month rule for the $2,500 above-the-line student loan interest deduction. The American Taxpayer Relief Act also expands the modified adjusted gross income range for phaseout of the deduction permanently and repeals the restriction that makes voluntary payments of interest nondeductible permanently.
Coverdell Education Savings Accounts
The American Taxpayer Relief Act extends permanently Bush-era enhancements to Coverdell education savings accounts (Coverdell ESAs). These enhancements include a $2,000 maximum contribution amount and treatment of elementary and secondary school expenses as well as post-secondary expenses as qualified expenditures. Without the American Taxpayer Relief Act, the maximum contribution amount to a Coverdell ESA was scheduled to significantly decrease from $2,000 to $500 after 2012.
Under the American Taxpayer Relief Act, qualified educational expenses for a Coverdell Education Savings Account continue to include expenses incurred while attending an elementary, secondary or post-secondary school.
Employer-Provided Education Assistance
The American Taxpayer Relief Act extends permanently the exclusion from income and employment taxes of employer-provided education assistance up to $5,250. The employer may also deduct up to $5,250 annually for qualified education expenses paid on behalf of an employee.
Federal Scholarships
The American Taxpayer Relief Act makes permanent the exclusion from income for the National Health Service Corps Scholarship Program and the Armed Forces Scholarship Program.
If you have any questions related to these education incentives or to the American Taxpayer Relief Act, please call our office for an appointment. We will be happy to assist you.
Tags: American Opportunity Tax Credit, American Taxpayer Relief Act of 2012, Armed Forces Scholarship Program, asset protection, Asset Protection Planning, business tax, Capital gains tax, corporate tax, Coverdell, Coverdell Education Savings Accounts, Coverdell ESA, Economic Growth and Tax Relief Reconciliation Act of 2001, elder law, elderlaw, Elderlaw/Law For Life, Employer-Provided Education Assistance, HOPE credit, income tax, internal revenue code, Internal Revenue Service, IRS, Lifetime Learning credit, mclaughlin & quinn, Moore McLaughlin, National Health Service Corps Scholarship Program, Providence, Qualified Tuition, Rhode Island, Student Loan Interest Deduction, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Current Events, Estate Planning, Self-directed IRAs, Tax Current Events and News, Tax planning
Tuesday, January 15th, 2013 by Moore McLaughlin
The American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act) extends through 2013 the provision which allows individuals who are at least 70½ by the end of the year to exclude from gross income qualified charitable distributions up to $100,000 from a traditional or Roth IRA that would otherwise be included in income. Married individuals filing a joint return are allowed to exclude a maximum of $200,000 for these distributions ($100,000 per individual IRA owner).
Congress waited until it was too late to make a 2012 qualified charitable distribution before extending the benefit, so it provided two forms of relief. First, you may elect to treat a qualified charitable distribution made in January of 2013 as having been made on December 31, 2012. Second, you may treat any portion of a distribution made in December 2012 as a qualified charitable distribution if it is transferred to a qualified charity in January of 2013. When these relief provisions are properly executed, the distribution made or transferred in January 2013 counts toward the $100,000 exclusion limitation and the required minimum distribution for the 2012 calendar year.
A review of your tax return indicates that you may be eligible to take advantage of these opportunities. As you may know, IRA owners must either withdraw the entire balance or start receiving periodic distributions from their traditional IRAs by April 1 of the year following the year in which they reach age 70-½. The minimum distribution that is required each year is computed by dividing the IRA account balance as of the close of business on December 31 of the preceding year by the applicable life expectancy. An IRA owner who does not make the required withdrawals may be subject to a 50-percent excise tax on the amount not withdrawn.
Many taxpayers like you, who receive taxable distributions, also contribute to charitable organizations. You can reduce your taxable income by excluding up to $100,000 of your IRA distribution from gross income when you transfer it directly to a charitable organization. This exclusion is available for taxable Roth IRA distributions as well as minimum required distributions from a traditional IRA.
Although a charitable contribution may be motivated by humanitarian reasons rather than by tax considerations, it is, nevertheless, wise to take tax considerations into account when making a contribution. Since this distribution must be made by the IRA trustee directly to a qualified (i.e., 50-percent) charitable organization, you should review your charitable tax giving as soon as possible. Please call our office at your earliest convenience to discuss this option.
Tags: American Taxpayer Relief Act of 2012, asset protection, Asset Protection Planning, business tax, Capital gains tax, charitable contribution, charitable organization, corporate tax, Jill E. Sugarman, Jill Sugarman, Long-term care, long-term care insurance, mclaughlin & quinn, Medicaid, Medicaid planning, Moore McLaughlin, Providence, Rhode Island, Roth IRA distributions, tax, Tax planning, Thomas P. Quinn
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