The IRS is Paying Close Attention

This was based on numbers from 1999 to 2006, and is probably even higher in recent years, as the weak economy may have led more people to hide money from the government. As an example, the average tax refund decreased by $100 in 2011 — perhaps people are reporting less income in order to keep more of their money.

Now, it’s hard for us wrap our heads around how much money that really is. Here’s a way to do so: Recently, Congress was unable to agree on a plan which would reduce the national deficit by $1 trillion over 10 years. Over that same time period, tax evasion will cost us well over $3.3 trillion.

Given my profession, perhaps it’s obvious that I’m a big proponent of everyone following the tax rules. When we don’t, it means that everyone else has to pick up the slack. And the consequences of all of this reporting about tax fraud is greater scrutiny on honest taxpayers, and higher tax rates.

The IRS is Catching More Tax Evaders

The “good” news is that the IRS is doing a better job of catching people who aren’t paying their fair share of taxes. Fraud investigations increased by 14% in 2010, while prosecution recommendations (cases that the IRS thinks should be brought to court) increased 18% and convictions increased by 4%.

Again, it’s possible that some of these increases are due to the economic situation of the past few years, but the fact that the IRS decreased its investigation time by nearly 40 days is a sign that the IRS is doing a better job.

Don’t Give In To The Pressure; Avoid Taxes — LEGALLY

Here’s what you should understand — the rise in tax evasion means that the IRS is continuing to increase its scrutiny on every return. But that doesn’t mean you have to give up the fight! There are innumerable LEGAL ways to avoid paying too much in taxes. And, unfortunately, software programs and fly-by-night tax shops don’t do a very good job of proactively seeking them out for you.

But perhaps you know someone who does?

Posted on April 1, 2012 Read More

Two Common Estate Plan Myths – BUSTED

One of the big reasons that most families don’t yet have this kind of plan in place is because of some incorrect thinking about whether it’s right for them, or if it’s even necessary. And sure –some people just haven’t gotten around to creating a will or trust. Others think they don’t need an estate plan because they’re not “rich”.

But here’s the problem–if you continue without an estate plan, you could leave a legacy of bad feelings and attorneys’ fees.

So I wanted to speak to some of the more common misconceptions out there. I’ll start with a couple big ones this week, and when the time is right, address a few more for 2012…

MYTH #1: Only rich people prepare estate plans.

Do you own ANYTHING? Because if so, you need a will. You see, a will allows you to designate who will receive your property should anything happen. Continuing without one ensures that your assets will be distributed under the terms of your state’s “intestate succession” laws. That means your money and property could end up with family members you haven’t spoken to in years, instead of who you’d really like to see control your assets.

I won’t go into all of the different components of a will, trust, health care directive etc., as my purpose here is to emphasize that failing to plan is simply a decision to trust your assets to government bureaucrats who don’t know you from Adam.

Even if you think your situation is pretty straightforward, you may feel more comfortable hiring a lawyer to guide you through the process.

MYTH #2: Everything goes to your spouse, if something happens.

Unfortunately, that’s not always the case. We deal with clients from different states around the country, and state laws vary. In fact, in most states, if you continue without a will (intestate), your inheritance will be divided among your spouse and your children. In New York, for example, when someone dies intestate, the spouse gets the first $50,000 of the estate and what’s left is divided 50-50 among the spouse and the children.

You can imagine how this could create all kinds of problems, particularly if your spouse was financially dependent on you or you have children from a previous marriage.

I’ll send a few more in the future, but I hope you can already see that things are not always as we “think”. And let’s take advantage of tax season and move towards getting this done (or updated) this year!

I hope this helps. To your family’s financial and emotional peace…

Posted on March 1, 2012 Read More

Questions Which Might Affect Your 2011 Tax Bill

There may be a few moves we can make that can help your tax hit before we’re forced into “reaction mode” — which is the only mode out of which after-the-fact tax work can be done. So, if at all possible, I’d like to change that paradigm for you by having you answer a few short questions…

So, without further ado — some questions for you:

Have you had a significant change in your wage income this year?

Have you taken capital gains or losses this year? Are you planning to?

Did you start or sell a business this year?

Did you purchase real estate?

Did you make your full contributions to retirement accounts?

Have you considered a Roth IRA?

Did you withdraw from retirement accounts, and for what purpose?

Are there any other issues you think we should know about?

Now — the answers to these questions form the “tip of the iceberg”, and they will help us to know which direction to take as we work with you.

Posted on February 1, 2012 Read More

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