People often accuse me of being overly critical of IRS when I say they are slow to release information.  How else would you describe the fact that they have just now admitted to losing 30,000 estimated tax payments into San Francisco Bay, after TaxProf Paul Caron reported this event a week ago, and I added my comments later that same day?  It’s just one more example that IRS isn’t the quickest source of info.

IRS’s official advice for those folks whose checks may have been lost:

After Sept. 30, a taxpayer whose check has not cleared his or her bank should contact the IRS on its toll-free taxpayer assistance line at 1-800-829-1040. Taxpayers who contact the IRS will receive instructions regarding how and where to send a replacement check. The IRS will waive interest and penalties for affected taxpayers.

As I’ve said on several occasions, the ability to properly prepare for one’s retirement has always been hampered by the one unknowable variable; how many years of retirement life you will need to pay for.  Obviously, if you will be living to over 100, you will need a lot more resources than if you will be passing away at 66. 

While nobody can guarantee the accuracy of actuarial tables or other predictors of life expectancy, I was impressed with the breadth of topics covered in this questionnaire to calculate life expectancy to include many of the factors associated with expected lifespan.

While it covers such critical factors as family health history and lifestyle, I did think it strange that it doesn’t include some of the high-risk questions I have seen in life insurance applications, such as whether you participate in such dangerous activities as sky-diving and SCUBA diving.

While I’m not sure I would base all of my retirement planning on the results of this calculator, it is interesting for entertainment purposes.  FWIW, it gives me another three decades, to 80.31 years.

From a financial planner:

Subject: Gifts

Don’t mean to be pickey but gifts do reduce the taxble income as in gifts to charity.  Hope all is well.

My Reply:

I think there is some confusion over terminology.

While some lay-people may use the term “charitable gifts,” we tax pros don’t.  There are charitable “donations” and “contributions,” which do reduce taxable income via Schedule A for those people who itemize their deductions.

There are also charitable “bequests” that reduce the taxable estate on Form 706.

However, we reserve the terms “gifts” and “gifting” to only designate transfers of assets between individuals.  These are part of the estate tax system and do not have any effect on the taxable income of the donor or recipient.  I have more info on this on my main website.

I hope this clears up your confusion here.

Thanks for writing.

Kerry Kerstetter

Q:

Subject: Gift Tax Limit 2006

Kerry,

I need to show an IRS certified verification that the 2006 gift tax limit will be $12,000.  Is there an IRS resource that shows this information.  So far, I have been unable to locate this information over the web.

Thank you for your time!

A:

Historically, IRS is always at least a few months behind the academic community when it comes to releasing the inflation adjusted changes in tax related amounts.  This means it probably won’t be until near the end of the year until IRS officially confirms the calculations that CCH released last week.

While he doesn’t include gift taxes, Professor James Young shows the actual inflation factors used in these calculations.

That will have to do the job for you for now.  Anybody demanding official IRS confirmation of those calculations at this early date is being completely unrealistic. 

Kerry Kerstetter

 

Q:

Subject: C versus S Corp

What a great article.  I am in the decision making stages of determining which is better for the purchase of an existing business (car wash in FL).  The problem I am having is the attorney suggest S and the CPA is suggesting C.  I am stuck in the middle.  Any advise?

Second option??

Regards,

A:

I obviously don’t know anything about your personal situation and thus have no idea which entity is better for you.

Assuming both of these individuals are competent, it seems that you should heed the advice of the one who most thoroughly understands your current and future tax and financial situation, which in most cases would be the CPA; but you may have different working relationships with your CPA and attorney.  

Choosing between a C or S corp really is only a taxation matter.  Legal liability issues, another very big reason to use a corporate structure, and what most non-tax attorneys are mainly concerned with, are identical for both types of corp.

Good luck.

Kerry Kerstetter