Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for August, 2006

Learning how to play the stock market…

Posted by taxguru on August 31, 2006

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Starting retirement saving a little too early?

Posted by taxguru on August 30, 2006

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Tweaking Quicken

Posted by taxguru on August 30, 2006

 

Q:

 Subject: Quicken Question…

I have Quicken 2005 and haven’t figured out how to make it do a particular thing.  Maybe you can help me with it.

Let’s say I have 4 different accounts:
 
Child 1 (10%)
Child 2 (20%)
Spouse (30%)
Self (40%)
 
I want to create a transaction say of $1000 into Quicken (somehow) and have it split the $1000 out by the percentages and place the money into each account.
 
Child 1 ($100)
Child 2 ($200)
Spouse ($300)
Self ($400)
 
When a certain person uses their money, it should come from their account and they should not be able to draw out more than is in their account.
 
Do you know of any way to do this?
 
Thanks,

A:

There may or may not be a way in which to automate what you want in Quicken.  Having switched all of our clients over to QuickBooks, I haven’t used Quicken in so long I can’t advise anyone on this.

The best thing would be to work with your professional tax and accounting advisor, specifying what kinds of reports and other info you are looking to be able to produce. S/he should then be able to help you tweak your accounting program in such a way as to accomplish that goal.  You should already be providing your tax return data to him/her via your Quicken data files; so this wouldn’t be something entirely new for him/her to help you with.

Good luck.

Kerry Kerstetter


Follow-Up:

Kerry,

Thanks for the information and for taking the time to answer my question.

I’ll check with an accountant to see if such a thing can be done.

Thanks again,

 

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Medicare Means Testing

Posted by taxguru on August 30, 2006

 

Q:

Subject: Medicare Part B – Time to OPT OUT?
 
Back in May, 2006 I wrote you about the new tax law wherein for the first time, the payors of tax exempt interest are required to report said
interest [on 1099s] to the IRS. You mused that maybe the reason for the reporting was to catch Social Security recipients who are not adding tax
exempt interest on the SS worksheet to determine its taxability. I think there may be another reason; starting in 2007,  Medicare Part B premiums
will be income based for higher bracket individuals. The premiums will be based on “adjusted AGI” which includes tax exempt interest. The higher
Medicare Part B premiums will be phased in over the three year period, 2007 – 2009 & will be based on 2005 – 2007 adjusted AGI respectively. [The
Social Security Administration will now have access to our 1040s – ain’t that sweet]. 
 
For a scary preview of the forecasted Part B premiums, see http://www.tscl.org/NewContent/102589.asp
 
I am turning 65 at the end of this year & just received my Medicare card for Part A [Hospital coverage which is free] & Part B [Medical coverage which in 2006 cost $88.50/month]. One is automatically opted in to both parts of Medicare; it is necessary to affirmatively opt out of Part B. Not surprising calls to both the SSA & Medicare received little or no knowledge of the upcoming Part B means test. I urge all SS recipients to take a hard look at the forecasted Part B premiums & seriously consider opting out.

A:

You are correct.  This is one more in a long line of attacks on the “evil rich,” using tax return info as the trigger. 

FYI: SSA has always had access to tax return data directly from IRS.  That is what they use to determine income and SE taxes for those of us who are self employed and don’t receive W-2s.  What has actually long been frustrating is that SSA only seems to want to work with original tax returns.  They don’t adjust for subsequent changes in those returns, either through voluntary amendments or by IRS audit adjustments.

I’m not sure of the higher Medicare premiums will be enough on their own; but along with all of the other penalties for having a high AGI, this should motivate more people to use C corporations and other techniques to reduce the income that shows up on their 1040s.

Thanks for sharing this info.

Kerry Kerstetter

Follow-Up:

Thanks for the response & info. My income consists exclusively of the “unearned” type – mainly dividends & interest [mostly exempt]. I haven’t paid any SE taxes for over 30 years [I worked the minimum 40 quarters & out]. Here’s a few more facts about the upcoming rise in Medicare part B premiums:
 
Below is reproduced the table for estimated increase in Medicare Part B premiums. Note that there is a particularly vicious nature to the break points between income levels not found in the familiar X, Y & Z 1040 Tax Rate Schedules. One dollar of income over an income break point can cost anywhere from $154.80 (12x[113.40-$100.40]) to $930.00 (12x[$413.40-$335.90) in additional yearly premiums. That’s confiscatory taxation parading as an insurance premium. Because premiums are based on Modified AGI, shifting deductions from one year to another is of no help; one must work on the gross income side of the equation with such strategies as realizing capital losses or purchasing bonds with accumulated accrued interest wherein the coupon is not paid until the following year. Even such common practices as dollar rounding on tax returns can have a costly effect if the rounding, on balance, goes the wrong way (i.e. up). The closer one gets to December 31st, the more important it is to run an accurate as possible 1040-ES if you are a Part B participant & near an income break point.
 
Estimated Medicare Part B Premiums
[From http://tscl.org/NewContent/102589.asp]           
 
Assuming the Medicare Part B premium continues to rise at the same average rate that is has for the past five years (about 13.4%), the following chart illustrates 
what estimated premiums may look like for 2007 through 2009.                                   
                                        
          Income [MAGI]*                                               Monthly Premium is                       
Individuals          Married Couples                    2006          2007              2008      2009

Under $80,000       Under $160,000               $88.50       $100.40      $113.90      $129.20
$80,000-$100,000    $160,000-$200,000      $88.50       $113.30      $141.30      $180.90
$100,000-$150,000   $200,000-$300,000      $88.50       $133.30     $190.00      $258.40
$150,000-$200,000   $300,000-$400,000      $88.50       $153.30      $235.50      $335.90
Above $200,000  Above $400,000                  $88.50       $173.30      $281.10        $413.40

    * Modified AGI [includes Tax Exempt Interest, Series EE savings bond interest used for educational expenses & any excluded foreign earned income]

NOTE: The premium for 2007 is based on the Modified AGI for 2005.
      The premium for 2008 is based on the Modified AGI for 2006.
      The premium for 2009 is based on the Modified AGI for 2007.

 

 

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Posted by taxguru on August 30, 2006

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Posted by taxguru on August 29, 2006

Tax Break for Wealthy IRA Owners – Gail Buckner looks at the new tax law.

 

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Can CPAs be funny?

Posted by taxguru on August 29, 2006

This is the second recent comic by this cartoonist dissing our profession.

See earlier.

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Importing data from MS Money

Posted by taxguru on August 29, 2006

 

Q:

Subject: Importing data from Money to Quick Books

Dear Sir,
 
Thank you for your very helpful website tips.  It is very generous of you to share your experience.
 
If I am not imposing too much on your good will, may I ask:  am I able to import data from the Money program into Quick Books 6?  The person I am doing this for had kept all his info on Money and now wants to change to Quick Books and I would like to avoid reentering all his information from the first of this year.
 
Thank you.

A:

You should check out the conversion tools available from Big Red Consulting.

Specifically, they claim that the QIF to Excel to IIF Converter can 
   “ Convert part or all of a Quicken or MS Money file to a new or existing QuickBooks company file.”

I hope this helps.  Good luck.

Kerry Kerstetter

Follow-Up:

Thank you very much.

 

 

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Who make the most money from investors?

Posted by taxguru on August 29, 2006

Seminar promoters with their top secret magic formulas for getting rich quick have no shortage of people willing to fork over their money.


(Click on image for full size)

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Eliminating the middlemen.

Posted by taxguru on August 27, 2006

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