Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for October, 2008

More Evil Rich Every Day

Posted by taxguru on October 31, 2008

As I have been screaming for decades, the definition of who is in the cross-hairs as being the Evil Rich and deserving of extra tax persecution is subject to constant change by our rulers in DC.  It’s the classic camel’s nose under the tent.  The O’Biden DemonRat tag team isn’t even waiting until the election’s over before publicly announcing that their target for additional mandatory patriotism has widened from those making over $250,000 per year a few weeks ago to anyone earning over $120,000 today.  As I have long predicted, it won’t be long until these nut-cases use the same definition of evil rich as the IRS has for decades for Social Security recipients; Single persons earning over $25,000 per year and married couples earning over $32,000 per year.

How Low Can It Go? Richardson Pegs Middle Class as Those Making Under $120,000 – From FoxNews

Richardson Lowers Obama’s Definition of “Rich” to 120K a Year – From Rush Limbaugh

 

 

 

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Posted by taxguru on October 30, 2008

Taxing Times – Thomas Sowell, predicting a huge exodus of capital out of the USA between November 5 and December 31 if 0bambi wins this election, for very obvious and justifiable reasons.  

 

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0’Biden’s first 100 days…

Posted by taxguru on October 30, 2008

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Targeting the Evil Rich

Posted by taxguru on October 30, 2008

From last night’s Tonight Show via NewsMax:

The Democrats’ definition of the rich keeps going down: Barack said no one making under $250,000 a year will see a tax increase. Then he said no one making under $200,000 will see a tax increase. Then Joe Biden said no one making under $150,000 will see a tax increase. I think we’re going to see a tax increase.

 

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Posted by taxguru on October 30, 2008

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100% Fair Tax

Posted by taxguru on October 28, 2008

 

This latest video from F.R. Duplantier’s mock presidential campaign has a tax plan that sounds very much like Obambi’s

 

 

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Free rebates…

Posted by taxguru on October 27, 2008

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Qualifying for IRAs

Posted by taxguru on October 27, 2008

Q-1:

Subject: sep ira tax calculations

can profit distributions to an owner of an s corp. be used to calculate contributions to a sep ira?

 

A-1:

No it can’t. 

Only earned income that is subject to Social Security tax is eligible for the SEP earning test.  Since S corp net profit on a K-1 is not subject to any SS tax, it doesn’t count towards SEP-IRA eligible income.

Whether or not it makes sense for you to intentionally restructure your S corp income in such a way so as to pay in some SS tax and thus make it possible to use that income as a means of qualifying  for  a SEP-IRA contribution is something you need to work on with your professional tax advisor.  It may or may not be counter-productive to do that.

Good luck.

Kerry Kerstetter

 

Q-2:

kerry can someone have a sep ira and a roth ira or any other retirement combination with a sep ?

 

A-2:

You can simultaneously have several types of retirement accounts.  The tricky part comes in determining which ones you are allowed to contribute to each year.

Rather than ask me about each potential combination of plans, the more efficient approach would be to work with a professional tax advisor to run each of the scenarios until you find one that suits your unique situation and goals.

Good luck.

Kerry Kerstetter

 

TaxCoach Software: Finally! Plain-English Tax Planing That Builds Your Business!

 

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Gifts made after death?

Posted by taxguru on October 27, 2008

Q:

Subject:  gifting

In the year of death can the surviving spouse make a $24000 gift to her daughter after her husband has passed away? She gets to claim him as an exemption in 2008 even though he died Jan 2008.Can she still use his annual gift exclusion to make gifts in 2008 after his date of death?

  

A:

What you are proposing is not allowed.  Once a person passes away, s/he can no longer make gifts or use the Gift Splitting option between spouses. Any transfers of assets owned by the deceased will need to be treated as a distribution of estate assets.

Even though the widow can’t exclude the full $24,000 gift, the additional $12,000 can still be given tax free as part of her one million dollar lifetime exclusion, which may or may not make sense depending on the potential size of her taxable estate.

A qualified professional tax advisor should be consulted to work out the most sensible strategy.

Good luck.  I hope this helps.

Kerry Kerstetter  

 

 

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S Corp Payments

Posted by taxguru on October 26, 2008

Q:

Subject:  S corp’s

Hi I just found your site and read about S vs C Corp’s.  We have been an S Corp for years.  Some questions I have is:  money taken out by shareholder ( my wife and I) should that be ledgered under personal income or shareholder loans?  Is that money taxable?  My CPA says it is not taxable.  Why would I ever pay myself in wage form if this is the case.  I see as our profits get up to 65,000 or more maybe we should start a C Corp.  How so you smooth out the money in a C Corp.  I don’t understand.  Maybe I should get a new CPA? 

Thanks

 

 

A:

 

If you’ve been operating an S corp for any period of time and your professional tax advisor hasn’t explained to you all of the details of how cash distributions are treated, it does sound like s/he has dropped the ball.  That all should have been explained to you prior to your even setting up the S corp.

Likewise, if your professional tax advisor isn’t aware of how to effectively utilize a C corp to smooth out your taxable income, it is time to find someone who understands this very basic tool of tax planning.

Good luck.

Kerry Kerstetter

 

 

 

 

 

 

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