Q-1:

Subject: Unique Tax Comparison Tool

Hi Kerry,

 

My name is Megan, and I am a student intern at FindTheBest in Santa Barbara, CA. FindTheBest offers over 800 unbiased comparisons and receives over 8 million unique visitors per month.

I want to compliment you on the great tax resources Tax Guru – Ker$tetter Letter features. We have just launched a comparison tool that is a reference of individual income tax by zip codes and compares them by state, number of returns, AGI, AGI class, and more and I thought it might be a great tool to pass on to your readers.

Would it be alright if I sent it over for your review?  It’s completely free, and I think you’ll really enjoy it.

Best,

Megan

A-1:

Megan:

That sounds interesting.  I would love a chance to see what you have.

Kerry Kerstetter

Q-2:

Kerry,

Thank you so much for your quick response! I bet your glad to have some time to breathe now that tax season is finally over!

Our tax rates directories offer around hundreds of thousands of informative tax listings compiled from the IRS, allowing readers to easily access income tax data for different regions and compare them to each other:

“Individual Income Tax by Zip Code” (http://income-tax-zip.findthedata.org/)

It is a great tool for accountants, taxpayers, politicians, home buyers, etc.  If you find it to be a useful resource, would you mind sharing the link with your readers on your blogroll?

Looking forward to hearing your feedback!

Best,

Megan

A-2:

Megan:

I finally had a chance to look around your site and some of the tax stats.

At first blush, it looked interesting.  However, some of the figures don’t seem to make sense, such as the tax percent paid by upper income levels.  They seem to be far too low.

I checked your page on the history of top tax rates (http://top-federal-tax-rates.findthedata.org/) and noticed that you have the top rate for 1972 through 1981 as 60%.  That rang odd.  Since 1982, whenever people describe the Reagan tax cuts, it’s always said that the top rate was 70% before he cut them.

You can find a more accurate history of tax rates here:
http://www.taxfoundation.org/taxdata/show/151.html

You can see that 1965 through 1981 had a top rate of 70%

I hate to rain on your parade here, but you may want to check on how the figures and stats you have were assembled.

Please keep me posted as to when the info is corrected.

Kerry Kerstetter

Q:

Subject: corporate medical plan

You recommend setting up a corporate medical plan for people with C-Corps who have a lot of medical expense. Can you comment on whether this a formal arrangement involving a plan document, or a corporate resolution or an IRS filing or a non-formal arrangement that simply involves paying medical expenses from the corporate check book?

Thanks for your consideration and your website which is a real public service.

A:

There are companies that will provide admin services for small employer plans, but that is an unnecessary expense.

I have handled some recent IRS audits where they allowed all of the medical costs without even asking for formal documentation of a plan. However, I think it is still a good idea to have a corp resolution just in case your auditor isn’t as lenient.

Attached are a couple of samples from the Small Business Tools program from CFS Software that can give you a good idea of what a plan resolution should look like.

TaxToolsMERP1.doc

TaxToolsMERP2.doc

I hope this helps.

Kerry Kerstetter

Additional Info: TaxCoach has an even more detailed plan document, along with an excellent implementation guide with the applicable IRS regs and court cases to document the kinds of expenses that can be included in the plan.  Their planning module on MERPs has a lot of useful info, including these advantages of using a MERP:

• You can deduct 100% of your employees’ health insurance. Deductible health insurance costs include major medical and supplemental premiums, Medicare premiums, qualified long-term care premiums, and Medicare supplemental (“Medigap”) policies.
• Out-of-pocket medical costs include routine expenses such as co-pays, deductibles, and prescriptions; occasional expenses such as eyeglasses and dentistry; big-ticket items like orthodontics, fertility treatments, and schools for learning-disabled children. It also includes over-the-counter medicines and health-care supplies, if prescribed by a physician. You can reimburse employees or pay health-care providers directly.
• The plan lets you deduct 100% of your out-of-pocket costs, bypassing the usual 7.5% floor for itemized deductions. You’ll also avoid any self-employment tax you would otherwise pay on amounts you deduct as plan benefits.