Sunday, May 5, 2013

Around The Tax-Avoiding World In 53 Minutes (Click To View Video)

  1. Tyler Durden  for ZeroHedge.com writes: "Where do multinationals pay taxes and how much?" Gaining insight from international tax experts, this excellent documentary takes a look at tax havens, the people who live there and the routes along which tax is avoided globally. As we have previously discussed in great detail, those routes go by resounding names like 'Cayman Special', 'Double Irish', and 'Dutch Sandwich' amid a financial world operating in the shadows surrounded by a high level of secrecy where sizable capital streams travel the world at the speed of light and avoid paying tax. 'The Tax Free Tour' explains the systemic risk for governments and citizens alike. Is this the price we have to pay for globalized capitalism? 
Posted on 7:37 AM | Categories:

Be Tax-Smart About Gold (Click To View Video) Tax Consequences of Investors Selling Gold

Dan Caplinger for Motley Fool.com writes: Owning gold has been extremely lucrative for long-term investors over the past decade, with prices of the yellow metal soaring. But now that a big price drop in gold has prompted many precious-metals investors to contemplate selling their holdings, the tax consequences of selling their gold may give investors a nasty shock next April.
In the following video, longtime Fool contributor and tax expert Dan Caplinger explains some of the tax consequences of holding gold. Dan notes that several of the most popular exchange-traded funds, including SPDR Gold (NYSEMKT: GLD  ) , are subject to higher tax rates because of their status as collectibles. To help solve the potential problems involved with many investments, Dan discusses two potential alternatives that can let you keep more of your precious-metals profits.
Posted on 7:36 AM | Categories:

Better Alternatives to 529 Plans

Mark Kennan for Demand Media writes: Using a 529 plan for college savings lets you save on a tax-deferred basis and use the money at any qualifying college, university or trade school. However, 529 plans aren't right for everyone because of restrictions on how the money is invested and spent. Considering alternative savings methods helps you make sure you're making the right choice.


COVERDELL ESA

Coverdell Education Savings Accounts function similarly to 529 plans: you contribute after-tax dollars, those dollars grow tax-free while in the account, and when you take the money out, you don't pay taxes as long as you're using it for qualified educational expenses. The difference lies in what counts as qualified expenses: Coverdells let you spend the money on elementary and secondary school as well as college, which means if Junior's breaking your bank going to a private high school, you can tap your Coverdell. If you tapped a 529 plan, you'd owe income taxes and a 10 percent penalty on the earnings. The downside to the Coverdell is you're limited to $2,000 per year in contributions and your income must fall below certain annual limits.

ROTH IRAS

Yes, the "IRA" in Roth IRA stands for individual retirement account. But, that doesn't mean that's all it can be used for. You won't get a tax deduction for contributions, but you can put in up to $5,500 per year -- $6,500 if you're 50 or older -- as of 2013, as long as your income falls below the annual limits. Once the money's in, it grows tax-free until you take distributions. But wait, you say, don't you have to use the money for retirement? Nope. In fact, you can get your contributions out tax-free and penalty-free any time you want. Plus, if you're 59 1/2 and have had a Roth IRA open for at least five years by the time your kid goes to college, you get the earnings out tax-free, too. Even if you're not, you won't owe the early withdrawal penalty because college tuition payments are exempted from the penalty. Plus, the Roth IRA won't appear as an asset on your kid's financial aid application.

CUSTODIAL ACCOUNTS

You can gift your kid up to $14,000 per year without triggering any gift taxes, as of 2013. Putting it in a custodial account gives you control over the spending, but only until the child becomes an adult, typically between 18 and 21, at which point the money belongs to your child -- and you can't make her use it for college. But, unlike a 529 plan, if your child decides to start her own business after high school, you don't have to worry about nonqualified withdrawal penalties from a 529 plan. Plus, the income on the money in the custodial account won't be tax-sheltered, but all or a part of it might be taxed at the child's lower rate.

TAXABLE ACCOUNTS

Before you tune out because of the word "taxable," hear out the reasons it might be to your advantage. Using a regular investment account means you get to pick how the money's invested. With a 529 plan, you're stuck picking one of the state-approved investment options and you're only allowed to switch investments once per year. Plus, any money you take out of your 529 plan to pay for college can't count toward getting you an education tax credit, like the lifetime learning credit or American opportunity credit.
Posted on 7:36 AM | Categories:

Fixing QuickBooks Problems: Free Tools You Can Use

Charlie Russell for the Sleeter Group writes: Any time that you are working with a program that runs on Microsoft Windows you have to be ready to fix odd problems that can crop up.QuickBooks is no exception – it relies on many different components and settings in Windows to work properly, and if something isn’t right then QuickBooks just won’t run or install. Let’s talk about some FREE tools that are available to you if you can’t get QuickBooks to install, run or open a company file on your Windows computer.
Fixing these problems can be VERY frustrating because there are an uncountable number of variations in how a Windows computer can be configured. Even if you are successful in getting things running today, the next time you get a Windows Update or install some other program, your QuickBooks installation may fail. Fortunately, Intuit provides us with several tools that can help with many of the problems that you may run into.
Note that these all refer to the Windows Desktop version of QuickBooks, and many of these tools are only available for the US version.

Reboot.bat

This has been around for a long time, but I’m surprised how many advisors don’t know about it. This is a simple “batch” file that QuickBooks will install on your computer. This “re-registers” the various QuickBooks related components with Microsoft Windows.

-SNIP-


Posted on 7:35 AM | Categories:

The Tax Rates on Cashing Out of Profit Sharing

Mark Kennan for Demand Media writes: Profit-sharing plans allow your employer to put money into a retirement account for you without bumping up your taxable income in the year of the contribution. However, when you take out the money, it's time to pay up. You'll receive a Form 1099-R that documents the distribution, and it needs to be included on your taxes. The rate you pay depends on your marginal tax rate.


ORDINARY INCOME

Distributions from profit-sharing plans count as ordinary income for federal income tax purposes. This means there are no special income tax rates for distributions, nor is there one single rate that applies to all your withdrawals. The distributions can't count as capital gains no matter what you invested the money in when it was in the profit-sharing plan. Instead, the distributions get added to your other taxable income for the year and taxed at your marginal tax rate.

TAX RATES

The tax rate applied to your profit-sharing distribution depends on your income tax bracket. The higher your total income, the higher your tax rate on your profit sharing distribution. As of 2013, the tax rates go as high as 39.6 percent for singles making more than $400,000 and joint filers making more than $450,000. Your profit-sharing withdrawal might push you into a higher tax bracket, but that higher rate only applies to the portion of your income that falls in that bracket. For example, say you're in the 25 percent bracket, just $5,000 under the 28 percent bracket, without your profit-sharing distribution. If you take out $25,000, the first $5,000 is taxed at 25 percent and the remaining $20,000 is taxed at 28 percent.

TAX PENALTIES

If you're under 59 1/2 years old, the IRS might tack on another 10 percent tax penalty on your distribution from your profit-sharing plan. Though you're allowed to get the money out before then, Uncle Sam discourages you from raiding your retirement plan early by adding this tax penalty -- unless you qualify for an exception. For example, say you want some extra money for a down payment on a bigger home. If you take $25,000 out of your profit sharing plan, you'll owe an extra $2,500 on your taxes -- in addition to the ordinary income taxes.

EXCEPTIONS

Not all early withdrawals from profit-sharing plans get hit with an extra 10 percent penalty: if you qualify for an exception, you're off the hook on the penalty but you still owe the ordinary income taxes. You won't owe the penalty on any distributions taken after you suffer a permanent disability or distributions taken by your beneficiaries after your death. You can also take out qualified reservist distributions without penalty. Plus, if your medical expenses exceed 10 percent of your adjusted gross income, you won't owe the penalty on the portion of your withdrawal used to pay those medical bills.
Posted on 7:35 AM | Categories: