- Name: Milt Baker CPA
- Location: Westland, Michigan, United States
Graduate of Walsh Institute Of Accountancy (Now Walsh College) Michigan in 1959. Retired in 1987, but still active in the profession **World War II Veteran (Pacific) **PHONE 734-261-1979 **E-MAIL -email@example.com **(Domain Name CPASENSE Registered) **Mentioned in the Journal of Accountancy, SmartPros, Tax Prof Blog, CPA2BIZ, CPA Journal, AccountingWEB, CPATrendlines & More **Search Accounting Blogs: http://www.blognetnews.com/accounting (Includes cpasense)**TOPICS - FINANCE - FEDERAL & MICHIGAN TAXES ** Making Sense Of Your Finance & Taxes
Saturday, May 28, 2005
Friday, May 27, 2005
THE new car donation law curbs drastically the economics of many car donations. Take the example of a prior year taxpayer taking a $2,400 deduction for a donated truck sold at auction by the charity for $375. Assuming a combined 20% federal and state tax rate for the donor, a donation is worth $480 in saved taxes - so the donor was better off donating the car than selling it.
NOW, this year, the deduction for the same car would be limited to $375 (the charity sold it for at auction), resulting in a $75 tax savings. Many would-be donors will just sell the car now; assuming they would also sell it for $375, they'd be money ahead to do so, but you should run the figures for your situation.
WHAT TO DO? I recommend that, in the above example, you consider a donate cash or appreciated securities to the Salvation Army. No charity makes better use of their resources.
OH, and just sell the car.
Thursday, May 26, 2005
A new website - Project Blue Star - created to assist families of Michigan soldiers serving overseas
State of Michigan - Office of the Governor
Wednesday, May 25, 2005
Much has been reported in the media about the changes affecting consumers under the Bankruptcy Abuse and Consumer Protection Act of 2005, which was signed into law on April 20, 2005.
But there are some tax law changes to consider. Interestingly, many of the changes can be found in the Bankruptcy Code rather than in the Internal Revenue Code. The changes become effective on Oct. 17, 2005 so you can still act until then under the old law.
Protection For Some Assets:
The new law changes some of the rules regarding the exemption of assets from bankruptcy.
• Qualified retirement plans and Individual Retirement Accounts (IRAs. As under prior law, assets in qualified plans are fully protected from the claims of creditors. The new law clarifies that this protection extends to IRA rollovers funded with distributions from qualified retirement plans. But the new law limits protection for funds in IRAs. The maximum amount of exempt funds is $1 million. This limit will be adjusted for inflation in the future.
Note: The U.S. Supreme Court had ruled that funds in an IRA were exempt (Rousey v. J.R. Jacoway, SCt, 2005-1 USTC ¶50,258); it did not place any cap on this exemption nor give any recognition to the bankruptcy law that had been pending at the time.
• Residences. Florida and Texas had provided unlimited homestead protection for personal residences, while other states had more modest protection for homes. The new bankruptcy law provides uniform treatment that overrides the different state rules. The exemption is now capped at $125,000 if the home was acquired within 3.3 years (1,215 days) of filing for bankruptcy protection. Thus, homes owned prior to this time continue to enjoy unlimited protection in Florida and Texas.
• Education savings plans. The new law creates for the first time clear protection for funds in 529 plans [A 529 plan is a state-operated investment plan that gives families a federal tax-free way to save money for college. Authorized by Congress in 1996, they are officially known as qualified tuition programs (QTPs), but commonly referred to as "529 plans," "state 529 plans" or "section 529 plans" after the section of the Internal Revenue Service (IRS) code that provides the plans' special tax breaks] and Coverdell education savings accounts [A Coverdell education savings account (ESA) is a savings account, created under the aegis of the IRS, as an incentive to help parents and students save for education expenses]. Contributions made within a year of filing for bankruptcy are not protected. Contributions made between one and two years of filing are protected only up to $5,000. Older contributions are fully protected.
• Asset protection trust. Some states--Alaska, Delaware, Nevada, Rhode Island and Utah--allow individuals to create self-settled trusts that protect their assets. The grantor can be both a beneficiary and trustee of these trusts while blocking creditors from assets held in the trusts. The new law limits the protection to transfers of property made within 10 years of filing for bankruptcy only if the transfers were not made with the intent to hinder, delay or defraud creditors, so protection can be obtained.
Note: These states permit nonresidents to set up asset protection trusts within their borders, provided that there is a resident trustee. However, it has not yet been tested whether nonresidents can enjoy the same asset protection as residents and the bankruptcy law does not clarify this point.
Discharge of Taxes:
For some individuals, outstanding taxes, federal, state or local, can be a main reason for the need for bankruptcy protection. In the past, an individual who used a Chapter 13 bankruptcy (a repayment plan that generally ran for three years) could obtain a partial discharge for taxes related to nonfiled returns and certain late filed returns; whatever was paid to the government during the repayment period was all the debtor was required to pay.
Rules For Chapter 13 and Chapter 7 Bankruptcy
The new law changes the rules for Chapter 13 bankruptcy. The repayment period is now five years. And the law specifically provides that back taxes related to nonfiled or late-filed returns cannot be discharged. This includes interest that accrues on the taxes after the filing of a bankruptcy petition. And, as under prior law, the treatment of penalties follows the treatment of the underlying taxes to which they relate, so penalties may not be discharged either.
The new law continues the opportunity to obtain a discharge of taxes under Chapter 7, which is a straight bankruptcy filing in which the individual can obtain a fresh start. Discharge applies only to taxes owed on timely filed returns that arose three years before the filing of a bankruptcy petition; the IRS must have assessed the tax at least 240 days before the petition and there is no fraud.
But the opportunity to use Chapter 7 has been severely restricted. This type of filing is restricted to individuals with income below a set limit who cannot afford to make monthly payments to creditors of at least $100. Thus, only low-income taxpayers can now qualify for Chapter 7 bankruptcy and obtain a discharge of back taxes.
New York Law Journal
Tuesday, May 24, 2005
A bill boosting the income eligibility levels for older persons, aged 62 or older, and others wishing to defer payment of summer property taxes was signed by Governor Granholm on Monday, May 23. Under HB 4188 (PA 24, immediate effect) the income level for deferred payments will increase from $25,000 to $35,000. http://www.michiganlegislature.gov/
Monday, May 23, 2005
Michigan Department Of Information Technology
Thursday, May 19, 2005
Standard homeowners, renters, and auto insurance policies protect policyholders against certain types of personal liability. However, in today’s litigious society, this basic coverage is often not enough to protect your assets from a devastating lawsuit that may result should you, a member of your household, or even a pet accidentally injure someone or damage someone’s property. That is why the Michigan Association of CPAs recommends that you have personal liability insurance....-MORE-
Tuesday, May 17, 2005
Friday, May 13, 2005
Michigan Labor & Economic Growth
Wednesday, May 11, 2005
See current averages in right hand column under Overnight Averages - As of 5-27-05, they are 5.22%, 4.80%, and 4.71%
Tuesday, May 03, 2005
For many, purchasing a home is one of the most significant investments of their lives. So if you are in the market for a home, be sure that thorough research and an understanding of your financial situation – rather than emotion – drive your decisions. The following step-by-step advice from the Michigan Association of CPAs will help to prepare you for the road to homeownership....-MORE