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 **(Domain Name CPASENSE Registered) **Mentioned in the Journal of Accountancy, SmartPros, Tax Prof Blog, CPA2BIZ, CPA Journal, AccountingWEB, CPATrendlines & More **Search Accounting Blogs: (Includes cpasense)**TOPICS - FINANCE - FEDERAL & MICHIGAN TAXES ** Making Sense Of Your Finance & Taxes

Thursday, October 30, 2008

AICPA Offers Americans Financial Advice On Job Loss

New York (October 27, 2008) – CPAs serving on the National CPA Financial Literacy Commission of the American Institute of Certified Public Accountants (AICPA) are offering tips on managing personal finances in the event of a job loss. The United States lost more than 159,000 jobs in September, a five-year high, according to the Department of Labor. The total number to date for 2008 is 760,000. U.S. unemployment held steady at 6.1 percent in September, according to the Bureau of Labor Statistics.........


Fidelity Investments Reports Nearly Half Of 61 Year-Olds Plan To Start Taking S.S. As Soon As Possible

Financial Needs and Health Concerns Cited As Top Factors in Decision to Begin Receiving Benefits at Age 62

BOSTON, Oct 27, 2008 (BUSINESS WIRE) -- In a new survey(1) released today, Fidelity Investments reports that nearly half (45%) of Americans age 61 today are planning to begin taking Social Security at the age of 62, the first year that eligible recipients can apply. The top reasons driving their decision to collect early are immediate financial needs and health and longevity concerns............

MarketWatch (Wall Street Journal)

CPAs Provide Tips On Calming Client Fears

The Texas Society of CPAs has provided five tips that CPAs can pass along to their clients to calm their financial worries............


Tuesday, October 28, 2008

Michigan Tax Values Go Down, But Property Taxes Go Up

These are very different times we live in. Last week at the Broadway Theatre Guild office, I ran into Ken Parrish, a CPA, long time friend and the Kent County Treasurer. I asked him his opinion on the current state of property taxes in Michigan. What's going to happen with declining property values and the resulting loss of property taxes. He said for most homeowners, property taxes in 2009 will probably go up. How can that happen?

This is how the property tax system works based on current law. This past year residential property values declined by 20% to 30% in some areas. Tax day in Michigan is December 31st. All property is to valued on December 31, 2008 for purposes of the 2009 property taxes. A logical person may conclude that all residential property taxes will go down in 2009. Not so.

The 1994 ballot proposal, known as Proposal A, specifies that property taxes cannot increase by more that the rate of inflation or 5%. Since 1994, because of low rates of inflation, property values for purposes of the property tax, known as Taxable Value, have increased at very low rates (the inflation rate) even at a time when property values were increasing at double digit rates. Now its payback time.

Property owners who have owned their homes for a large number of years have seen their state equalized value (SEV) go up while increases in Taxable Value have been held back by the Proposal A limitation. Now the reverse is happening. Property values are declining while inflation is up. The social security inflation adjustment will be 5.8%. We can expect the rate of inflation in Michigan to be up. For a long term property owner, this means their Taxable Value will increase even though their SEV will decrease. As long as the Taxable Value does not exceed the SEV, they will experience an increase in tax in 2009. New home owners may not experience a property tax increase.

In the 1990s, no one ever thought property values would decline while inflation is increasing. But, we are now living in a very different time. A ballot proposal which would have frozen the taxable value when the SEV goes down failed to make the ballot.

Ed Kisscorni Blog

Saturday, October 25, 2008

New Tax Law Offers Opportunities

Is it time for the kids to get their own home?

Practitioners have a new tax benefit to consider, but, as has become an increasing Congressional practice, one that has a very short time line. The Housing and Economic Recovery Act of 2008 provides a credit of 10 percent of the purchase price (but not to exceed $7,500 ($3,750 for married filing separately)) for a principal residence by a first-time homebuyer (defined as one who has not owned a residence for the three years preceding the purchase). This is phased out for MAGIs in excess of $75,000 ($150,000 for married filing jointly). The credit is recaptured proportionately for each of the first 15 years the taxpayers own the property with any unrecaptured amount accelerated to the year of disposition. The recapture cannot exceed the amount of the gain on a sale to an unrelated party. This applies only to purchases made on or after April 9, 2008 and before July 1, 2009.

Note: This has the effect of an interest-free loan from the government repaid through the tax system, but its benefits may be attractive for extended year-end planning to buy a principal residence.

The credit is reduced by phasing out over a range of $20,000 of MAGI in excess of $75,000 ($150,000 in the case of a joint return).

An important and unusual feature of this credit is that it is refundable, meaning that even though the purchaser may have a small or no tax liability, the purchaser may receive the full amount of the credit in cash (or in part as an offset against nominal tax liability). Although in most cases this means that the purchaser will receive $7,500 in the year of purchase and then increase tax liability by $500 in each of the following 15 years, this benefit can be fairly substantial. If one assumes a rate of return on the $7,500 subsidy equal to the mortgage rate (assumed 6 percent), since the purchaser can “invest” in the mortgage itself by paying down the mortgage by that amount, then one calculates the approximate net present value of an undiscounted credit amount (generally $7,500) inflow followed by 15 successive outflows, each discounted by 4.5 percent (the after-tax rate of return assuming the purchaser is in the 25-percent rate in each future year) for the number of years from the date of purchase. This amounts to $2,131. If the taxpayer is in the 15-percent tax rate, the after-tax rate of return on the mortgage increases to 5.1 percent, and the net present value to $2,345. By contrast, if the purchaser is in a low tax bracket in the year of purchase but will be in the 35-percent rate in years thereafter, the after-tax rate of return declines to 3.9 percent and the net present value to $1,902. There are of course many possible combinations of tax rates in future years, and the problem can become much more difficult with variable mortgages.

Now might be the time for clients to facilitate the purchase of a starter home for certain children by funding the down payment by a $12,000 gift shielded by the annual exclusion ($24,000 if gift-splitting is applicable). Alternatively, the client can make a low-interest rate loan of the down payment or the full mortgage amount. Such loans are generally subject to §7872 rules that require a minimum (or will be deemed to have) interest rate at the AFR. This produces taxable interest income to the parent’s tax rate, thereby reducing the amount of the subsidy as calculated above. The child, even if the loan from the parent is collateralized by the residence, may not be able to deduct the interest if the child cannot itemize deductions. Currently – September 2008 – the applicable long-term annual AFR is 4.58 percent (compared to a conventional 6-percent mortgage rate), so the benefit of the credit will be reduced by the additional taxes paid by the parent. However, no interest rate need be (and none will be deemed to be) applicable if the gift loan does not exceed $10,000, and applies to loans in excess of $10,000 but not in excess of $100,000 only to the extent of the child’s net investment income for the year

SurgentMcCoy Newsletters

Thursday, October 23, 2008

Michigan Income Tax Credit Enacted For Qualified Home Improvements And Electric Utility

Public Act 287 of 2008 (2008 PA 287) is effective October 6, 2008 and applicable for tax years beginning after December 31, 2008 and before January 1, 2012. PA 287 enacts an income tax credit for a taxpayer with adjusted gross income (AGI) of $37,500 or less ($75,000 or less for spouses filing jointly) who purchases and installs a qualified home improvement for his or her principal residence during the tax year.

The credit is equal to 10% of the amount paid by the taxpayer in the tax year for the purchase and installation of each qualified home improvement or $75 ($150 for a husband and wife filing jointly), whichever is less for each qualified home improvement purchased and installed during the tax year.

To claim the credit, the taxpayer must provide verification of the amount paid along with documentation of its compliance with the Energy Star energy efficiency guidelines. “Qualified home improvement” includes the following items intended for residential and noncommercial use that meet or exceed the applicable Energy Star energy efficiency guidelines: insulation; furnaces; water heaters; windows; and refrigerators, clothes washers, and dishwashers. If the home improvement credit exceeds the taxpayer's tax liability for the tax year, the excess must be refunded.

Effective for tax years beginning after December 31, 2008 and before December 31, 2012, the bill also enacts an income tax credit for a taxpayer with AGI of $65,000 or less ($130,000 or less for spouses filing jointly) equal to specified percentages of the amount authorized for the customer's electric utility under Section 45(a)(a) of the Clean, Renewable, and Efficient Energy Act and paid during the tax year. The percentages of the amounts authorized are: 25% for tax years that begin after December 31, 2008 and before January 1, 2010; and 20% for tax years that begin after December 31, 2009 and before January 1, 2012. If the electric utility credit exceeds the taxpayer's tax liability for the tax year, the excess is not refunded.

Ed Kisscorni CPA

Tuesday, October 21, 2008

Canceled Mortgage Debt And Taxes

Lenders sometimes cancel or forgive a person's debt. While this relieves the debtor of an immediate financial stress, it often triggers a tax liability. Under the tax law, canceled debt is considered income to the debtor and is included as part of the debtor's income. Not only does this impact how much tax is paid, but can reduce deductions that are limited based on adjusted gross income........

Editor's Note:
The Mortgage Forgiveness Debt Relief Act, was enacted in late 2007. The new law , Economic Stabilization Act of 2008, extends this treatment from the end of 2009 through 2012

FBI Struggles To Handle Financial Fraud Cases

WASHINGTON -- The Federal Bureau of Investigation (FBI) is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country’s economic crisis, according to current and former bureau officials that spoke to the New York Times...........

New York Society of CPAs

Momentum Builds For New Economic Stimulus

WASHINGTON --October 21, 2008 -- What's another $150 billion on top of the more than $1 trillion that's already been spent to rescue the sinking economy and financial markets?

Momentum is building for a fresh dose of economic stimulants to boost the country out of the doldrums -- perhaps by putting more money in Americans' pockets. The White House said Monday that President Bush was open to some sort of action after Federal Reserve Chairman Ben Bernanke warned the slump could drag on without it........

Detroit News

Monday, October 20, 2008

Phishers Taking Advantage Of Financial Worries

The Federal Trade Commission is warning consumers to be cautious of e-mails, phone calls or letters claiming to be from their financial institutions and seeking personal information.

Phishers, or people who want to steal your identity via the Internet, see the current chaos in the economy as a good opportunity............

Detroit News

Saturday, October 18, 2008

Washington Considers Economic Stimulus

WASHINGTON, Oct. 16 (UPI) -- Congressional leaders in Washington on both side of the aisle have indicated a new economic stimulus package should be enacted soon.

The shape of a new package is undetermined, but preliminary discussions show signs of partisan divisions, the Los Angeles Times reported Thursday.........


2009 Social Security Changes

Cost-of-Living Adjustment (COLA):
Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2007 through the third quarter of 2008, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 5.8 percent COLA for 2009. Other important 2009 Social Security information is as follows:...............

Social Security Administration

Friday, October 17, 2008

Bailout Act Includes Tax Breaks For The Little Guy

You might not be a big fan of the Emergency Economic Stabilization Act of 2008 (better known as the bailout bill). But it does include a bunch of federal income tax changes, most of which are taxpayer-friendly. Here’s a rundown of the personal tax changes that may affect you and members of your family..............


Thursday, October 16, 2008

IRS Announces Pension Plan Limitations For 2009

WASHINGTON — October 16, 2008 -- The Internal Revenue Service today announced cost‑of‑living adjustments applicable to dollar limitations for pension plans and other items for tax year 2009.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. It also requires that the Commissioner annually adjust these limits for cost‑of‑living increases...............

Social Security Payments Getting 5.8% Hike

WASHINGTON October 16, 2008 -(MarketWatch) -- Social Security benefits will rise 5.8% next year, the largest rate increase since 1982, the government announced ............

2009 IRS Inflation Adjustments

WASHINGTON — October 16, 2008 --For 2009, personal exemptions and standard deductions will rise and tax brackets will widen because of inflation adjustments announced today by the Internal Revenue Service.

By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009. Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:..............

Tuesday, October 14, 2008

Michigan Enhanced License Earns Approval From Federal Authorities

October 13, 2008 --Michigan motorists will have the option next year of applying for an enhanced driver's license that also meets tougher federal document requirements at America's borders, Secretary of State Terri Lynn Land announced today.

Land and U.S. Department of Homeland Security officials met in Detroit to sign a memorandum of agreement and a business plan that pave the way for Michigan's enhanced license program. Business, municipal and political leaders as well as members of the general public enthusiastically support Land's initiative, citing its convenience for drivers and its ability to keep cross-border commerce flowing smoothly......

State of Michigan

Monday, October 13, 2008

Solar Panel Credit

However, the residential market could see a slump until January, he said. The new ITC eliminates a $2,000 cap on the residential incentive, so homeowners who wait until January can save $9,000 instead of $2,000 on a $30,000 system......


Sunday, October 12, 2008

Michigan Republicans Challenge Democrats On Business Surcharge Tax

LANSING, MI-- A group of Republican lawmakers challenged House Democrats on Wednesday to break from their month of campaigning, return to the Capitol and pass a Senate bill to accelerate elimination of a 22 percent surcharge on Michigan's main business tax.

Legislation passed last week by the Senate's Republican majority would eliminate the Michigan Business Tax surcharge in a three-year period beginning Jan.1, instead of doing away with it over a decade as scheduled.

The Senate bill was approved over objections of Senate Democrats, who said faster removal of the surcharge would eliminate hundreds of millions of dollars in state revenue and blow a huge hole in the state budget........

Be Prepared For A Disaster

Natural or manmade disasters can strike at any time. Of course, your family’s health and security are the most important considerations. Once safety concerns have been addressed, regaining order in your finances is essential for returning to normal life. The Michigan Association of CPAs advises that proper planning and preparation before disaster strikes is crucial. CPAs offer these tips on how to do it........

Michigan Association of CPAs

Saturday, October 11, 2008

Don't Be A Victim Of Consumer Fraud

Consumer fraud is big business. An estimated 13.5% of American adults were identified as fraud victims in one study by the Federal........

Michigan Association of CPAs

A Death In The Family: Being Prepared Financially

What would happen to your family’s finances if you or your spouse were to die unexpectedly? Would it be easy for the surviving loved...

Michigan Association of CPAs