Focus CPA Group, Inc. (562)281-1040

The estate of a deceased person is subject to estate tax levied by the government. This tax is levied on his taxable estate, the value of which is arrived at by reducing his gross estate by something known as allowable deductions, where the gross estate is the total value of all the assets owned by the deceased at the time of his death. The allowable deductions are funeral expenses of the deceased that are paid out of his estate, marital deductions, deductions for payment to charity as expressed by the deceased, estate administration expenses, and outstanding debts at the time of death. The determination of the taxable estate is done by the IRS.
To arrive at the value of the assets, the fair market value is taken as the standard. The fair market value is the price that the assets fetch if sold in the open market. An option is given to the representative of the benefactor of choosing the date of the evaluation. It can either be the date on which the benefactor died or a date six months thereafter. The purpose is to give the benefit of a lower tax liability. The liability of estate tax arises with the death of the benefactor, and has to be paid within nine months of the date of death. It is incumbent upon the representative of the benefactor to file various forms related to the assets of the benefactor and the income derived therefrom.
Amongst these, two forms are very important: one is Form 706 that contains the details of all the assets, which cumulatively form the estate of the benefactor, and the second is Form 1041, which is meant to give the details of the income derived from the estate. However, all estates do not come under the estate tax net. At the moment, any estate that is less than the gross value of $2,000,000 is not subject to estate taxation. Looking at the structure of estate tax for the forthcoming years you will find the estate tax burden being reduced progressively each year, to be eliminated in the year 2010, and reinstated in 2011. The details are as under:
If the benefactor dies within 2006 to 2008, the exemption limit is $2m. For 2009, the exemption limit is raised to $3.5m, whereas 2010 will be an estate tax free year. In 2011, estate tax will be reinstated with a basic exemption limit of one million dollars and a maximum tax limit of 55%.
Estate tax is mandatory under law. However, the burden can be reduced through intelligent estate tax planning. There are several techniques that can be employed legally to allow a greater part of your assets to be transferred to your loved ones instead of serving to fill the coffers of the government through estate taxes. When you have decided whom you wish to benefit from your estate and by how much, instead of waiting for you demise, you could start gifting them amounts which do not attract gift tax in your lifetime. At present, a single individual can gift up to $12,000 in a year to one person without attracting gift tax. There is a lifetime exemption of $1m on gifts.
This means you can make unlimited numbers of $12000 gifts to various people in one calendar year. You just need to make sure that the gift(s) to a single recipient does not exceed $12000 in a year. The gifts can be made to one or more persons within the total limit of $1m in your lifetime without attracting gift tax. Apart from cash, the exemption limit also covers gifts in the form of a percentage of real estate, business, stocks etc.
Another way is to transfer assets to your spouse during your lifetime. According to the law, such transfers are free from gift or estate tax, irrespective of the value of the transferred asset. This tax benefit is permissible under a provision known as marital deduction, which is considered when the estate tax is calculated after your demise. But the assets will be subject to estate tax (if in excess of the exemption limit) on the demise of the surviving spouse, unless he/she remarries and transfers all assets to the new spouse. Another way would be to create a bypass trust in which the property is held in trust for minor children until they grow up, while continuing to provide for the surviving spouse. Bypass trusts can include insurance trusts, irrevocable trusts etc.

Many people view April 15th as the end of tax season and enjoy the idea that they don’t have to deal with their taxes for another year. I look at April 15th a little differently. I see April 15th as the time to start planning your taxes for the next year (and the next year and the next year).

The best potential to create massive tax savings comes from planning your taxes not only throughout the year, but years in advance.

This doesn’t mean you have to treat your tax planning like a part-time job (although I’ve seen tax savings that yield more than a part-time job!). It simply means take a few hours now to create a tax strategy that is specific to you, then integrate your strategy into your daily routine and take a few hours a month to keep it on track.

I think most people dread tax planning because it’s something they have found to be boring and confusing (and sometimes painful) in the past. Traditional tax planning can be all of this!

This is why I’ve made it my mission to make taxes more understandable. I’ve just recently taken the hundreds of strategies I use with clients and broken them down into 5 secrets that cover the scope of how to create massive tax savings.

5 Secrets to Massive Tax Savings

Secret #1 Rules the IRS Won’t Tell You

Secret #2 Creating Permanent Tax Savings

Secret #3 Forming Your Personal Tax Strategy

Secret #4 Tax Saving Entity Structures

Secret #5 Reducing Your IRS Audit Risk

I’m so excited to share this information!

I’m going to share more about each of these secrets over the next few weeks, but before getting into those details, this week I want to share the common theme behind each of the secrets.

Behind Every Secret is… Knowledge! Now, I’m not referring to the type of knowledge that will have you quoting Internal Revenue Code sections – that falls into the category of boring and confusing. The knowledge I’m referring to is the type of knowledge that makes you aware of what creates massive tax savings so you begin to see your daily routine a little differently.

Here is an example most people can relate to:

Have you ever noticed that right after you buy a new car, you see that same car everywhere and you don’t remember ever seeing that many before? The reality is the cars have always been there, it just takes awareness to see them. Once you become aware of the car, you see it everywhere.

The same is true for tax savings! The opportunities are there, it’s just a matter of being aware of them.

What If You Did It Like This?

Year End Tax Planning Help-Your Corporation

A greeting to you all my friends, it is time to write another year end tax planning article. What shall we discuss? What can I tell you all that will offer some sort of financial revelation helping with both your income tax and strategic financial management?

Well, times are difficult but some of you might still be in need of some practical tax planning. How about a C corporation taxpayer (a corporation that is not a subchapter S and pays tax as though operating as an individual) that has a sizeable profit, a father-son ownership team, and reports for tax purposes on the cash basis method of accounting. Suppose that Daddy has aspirations of retiring in the not too distant future. Try this one on for size. For the current year, why not allow the Company to pay tax on $75,000 of income. By leaving this amount of taxable income inside of the C Corporation, the 15% and 25% tax brackets will be exploited. The father ?son owners have a much higher marginal tax rate facing them-35%. By doing it this way, we save money within the corporate structure allowing it to stockpile additional capital to manage operations going forward. The earnings exceeding the $75,000 of desired taxable income will be paid out to father-son in the form of bonus or other compensation. In addition, the Company will make a profit sharing plan contribution on their behalves. This is a great tactic for this Company?s year end tax planning as the lower corporate rates are used for maximum benefit and the owners (father and son) get tax sheltered income in the form of retirement plan contributions. The business now has working capital as we approach another year of operations.

As for a strategic financial consideration, if Father is considering retirement in the not too distant future, why not consider gifting the stock to qualified small business trust, where sonny is the beneficiary, in January (the next year of operations). The Company would then make a corresponding S corporation election (due by March 15th for calendar year corporations-use form 2553). A gift tax return will have to be filed by father and a valuation will need to be performed on the gifted shares. The valuation of these shares will consider the time frame of the gift to the trust and its earnings potential. If father will strip most or all of the earnings and the gift term is say ten years (the recognition period for the S corporation, when it is converted from a C corporation, in order to avoid liquidation tax), the value of the gift will be significantly reduced thus preserving the estate tax exemption for other assets in his estate. The gift tax return is filed on form 709 and is due by the filing of Father?s personal income tax return.

For those of you more advanced, when converting a C corporation to an S corporation, income is recognized at the corporate level to the extent of unreported receivables and payables, the 481(a) adjustment, because of using the cash basis method of accounting for tax reporting purposes. Remember, a major trait of the S corporation involves the flow-through of profits to the shareholders, thus avoiding corporate level tax. Regarding cash basis C corporations converted to S corporations, the would-be taxable income of the entity would have to be eliminated to avoid a corporate level tax. This would be true for the entire ten year recognition period. Because it would be the goal of the corporation to eliminate taxable income, in order to reduce the exposure to gift tax consequences, we have effectively killed two birds with one stone. There will be no corporate level tax; the corporation can continue to use the cash basis method of accounting, and Father will have a limited exposure to estate and gift taxes. Wait a minute, that?s three birds with one stone. Nice.

?The hardest thing in the world to understand is the income tax.?Albert Einstein

While many of us are experts, most would not shy away from confessing that they belong to the genre of Albert Einstein who gets boggled with the formalities and numerical calculations associated with Income tax filing. Exclusively for this tribe of Albert Einstein who get nervous at the end of the financial year, here are some simple tips to make things simple?or at the most simpler. Make friends with the word ?Income Tax?

The fear they say is all in the mind. They first thing you therefore need to do is get your mind rid of the phobia. Trust me, the things are not that complex as they sound in the first place. It is only humans that made the procedures and it is only humans like us that become CAs and tax planners helping us simplify things. You don?t have to be professional in the matter but it is always advisable to get basic knowledge on the subject to atleast know what your CA actually means when he says something on the subject. Gradually you will notice, you know much more than the ABC of tax planning. Educate Yourself

The best way to become comfortable with the income tax laws is to educate yourself. Knowledge is the only way to get rid of the fears of ignorance. The easiest way to gain information these days is to trawl the net. You put the keyword and search engine will get you scores of results vital to your search. Besides, there are many guides and reference books available in the market that claim to make tax filing simpler for you. Moreover, you may request your friends, siblings or colleagues to guide you in the matter. Be Methodical Round the Year

The best way is to avoid March phobia is to keep yourself organized round the year. Keep a record of your investments, insurance policies and incomes from various means by carefully keeping the papers in a file. Also jot down relevant points in diary to keep a ready reckoner of investment and income. A well-organized diary and folder will make this exceedingly simple for you. Invest Wisely

Prudent investment decision will not just help you save on your taxes but also help you improve your financial health in the long run. Keep your eyes and ears open to new and more attractive schemes being launched in the market that assure you a handsome saving on income tax. Allocate your savings in a mixed portfolio of insurance, fixed deposits, mutual funds and stocks to help your money grow and save your taxes. Don?t wait for the last moment but make small investments round the year to avoid March blues.Take Guidance from your CA

Most importantly, take guidance from your CA. A professional CA will give you tips on saving taxes and help you in filing income tax and also claim necessary return. By paying a small fee you will be able to fill up your taxes in the right manner and get rid of hassles. These days there are lot many CA firms and agencies that offer you expert guidance on investments and tax planning and help make things simple and convenient for you.

One of the things that make employment management quite problematic is tax planning and benefit reviews. No matter what kind of employment, they always need to take care of their employees’ taxes and benefits. Either they do it by themselves or they ask somebody to do it for them, they need to make sure that they do it properly or else their employees would experience a lot of problems. For corporate executives with major Houston employers we offer fixed fee “concierge level” executive tax planning, IRS representation, and employee benefit review service.

For a single fixed fee we will prepare your annual Federal Income tax returns, hold a separate annual tax planning meeting, review your employee benefit statements with you, and advise you on your retirement plan* and 401K investment allocations.* What we are offering you is something that would solve your tax problems and help you deal with you taxation management in a more efficient way.

In order to give you an idea of how credible our services are, you should know the quality of work that we have been doing. And what better way to show this is to give you a list of the customers that we have – list of big names trusting a responsible company that delivers. We have in-depth experience with the retirement and benefit plans of most major Houston employers including:

Exxon Shell

AT & T Dow Chemical

Conoco Philips Chevron

Marathon Oil Reliant Energy

MD Anderson Baylor College of Medicine

and many others.

NOTE: All investment review services are provided by our affiliated company, Trippon Wealth Mangement group, LLC, an SEC Registered Investment Advisory. Tax planning and preparation services are provided by J.M. Trippon & Company, PC CPAs.

As the end of the year approaches, it’s always a good idea to consider what tax-saving initiatives you might commit to before Dec. 31 in order to ensure you get the most benefit for the 2006 tax year.

To that end, I would recommend 10 key strategies in relation to your investments that you should consider. Keep in mind that these plans should be thought out as soon as possible, since they take some planning and proactive action on your part to set up.

Tip 1. Postpone any asset sales that would result in capital gains until 2007. By doing so, you’ll avoid paying income tax on any gains until you file your 2007 return in 2008. Delayed expenses are almost always a good idea.

Tip 2. Record losses on securities and stocks held outside of any registered plans. This is a significant advantage as tax laws permit the current year’s losses to offset the current year’s capital gains. Additionally, remaining losses can be carried back and put against capital gains in any of the preceding three years or carried forward indefinitely. It’s an important point to note that in order to benefit from a tax loss in this way, you are not allowed to purchase the same security again until 31 days after the sales. And that applies to both non-registered and registered accounts.

Tip 3. Research and Invest in a resource tax shelter. Resource tax shelters allow you to deduct the full value of your investment against other income in 2006. Resource tax shelters are fully endorsed by Canada Revenue Agency, whereas many other tax shelters present the risk of being declared invalid, whether or not they have a tax number.

Tip 4. If you are considering a donation to a registered charity, give stock instead of cash. This creates an exclusive tax break. Under normal circumstances, half of a capital gain is taxed as income; under new regulations, any capital gain created by a donation of securities or stocks to a charitable organization is exempt from tax.

Tip 5. Complete an RESP contribution before the end of the year to qualify for the Canada Education Savings Grant. This grant is up to a maximum of $400 or 20 per cent of your contribution up to $2,000 for the 2006 tax year. If you are just establishing an RESP, it’s important to keep in mind that you’ll require a social insurance number for the child to get the grant. Obtaining a social insurance number can take several weeks to obtain.

Tip 6. If your plan is to make a spousal RRSP contribution, do it before the end of the year, as it will shorten the waiting period for withdrawal. Your spouse will be able to access the funds in 2009 without attribution to you. If you don’t make the contribution until 2007, the three-year waiting period won’t end until 2010.

Tip 7. If you have an RRSP and you are turning 69 in 2006, you are required to convert your RRSP into a RRIF by the end of the year. When establishing your RRIF, you can set up the withdrawal schedule on your younger spouse’s age, which should minimize the mandatory withdrawals and taxable income they create in subsequent years.

Tip 8. If you are required to set up a RRIF in 2006 and you still have income from employment, you are able to make an RRSP contribution and enjoy the benefit of a tax refund the following April. The only caveat is that your contribution must be made before your RRSP ceases to exist at the end of the year. This can by somewhat difficult to do properly, since you are not meant to make contributions to you RRSP on this year’s employment income until 2007. In spite of that, the penalty you will pay for over-contribution will be relatively small when measured against the income tax refund you will receive.

Tip 9. If you are past the age of 69 and still have employment income, you can still defer taxes by contributing to a spousal RRSP. This is a valid approach until the end of the year for spouses who turn 69 in the current tax year.

Tip 10. Avoid investment in mutual funds in your non-registered account prior to year-end otherwise you’ll be stuck paying taxes on gains you didn’t benefited from. This scenario arises because Canadian tax rules require that all capital gains within a mutual fund must be attributed to those holding the mutual fund units at year-end.

While not an exhaustive list, following even a couple of these tax planning tips will ensure you pay the lowest possible taxes possible.

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Tools & Techniques Estate Planning

Tax planning is essentially tracking your income tax deductible items as they come up, and keeping records organized and handy in case they are needed. The most important tool for tax planning is a small filing cabinet. You can use this filing cabinet to file your tax planning documents and receipts, as well as keep track of previous tax returns filed and other important documents such as birth certificates and social security cards. The file cabinet you get to use for your tax planning should be fire proof and have a lock. That way your tax planning documents are safe in almost any disaster, and other people cannot easily gain access to your tax planning and other important documents.

Part of tax planning is making sure that you are aware of what expenses are tax deductible. You cannot engage in tax planning and track tax deductible expenses if you don’t know what you should be tracking! The Internal Revenue Service offers many publications on this subject. However, if you have any questions about income tax deductible items you should contact a qualified, certified, and licensed tax professional.

Once you know what tax deductible expenses you will need to track for the coming tax year, you need to set up tax planning record keeping system. This can be a simple receipt book, expanding file, index cards, envelopes, or any other method that makes sense to you. Keep in mind, however, as you engage in tax planning, that your tax planning record keeping system should not only make sense to you, but also make sense to your income tax preparer and the Internal Revenue Service if necessary.

At the end of each month, you can add up the totals for the different types of income tax deductible expenses you recorded in your tax planning records for that month. This way, all you have to do to discover your tax deductible amount is add up the totals for each month. The other records you collect and track through your tax planning are simply for proof that you can claim these income tax deductions, and are not really needed for preparing your income tax return if you have all of your totals in order.

On the surface, income tax planning may seem complicated and difficult. But with proper organization, tax planning is really quite easy. Not only that, but when you engage in income tax planning, you better your chances for that larger income tax refund that you need and deserve. If you have any questions about tax planning, you should contact a tax planning professional tax accountant today!

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Lower Your Taxes – Big Time! : Wealth-Building, Tax Reduction Secrets from an IRS Insider

Dual citizenship and dual nationality is your safeguard against unknown misfortunes. Dominica dual citizenship is your getaway from excessive taxation. Dual citizenship and dual nationality is a key to preserve your confidentiality.Significant part of our citizenship clients who subsequently want to change the normal residency are wealthy individuals (mainly Americans, Western Europeans or citizens of other high tax countries), who want to save on their tax payments, obtain citizenship for tax planning or citizenship for tax reduction enhance their privacy and confidentiality of their affairs and enjoy the good weather and climate all year round at the same time. It could be retired people or businessmen who have sufficient funds to leave of their income, or those who can work away from the original country of residence. These people are interested in residing in Monaco, Switzerland, Andorra, Bermuda, Cayman Islands, Bahamas and other Caribbean countries.There is another category of our clients, which is increasing fast. They are wealthy businessmen or professional people from not so prosperous countries, like the former Soviet Union, China and the Eastern Europe countries. These people need a dual citizenship to establish a new permanent residence in the counties of the European Union. They need second citizenship for residence in England, residence in United Kingdom, residence in European Union and residence in United States. Second passport and Dominica citizenship is the key to preserve your wealth. There are no capital gains, gift, wealth and inheritance taxes.Every country has its own citizenship rules. Some countries welcome individuals with nationalized ancestors; others give passports to those of a certain religion and some for simply buying real estate, or through so called ‘Economic Citizenship Investment Programs’. The rules and the opportunities are endless. Though the easiest and quickest! way to secure citizenship is through simple purchase of citizenship.Economic Citizenship in DominicaOn February 1, 2000 the Labor Party narrowly won parliamentary elections in Dominica and formed a coalition with the Freedom Party. Almost 10 years ago, the Freedom Party had introduced the first economic citizenship program. The new government is committed to continue it while reviewing and improving certain options. Dominica has the most successful economic citizenship program still in operation.Since 1991, more than 600 families have received Dominica citizenship. The program has been reviewed several times since its inception. Although there have been some irregularities in the past, the program is well established because of its long and largely unproblematic operation.There is no doubt that Dominica has unmatched expertise and experience in handling one of the world?s most successful citizenship programs. It is well administered, based on clear and established procedures, and all applicants are thoroughly screened and interviewed. With the new government committed to high standards, Dominica definitely continues to be one of the best choices for economic citizenship.