Archives for August 2013

Post DOMA Wealth Management Tips

There have been many changes now that the Supreme Court overturned the Defense of Marriage Act (DOMA). Some of the changes include how same-sex couples are able to manage their wealth in regards to their partner. Couples will need to think about changing or review many aspects to their financial wealth. The following are point to consider reviewing to get a fresh look at how the law changed same-sex couples’ financial plans.

  • Revisit your Financial Plan. Having your marriage recognized by the government is a big deal. There are many points to you financial plan that will need to be reviewed.
  • Update Estate Plans. The biggest benefit of having your marriage recognized by the federal government is there is no penalty of estate tax. Since the estate will be given over to a spouse, there is not estate tax to take 40% of the estate from them. It also give spouses a change to establish trusts, wills, general power of attorney and healthcare powers.
  • Beneficiary Designations for Retirement Accounts. Now that the same rules apply, same-sex couples can revisit beneficiary designations. The survivorship rules apply to IRAs and other qualified retirement plans.
  • Investment Portfolios. Are there any adjustments to investment that need to be made so you are truly investing together? Think about updating account titles or reorganizing the portfolio in a manner that would be more beneficial to both partners.
  • Tax Planning. The ability to file jointly is now a massive win. While you may choose not to change anything, it is worth a look. It may be in your best interest to file jointly and save you hundreds in taxes not paid. You may even want to look at amending the past three year’s taxes to see if filing jointly would be a benefit.
  • Health Insurance Benefits. An overhaul to the family health insurance plan is in order. If you are not already provided with spousal health insurance, it may be cheap to switch.
  • Taxable Estate and Social Security. If your spouse had died in the last three year, amend the estate tax return and have the taxes refunded. There is three years to be able to do this, so act soon. Also married couples are eligible for 50% of spousal Social Security benefits of the spouse’s full retirement age. If it is bigger switch to spousal benefits.
  • Consider the Whole Family. Since estate planning extends to children for most mixed gender couple, it should also extend to children for same-sex couples. Make sure the estate plan also defines the word spouse.
  • PreNuptials. It is important to protect you assets before entering into a marriage. Since the laws apply to everyone, any laws dissolving a marriage also applies.
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IRS Collections Due Process Program and Collections Appeal Procedures

With the economic downturn in recent years, many taxpayers have found it hard to keep up with their income tax obligations. It is hard to recover when people are getting notices everyday and are feeling hopeless.  The IRS has two programs to help in the appeal process when there is nothing left but to lien, levy, or seize a person’s property. The Collections Appeals Program (CAP) and the Collections Due Process (CDP) are two ways a taxpayer has a chance to stop collection and appeal the process.

According to the IRS, taxpayers can use the CDP process when they have received one of the following letters:

  • Notice of Federal Tax Lien Filing and Your Right to Hearing Under IRC 6320
  • Final Notice-Notice of Intent to Levy and Notice of Your Right to a Hearing
  • Notice of Jeopardy Levy and Right to Appeal
  • Notice of Levy on Your State Tax Refund-Notice of Your Right to a Hearing
  • Post Levy Collection Due Process (CDP) Notice.

Taxpayer, who experience one of the following problems, has the CAP available for them:

  1. Before or after the IRS files a Notice for Federal Tax Lien
  2. If property has received a lien or levy
  3. If the IRS has terminated, proposed to terminate, rejected, modified, or proposed to modify an installment agreement.

The first step is to take action. Contact your CPA immediately. They can help you figure out which appeal process will work best for you situation. With immediate action collective activities can be frozen long enough to collect your thoughts and information. Request an “account transcription” form the IRS to be able to review all the transactions and outstanding balances for the account.

If the taxpayer chooses to go through the CDP process then there is 30-days from the initial notice letter to request a hearing. If the 30-day window is missed there can be a request for an “equivalent hearing”, but this will not suspend collection procedures.

The CAP hearing can be requested at any time, but cannot go on to tax court if the taxpayer contests the decision. The taxpayer can go on to CDP hearings, but only if they have not already pursued this option. By picking the right appeals process, the taxpayer and IRS can both can be happy with the results.

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New AICPA framework Unveiled

The American Institute of CPAs announced, in June, a new framework the will provide a new accounting option to help small- and medium-sized businesses provide financial reports for specific entities. These new options are not currently required by the US Generally Accepted Accounting Principles (GAAP), but they will help to streamline financial information reports for privately held, owner-managed businesses.

The new framework was developed by a group of CPA professionals with vast knowledge and understanding of the needs of private companies’ financial statements. While there has been some scrutiny over the new framework, it was designed to make it easier for small- and medium-sized businesses to produce accurate, reliable financial statements. These statements show the business’s profitability, cash availability, assets to cover expenses and concise disclosures. The framework makes it easier to the businesses to create reports for lenders, insurers, and other people who require financial statements.

To help create these reports, the framework uses a blend of traditional accounting and accrual income tax methods. By using the historical cost and target disclosure requirements, the report provides options for presenting the information to various entities. It reduces book-to-tax differences while expanding options for CPAs and other companies to provide consistent, cost-beneficial statements.

After a survey of 200 CPA firms, many of them were familiar with the new framework and half of them expected their clients would use the framework. With the option of the new framework, many companies will use it to help them have less complexity in their daily business. As the framework is used more, time will tell if it will be the best for the companies that use the new framework.

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College Loans: Paying Them Off

Now that you are a college graduate, you have many things to think about; finding a job, maybe a new place to rent, and paying off student loan debts. With all the talk about student loan interest rates in Congress, it is important for student have a plan for paying off loans after college. Nearly 12 million students will take out loans to help pay for college, and with 37 million students currently with outstanding debt, the total student loan debt is reaching towards 1 trillion. Having a plan to help reduce student debt loan is vital for any college graduate.

Most college students do not fully understand the financial burden student loans will be on their future. Around 75% of them will make sacrifices, either personally or financially, to repay the loan. Some tips that will help make it easier to repay student loans debt are:

  • Understand You Options. It is important to know the different options of payment, including standard repayment, graduated repayments, extended repayment, and income-based repayment. Research which payment would work best for you and contact you lender for financial help. If you cannot pay there are options for you including deferment, forbearance, and loan cancellation. Many of the option will require an application and financial proof, so working with your lender is very important.
  • Keep Track of Paperwork. Keeping accurate records including promissory notes, correspondence from lenders, notes on phone calls and other loan related paper. If you lose any paperwork, you may have problems providing information to your lender if you need to seek a deferment, forbearance, or loan cancellation.
  • Grace Period. Most student loans have a 6 to 9 month grace period before official payments start. Use this time to find a job, make a budget and start tracking your monthly expenses. Make sure to budget in paying student loans, so you are not surprised when the payments begin.
  • Student Loan Interest Deductions. If you pay $600 or more to a single lender, our interest is deductable. At the end of the year you will receive Form 1098-E from your lender showing the exact amount of interest paid over the year.
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Targeting Fraud through New Task Forces

In an effort to detect and analyze fraud, the SEC announced recently that is has established three new task forces within the Division of Enforcement to aid in investigations. The new task forces will each have specialized jobs that relate to different aspects of financial fraud.

Center of Risk and Quantitative Analytics (CRQA)

The CRQA is the data and analysis center of the Division of Enforcement. The main focus of the division is to identify risks that could harm investors, and monitor for financial transgressions.  The Division of Enforcement uses the CRQA as a resource that supports investigations through data analysis and risk assessment.

Financial Reporting and Audit Task Force

The Financial and Audit Task Force will help in the detection and prosecution of fraudulent financial reporting. The effort to expand enforcement, the task force will work to detect fraudulent financial statements, issuer reports, and audit failures. Enforcement lawyers and accountants will work to find and identify, through ongoing reviews and performance trends, areas susceptible to fraud.

The Microcap Fraud Task Force

The Microcap Fraud Task Force will focus on microcap securities. The SEC says that microcap securities are most often connected with fraudulent and manipulative strategies to accumulate gains. These small companies do not always report financials to the public and so the SEC wants to concentrate on them to help keep fraud from happening.  This task force will work with the Microcap Fraud Group that formed in 2010, but will not replace them.

Each task force will work to prevent fraud and audit misconduct while working on strategies to improve systems for identifying fraud and improving how audits are conducted.

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