taxes – Susman

September 23, 2016

New Home

In the market for a new home? How about your FIRST home? This is both exciting and stressful. However, to elevate some of the stress and confusion, there are lots of things you can do to help make the house hunt easier and the entire process less stressful.

– Make sure you are saving/have saved for a down payment, closing costs, taxes, and insurance.

– Constantly work on improving your credit score

– Calculate exactly what you can afford and don’t go over budget

– Get pre-approved to see if it matches your budget

– Choose a realtor

– Make at ‘wishlist’ of what you want in a home

– Visit homes – hopefully find your dream home and make an offer

You also want to make sure you look at safe neighborhoods. While crime happens in all areas, moving to an area that is less prone and already has a low documented crime rate will give you peace of mind.

Don’t forget to add in other costs as well – utilities, l andscaping, remodel/renovations. You might find an amazing deal on the house with a mortgage you can afford and then go WAY over your monthly budget, because of all the extras.

Take your time and don’t rush. Purchasing a new home – especially your first home – should be taken very seriously with a focus on every detail.

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March 25, 2013

Life Insurance and Beneficiary Taxes

One of the significant benefits of a sizable life insurance policy, aside from taking care of family members or a significant partner after death, is the fact that it is generally exempt from income tax on the named beneficiary. This makes life insurance a powerful estate planning tool, especially when other estate assets do fall under inheritance tax and income tax after death.

Life insurance proceeds can be h andled two ways upon death. They can be paid out as a lump sum or they can be held by the insurer and distributed in a series of installment payments over time. In both cases, the actual principle amount is tax-free from income tax. However, where the insurer earns interest on the payments held, that interest becomes taxable when paid to a beneficiary.

The above said, if the life insurance policy ownership is transferred to a third party prior to death, usually in exchange for a cash or asset payment in return, then funds paid to a beneficiary do become taxable as income. This sort of situation is rare, but when it does occur, the beneficiary should definitely consult with a certified tax expert for proper reporting.

All of the above said, estate tax can be a problem. If the life insurance policy was in any way controlled by an owner, it falls under “incidents of ownership.” This frequently occurs with whole life or permanent life plans that allow borrowing, assigning, changing the beneficiary, etc. Such criteria make the payout to a beneficiary taxable under federal estate tax. A spouse is exempted from this charge, but kids and third party beneficiaries are not. As of 2012 this charge triggered on estates bigger than $5 million, but this is a temporary limit through 2013. In past years the estate tax has hit after an estate exceeds $1 million in total.

April 26, 2011

Seven Steps to a Sound Financial Future

Today, many people find themselves bombarded by a constant stream of financial news from television, radio, and the Internet. Yet, does all this “information age” data really help you manage your finances any better than in the past? The truth often is that the “old-fashioned” practices, such as periodic financial reviews, lead to greater success in the long run. Why not spend a few hours reviewing your finances? The changes you make today could result in increased savings. Consider these seven steps:

Analyze your cash flow. When your income is greater than your expenses, the excess is called a positive cash flow. When your expenses exceed your income, the shortfall is termed a negative cash flow. A positive cash flow means that you may have funds you can set aside as savings. A negative cash flow can indicate that it may be a good idea to reorganize your budget to minimize any unnecessary expenses.

Develop a program for special goals. For every financial and retirement goal you establish, identify a projected cost, a time horizon (how long it will take to reach the goal), and a funding method (such as through savings, liquidating assets, or taking a loan). Consider your goals in terms of a “hierarchy of importance.” The bottom—or “foundation” tier—should include emergency funds to cover at least three months’ worth of living expenses. The middle tier should include such essentials as your children’s education. On the top tier, place the “nice-to-haves,” such as a new car, home renovation, or vacation.

Boost your retirement savings. Employer-sponsored pensions and Social Security may not provide sufficient income to maintain your existing lifestyle when you retire. Thus, it is essential to identify your retirement needs and plan a disciplined savings program for the future. Maximize your contributions to retirement accounts, and if possible, make “catch-up” contributions.

Taxpayers, who are 50 years old, or older, are allowed to make additional contributions to their retirement plans. Traditional Individual Retirement Account (IRA) and eligible Roth IRA holders can save an extra $1,000 a year in 2010. Those with eligible 401(k), 403(b), or 457 plans can save an additional $5,500 in 2010.

Minimize income taxes. Why give Uncle Sam any more of your money than is necessary? It is in your interest to take advantage of all income tax deductions to which you are entitled. Consider exploring any possible ways of reducing your income taxes. For instance, under appropriate circumstances, losses or expenses from prior years may be carried over to the next tax year. A qualified tax professional can help you implement a tax strategy that meets your needs.

Beat inflation. Your income and retirement savings must keep pace with inflation in order to maintain your buying power. This means that if the inflation rate is currently 3%, you need to achieve at least a 3% annual increase in income just to break even. If your long-term savings plan fails to keep pace with inflation, you may be unable to maintain your current st andard of living.

Manage unexpected risks. As you undoubtedly know, life can sometimes throw you a “curve ball.” Without warning, a disability or untimely death can cause financial hardship for your family. Adequate insurance is an important foundation for your financial program—it offers the protection you need to help cover potential risks and liabilities.

Consult a financial professional. In today’s complex financial world, everyone needs help in making informed decisions. A qualified financial professional can help ensure that your financial affairs are consistent with your current needs and long-term goals.

Reviews can help bring focus to your overall financial picture. In the future, you will have the opportunity to alter your programs due to changing goals and circumstances. By faithfully tracking your progress, you will be in a better position to build financial security and realize the retirement of your dreams.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this article is not intended to— and cannot—be used by anyone to avoid IRS penalties. This article supports the promotion and marketing of insurance and/or other financial products and services. You should seek advice based on your particular circumstances from an independent tax advisor.

MetLife, its affiliates, agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and circumstances.

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This article appears courtesy of Karl Susman. Karl Susman is a representative of the New Engl and Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New Engl and Life Insurance Company, 501 Boylston Street, Boston, MA 02116

April 24, 2011

How Much Can You Earn and Still Receive Social Security?

Retirees are often ready, willing, and able to start new careers or businesses late in life that may earn them valuable incomes. However, some may feel that it is not worthwhile to work for wages, only to have to “give up” some of those earnings in the form of higher income taxes. Frustrating as that may sound, it is important to underst and the fundamentals of Social Security income and taxation so you can make your retirement years more “golden” and less “taxing.”

Income Limits—Paying to Work?

The first factor you must consider is your age and the so-called Social Security “giveback.” If you are age 62 or older, under the full retirement age (65–67 depending on your birth year), and receiving reduced Social Security benefits, you must “give back” $1 for every $2 earned above $14,160 in 2010. If you attain full retirement age in 2010, your benefits will be reduced by $1 for each $3 earned over $37,680. Upon attainment of full retirement age, you may earn as much as you like and Social Security benefits are not reduced.

How Much Is Taxable?

A second factor affecting your Social Security benefits is the potential income taxation of those benefits. Let’s assume you are working and you also receive a check from the Social Security Administration (SSA) each month. You must first determine how much, if any, of your benefit is included in your gross taxable income. The first step in estimating this is to add up the following items: your wages, taxable pensions, interest, dividends, and other taxable income; all tax-exempt interest; any exclusions from income; your net earnings (net income less net losses) from self-employment; and half of your Social Security benefits.

This total is then compared to a first-tier threshold of $25,000 for a single taxpayer or a married taxpayer who is filing separately and lived apart from his or her spouse for the entire year, or $32,000 for a married taxpayer filing jointly. For a married taxpayer filing separately, who lived with his or her spouse for any period during the year, the first-tier threshold is $0.

For the sake of illustration, suppose your total applicable earnings are $27,000, and you are married and filing jointly. Since the total does not exceed the applicable threshold amount of $32,000, then no portion of your Social Security benefit is taxable. However, if the total exceeds the applicable threshold amount, a further, more complicated, calculation must be performed to determine the amount of your benefits that are taxable. You can refer to IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for more information, or consult your financial or tax professional.

As you can see, performing these calculations is no simple task. Thus, it is important for anyone who is thinking about taking Social Security benefits while still working to underst and the potential tax consequences and to plan accordingly. As with all tax planning matters, it is wise to consult a tax professional to help ensure your planning decisions are consistent with your overall goals.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to ( and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. You should seek advice based on your particular circumstances from an independent tax advisor.

MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.

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April 19, 2011

Planning Your Charitable Gifts

Sometimes, our desire to give leads us to make commitments that are difficult to fulfill. Any endeavor worth undertaking, especially one that can benefit others, deserves our careful consideration before we begin. Doing so can yield the greatest results. When contemplating making charitable gifts, consider the following:

· Choose Your Causes. Good causes abound and regularly dem and our attention. Choose a limited number of organizations that concentrate on areas that are important to you, and then research what kind of help they need.

· Budget Your Gifts. When planning your annual budget, include charitable gifts. Spreading your donations over the year can both lessen the impact on your finances and increase the total you may be able to give.

· Plan Your Volunteer Career. Volunteering can be a personally rewarding experience, especially when you can see the fruits of your labor. Carefully determine the time you have available to ensure your best efforts for your cause, and avoid overloading yourself.

· Review Your Plans. Just as you review your annual financial budget, you should review your annual time/value budget. Revise your volunteer commitments to include those where the rewards have been the greatest for both you and your cause.

· Consider a Testamentary Gift. If you are fortunate enough to be in a position to increase the amount you donate, or you are concerned about the future of the organizations you support, consider making a Testamentary gift.

What Is a Testamentary Gift?

Quite simply, a testamentary gift is a promise of funds to be made available from your estate upon your death, typically through your estate. However, using your estate as a conduit can lead to a reduction in your intended gift if any of the following are experienced:

· A decrease in the fair-market value of your assets before your death;

· Unforeseen estate expenses that must be made from your assets; and,

· The elimination of your gift if your will is contested.

You may be able to protect your gift from estate problems through the establishment of a trust; however, the legal and administrative costs associated with doing so may also have an adverse impact on your gift.

Guaranteed Protection for Your Charitable Gift

Your intentions— and your gift—can be protected against many of the factors above through the use of life insurance. The potential leverage of life insurance may result in a larger gift than you had hoped.

In addition, the simplicity of doing so and the satisfaction you will gain will add to the rewards of giving. The policy can be purchased with funds that you contribute to the charity, and as such, they are tax deductible as a charitable gift. The policy can be owned by the charity and removed from your estate, thus protecting your gift from the taxation, creditors, or legal contest to which your estate may be subject. As owner of the policy, the charity can decide whether they want to use your gift to pay the premiums or let the policy lapse. As beneficiary, the charity will receive the proceeds of the policy at your death. Depending on the type of policy purchased and the charity’s willingness to use your contributions to maintain the policy, these proceeds may be guaranteed and may even increase over time. Depending on the performance of the policy and other factors, the proceeds may exceed the amount you would have otherwise given outright during your lifetime or upon your death.

Imagine What You Could Do

Your gift through life insurance could allow you to give far more than you ever thought possible. It could help guarantee funding for your chosen organization and help ensure the continuance of its good works. It could mean that your best intentions become reality. The satisfaction that comes from knowing you have done the most you could will be your final, and well-deserved, reward.

All insurance guarantees are based on the financial strength and claims paying ability of the issuing insurance company.

Neither MetLife nor its representatives offer tax or legal advice. You should consult you own advisors before making any decisions.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this article is not intended to ( and cannot) be used by anyone to avoid IRS penalties. This article does not support the promotion and marketing of this life insurance. You should seek advice based on your particular circumstances from an independent tax advisor.

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April 15, 2011

A Short Course in Budgeting for College Students

One “extracurricular” activity that every student should master while in college is personal money management. Typically, a student’s day-to-day spending is done on an improvised basis, meaning that overspending is often the norm rather than the exception.

It is estimated that during a school year the average college or university student will spend approximately $4,000 for books, supplies, transportation, and personal expenses (Trends in College Pricing—2009, The College Board). However, there is often room for economizing. The first place to look is at food and telephone calls. Difficulty may occur in controlling these expenses, especially if pizza is ordered regularly at 2 am and long-distance friends are simply a phone call away.

While many students may assume it costs less to live off campus than in a dorm, they may be in for a surprise. In college towns with a high dem and for off-campus housing, accommodations within walking distance of the campus may tend to be expensive. Some l andlords require a one-year lease—a period longer than the school year—thus, subleasing privileges should be included as part of an “economical” lease. However, off-campus students can save money by sharing housing and doing their own cooking.

Money Smarts 101

The following may serve as important steps toward helping your student underst and college finances:

1. Before your student leaves for college, sit down and have an open discussion of expectations—both your child’s and yours.

2. Consider providing a lump sum each semester, making it clear how long the money must last.

3. Explain when checks or money transfers can be expected, the amounts that will be received, and any rules concerning the use of funds.

Since most students rely on savings and checking accounts—regardless of whether they include parental funds, their own, or a combination of both—it is important for them to underst and how these accounts work. The ability to balance an account accurately and make needed corrections is especially critical.

Many undergraduates may keep most of their funds in hometown financial institutions. However, managing financial affairs long-distance can be difficult. Verifying an account balance quickly with an out-of-state bank can be both costly and time-consuming. So, it may be a good idea to keep a smaller account on campus.

While some parents may fear a credit card can give a student who has difficulty managing his or her affairs too much of a cushion, others find a credit card can provide a useful backup, especially in an emergency or for certain expenses. For instance, it can help with car rentals, plane fares, and railroad tickets. In addition, trying to get money to college students in different locations can be frustrating, and it is often impossible for anyone to cash personal checks away from home.

Making the Grade

Ideally, college students should take full charge of a semester’s spending. Life becomes much easier for parents when college-age children can manage their own finances, and the students will learn valuable life skills in the process.

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April 8, 2011

A Living Will—Your Medical Directive

How do you feel about life-support systems for the terminally ill? How much thought have you given to the decisions your family may face when contemplating the choice of maintaining or terminating life-sustaining medical treatment for you? Certainly, it is an easy subject to avoid considering. However, it is important to recognize there are measures you can take now that can help solidify your thoughts and wishes on the subject, thus providing your loved ones with guidance in the event such decisions become necessary.

A Closer Look

At the present time, nearly all states have passed some form of law dealing with the requirements for living wills or health care proxies. While a health care proxy allows you to appoint someone to make decisions on your behalf, a living will generally allows you to specify the particular types of treatment you would like to have provided or withheld. Each state has its own set of requirements.

A living will is a medical directive—written in advance—that sets forth your preference for treatment in the event you become unable to direct care. The document may be drafted to include when the directive should be initiated and who has the decision-making responsibility to withdraw or withhold treatment. In addition to allowing respect for your wishes, the living will can help alleviate feelings of guilt or uncertainty experienced by those faced with the responsibility of making important decisions for loved ones.

The Patient Self-Determination Act

A far-reaching federal law, known as the Patient Self-Determination Act, requires all health care providers that receive Medicare and Medicaid to inform everyone over age 18 of their right to determine how they want to deal with this issue and to ask whether they want to fill out a living will. If you have received information on this subject, it’s no coincidence, since the law also requires increased emphasis on community outreach and education.

This law impacts virtually every hospital, nursing home, and health maintenance organization (HMO) throughout the country. It is important to note that the law does not m andate that health care providers require their patients have a living will. Instead, it stipulates that health care providers must provide written information about the patient’s rights to make decisions about medical treatment, including the right to make an advance determination about life-sustaining medical treatment, and record whether the patient has done so.

At the present time, it appears most of these organizations have determined this question can most appropriately be h andled when a patient is admitted. Therefore, the next time you are admitted to a hospital—even for something as minor as having a mole removed—don’t be surprised if you are given information about these rights and are asked to fill out a form that asks whether you currently have a living will or wish to have one.

The living will is a legal document, and each state has its own specific requirements. A qualified legal professional can help you underst and the benefits of a living will and what has to be done to assure its validity.

Before implementing any strategy discussed herein, you should consult with your own financial, tax, and/or legal advisors to determine its applicability in light of your own situation.

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April 1, 2011

Small Business Tax Credit

Small employers who provide health insurance coverage to their employees may not realize they can claim a federal income tax credit on their 2010 filing, due to the Patient Protection and Affordable Care Act (PPACA). Unfortunately, a very low percentage of qualified business owners are taking advantage of this credit according to recent government reports. Even if companies have completed their 2010 filing, they can still submit an amended filing to request this tax credit.

Eligibility Rules
Small group employers must meet the following guidelines to be eligible for this federal income tax credit¹. The requirements are a combination of three factors related to the business – size of their company, percentage of health care coverage they provide, and total wages paid.

Firm size. First, there are restrictions on the number of employees that an employer may have. A qualifying employer must have less than the equivalent of 25 full-time workers when totaling all individuals’ hours of employment. When all part-time and full-time hours of employment are combined and divided by a full time 40 hour week, and if the number of employees needed to cover the total hours is less than 25 employees, the employer will qualify for the credit.
Provide health care coverage. Secondly, the employer must confirm that they cover at least 50 percent of the cost of health care coverage for their employees. To determine this, the firm size equivalent number determined above must be used. Next, the employer must know the cost they pay to cover a single full time employee’s insurance premium. The employer must then make the following calculation:
- Equivalent firm size multiplied by (X) the cost paid for an individual premium and divided by (/) two.
- The above calculation is the percentage of health care coverage that the employer must cover in order to qualify for the credit. Therefore, they do not have to pay full coverage for each employee. They could reach the required premium with some full coverage and some partial coverage of employees.
Total Wages Paid. Finally, there are wage restrictions on the qualifications.
- Employers with 10 or fewer Full Time Equivalent (FTE) employees, paying annual average wages of $25,000 or less will receive the maximum credit of 35 percent.
- Employers with greater than 10 and fewer than 25 Full Time Equivalent (FTE) employees, paying annual average wages of less than $50,000 will also receive the minimum credit of 35 percent of premiums paid.
- All tax-exempt organizations that meet either of the above criteria can only claim the minimum credit of 25 percent of premiums paid.

As the IRS states: “The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.²”

Amount of credit and years available.

As stated by the IRS: “Small businesses can claim the credit for 2010 though 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.²”

More information. Please visit the FAQ section on the IRS website as there are several examples listed and helpful questions and answers pertaining to different circumstances.

Claiming the Credit

Small employers, whether businesses or tax-exempt organizations, will use the new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the small business health care tax credit.
For-profit small businesses will include the amount of the credit as part of the general business credit on their income tax returns.
Tax-exempt organizations will include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T has been revised for the 2011 filing season to enable eligible tax-exempt organizations, even those that owe no tax on unrelated business income, to claim the small business health care tax credit.

For your interest: In an Analysis of the Small Business Health Insurance Tax Credit and Effects on Coverage conducted by the Committee on Small Business Democrats U.S. House of Representatives, a document was created showing the Impact of Health Care Tax Credit, by State. Please take a look at this document, as it pertains to the small group market in each individual state.

In order to make this information easier to communicate to your clients, BenefitMall has provided a client letter explaining the details above – Small Business Tax Credit. Please feel free to add your personal contact information to better utilize this component with your clients.

For further details on this opportunity for your valued customers, please visit the IRS website. Here the IRS provides form 8941 filing instructions, an informational video as well as a useful FAQ. Also, for further assistance with specific questions which cannot be answered in the information or links provided above, please click here for a state-by-state IRS Taxpayer Assistance guide.