• Refunds
• Blindsided by phaseouts?
• Certified?
• We Need Your Support
• Tax Tip of the Week
• Internet Access
• Two score and some years ago...
• Luxury vehicle
• Features Wanted
• Why it pays to talk to your CPA
• Roth IRA conversions
• IRA Contributions

Several of our clients had substantial refunds (upwards of $5,000). If this excess was invested, the taxpayers might have earned between $150 and $300 during the year (at little or no cost to them).

We suggest increasing your withholding exemptions to the utmost allowed by law, allowing you to take home more of your pay. Then by using a "systematic saving plan" (available through this office or most brokerage houses) send that money to your money market account to earn for you. Instead of waiting for the government to send you a refund of your own money, get your money and the earnings each year, out of your own account. Another benefit to remember: if you needed those funds during the year, the government will not let you get to them (you must wait until you file your annual income tax return to get a refund). With the funds in your own money market account, if you had an emergency, you could get at the money quickly.

This is a part of effective tax planning.

Phaseout of exclusion of Social Security benefits
Limitation on itemized deductions
7½% limitation on medical deductions
2% limitation on miscellaneous itemized deductions
10% floor on casualty and theft losses
Phaseout of earned income credit
Phaseout of credit for elderly and disabled
Phaseout of personal dependency exemption
Phaseout of Child credit
Phaseout for deductibility of IRA contributions
Phaseout for participation in Roth IRA program
Phaseout for participation in education IRA
Phaseout for participation in Hope credit
Phaseout for participation in Lifetime Learning credit
Phaseout of dependent care credit
Phaseout of student loan deduction
Phaseout of interest exclusion on education savings bonds
Phaseout of adoption credit
Phaseout of "passive" rental real estate losses
and, believe it or not, there are others.

If you think you are affected by any of the listed phaseouts, you need to know more about it or them.

This issue of TAX TIPS AND FACTS will appear on our own World Wide Web (WWW) page, making it available to the rest of the WORLD. You can find us at (our URL is) http://www.rak-1.com/.

Last month, 2,053 people accessed our web page and read TAX TIPS AND FACTS on-line.

Roger is always looking for more business and individual clients. With the advent of the Internet, fax machine and overnight delivery, our client base now covers many states in the USA. If you know of someone seeking professional tax or business advice, or funds management, please let us know. Also let me know if I can use your name in a welcome letter to the prospective client.

Now we are engaged in a great mass of calculations, testing where that taxpayer or any taxpayer so confused and so impoverished can long endure.

We have met on Form 1040. We have come to dedicate a large portion of our income to a final resting place with those men who here spend their lives that they may spend our money.

It is altogether anguish and torture that we should do this, but in a legal sense we cannot evade, we cannot cheat, we cannot underestimate this tax. The collectors, clever and sly, have gone far beyond our power to add or subtract.

Our creditors will little note and not long remember what we paid here, but the Internal Revenue Service and Department of Revenue can never forget what we report here.

It is for us taxpayers rather to be devoted to the tax return which the Government has thus far so nobly created. It is from these vanquished dollars that we take increased devotion to the few remaining; that we hereby highly resolve that next year shall not find us in a higher income tax bracket; that this taxpayer (underpaid and overworked), shall figure out more deductions and that "TAXATION OF THE PEOPLE, BY THE CONGRESS AND FOR THE GOVERNMENT" shall not cause our solvency to perish from the earth.

Note: This piece has been published annually at this time of the year as a "finishing touch" to another tax season.

The following vehicles are excluded from being classified as "luxury cars:"
(1) any ambulance, hearse or combination used by the taxpayer directly in a trade or business;
(2) any vehicle used by the taxpayer directly in the trade or business of transporting persons or property for compensation or hire, and
(3) trucks or vans that may be excluded by IRS regulation.

A car is classified as a luxury car if it is a four- wheeled vehicle, primarily manufactured for use on public streets, roads and highways, and rated at 6,000 pounds unloaded gross vehicle weight or less. In the case of a truck, the weight standard is applied to the gross vehicle weight (GVW). This means your "sports utility vehicle" costing $30,000 or more and having a GVW of more than 6,000 pounds is NOT a luxury vehicle.

Thanks to DS for brining up this subject.

My response was: First of all, you are TOO LATE for a 1997 contribution. That contribution was to be made by April 15, 1998 and there is NO extension provision available.

For years beginning after December 31, 1997, an individual will not be considered an active participant in an employer sponsored plan merely because the individual's spouse is treated as an active participant. However, the maximum deductible IRA contribution (up to $2,000) for an individual who is not an active participant, but whose spouse is, will be phased out at adjusted gross income between $150,000 and $160,000.ÿ The contribution cannot exceed earned income (wages or self-employment income).

The compensation limitation will come into play only in the case when the combined includible compensation of the spouses for the tax year is less than the sum of their dollar limitations. In effect, a spouse with little or no compensation may borrow his or her spouses compensation for purposes of obtaining the maximum limitation. There are other limitations based upon your combined adjusted gross income.

If you are now confused, thank Congress and the legislative writers. Join many other people in finding out that the tax laws are very complex and each situation must be reviewed individually for compliance with the laws and regulations. Her instant response back was: Thank you, Roger. I am confused, but will try taking it by syllables with deep breaths until I make sense out of it. :-)

I wished her luck.