• Elder care
• Private money manager
• 2001 COLA for Simple IRA Plans
• Important financial questions
• IRS simplifies rules on IRA distributions
• IRS is holding MILLIONS of dollars
• Certified?
• Job seeking expenses
• Gifts
• Beneficiary designations
• Why do I need a CPA

A while ago, I was discussing long-term care with a client, but he just could not talk about it. The client ended up waiting too long to begin a program. During our various meetings, he was diagnosed with a terminal disease, and was no longer eligible for long-term care insurance. We know delaying is common when it comes to planning for elder care issues. While causing a temporary relief of a person's discomfort, delaying a decision can cause massive financial problems. Long-term care costs in a nursing home can range anywhere from $45,000 to $100,000 per year, depending upon the level of services you require. Assisted living could cost as little as $25,000 each year.

You basically have three options when it comes to long-term care. You can go on Medicaid if you are at the poverty level, purchase long-term care insurance or you can self-insure. Medicaid, the state administered program for low-income people, has many restrictions and limitations. To self-insure your long-term care program could devastate your estate planning and your heirs' benefits. The safest way to prepare for the financial risk of long-term care is to obtain sufficient insurance coverage. There are many choices and benefits available to this form of protection. For more information, please call me.

Did you know we do more than just prepare, compile, and crunch numbers? We are not "bean-counters." We can also advise you on business planning and strategies to meet your goals. As your CPA, we know your needs better than any other professional.

Recent articles in the Wall Street Journal, the Boston Globe, and many magazines have revealed the benefits of investing with a private money manager. My affiliate, US Financial Advisors, LLC, a Registered Investment Advisor, has been managing assets for individuals and businesses for quite some time. If you have from $100,000 to $100,000,000 (or more) to invest or in a current portfolio, call me and ask for more details about USFA and their programs.

There are two sources of contributions for SIMPLE IRA Plans; employee and employer. The IRS has announced the contribution limits for 2001. These new limits replace those described on pages 1 and 3 of the SIMPLE IRA Employer Reference Guide.

Employee Contributions for 2001
The maximum amount of annual salary deferral is $6,500.

Employer Contributions for 2001
Matching Contribution -a dollar for dollar match of up to 3% of each participating employee's compensation (not limited to the $170,000 compensation cap). The maximum employer match is $6,500. This means the maximum total employee and employer contribution is $13,000.

-OR-

Non-elective Contribution- unchanged for 2001. A contribution of 2% of compensation for each eligible employee, including those who are not deferring from their salary (limited to the current $170,000 compensation cap). The maximum non-elective employer contribution is $3,400. This means the maximum total employee and employer contribution is $9,900. Contributing to a SIMPLE IRA can help you and your employees to begin accumulating benefits for retirement so consider taking advantage of these increased limits.

You can now find additional tax tips concerning home ownership in THE HOMESTEADER, the South Shore's new homeowner newspaper. Tax Tips are now featured in the monthly edition. For a copy, write to The Homesteader, 99 Court St., Plymouth, MA 02360. Mention my name in your request.

By the way, our participation began with the September edition of The Homesteader. This edition was distributed at the annual NEW ENGLAND HOME SHOW held September 22 to 24. Back issues of The Homesteader can be obtained from the same address in Plymouth.

1. If you die tomorrow, will there by any Estate Tax to pay?
2. What kind of plan do you have set up for your financial independence?
3. How are you funding your children's education?
4. When did you last review your entire financial portfolio?
5. What plans are in place in care of your demise or disability? a) Individual b) Business
6. As a businessperson, what is your exit strategy?
7. Whom do you look to as your Principal Financial Advisor?
8. Do you have savings accounts or investments that create taxable income?
9. What areas of your financial life keep you awake at night or can be improved?
10. What significant changes do you expect within the next five years?
11. Do you own annuities?
12. Would you like an independent review of your insurance coverage?

From now on it's going to be easy to figure out how much you must take from your IRAs. On 1/11/2001 the IRS issued proposed regulations that are retroactive to 1/1/2001, greatly simplifying IRA distribution rules. The change is being publicized that it will save taxpayers billions of dollars, and at the same time assist the IRS in collecting billions of dollars in uncollected taxes that is said to have slipped through the cracks of the old tax system. The bad news is that information on your minimum required distribution is now going to be sent to the IRS every year, even if you don't take the money, and this may cost you a large penalty.

The Internal Revenue Service has millions of dollars in refund checks that have been returned by the US Postal Service due to incorrect names or addresses, or because taxpayers moved and did not leave a forwarding address. If you were due a refund, but have not yet received it, call IRS at 1-800-829-1040.

If you moved since filing your last tax return, you should file a Form 8822, Change of Address, with the local office of the IRS serving your old address.

Planning for the future is a lot like planting a tree. You've got to do it today if you want your family to enjoy it tomorrow.

An emailed question:

I am interviewing for a medical residency position. I've interviewed at 22 different programs. All of the expenses have been paid for through money from a non-government loan made available for this purpose. Are any of the expenses deductible?

Thanks, Jason

Jason.
Individuals may deduct all expenses incurred in seeking employment in the same trade or business regardless of whether or not the search is successful. Expenses are not deductible if an individual is seeking employment in a new trade or business even where employment is secured.

An individual seeking his/her first job or switching his trade or business, or a person with a long period of unemployment will be denied a deduction. Of course, if the job seeking costs are deductible, there are limitations and restrictions.

Roger

A client submitted a question concerning a gift of appreciated property to his son. Here are the results of the research on the question.

Basis of property acquired by gift:

If property was acquired by gift, the basis to the donee (your son) is the same as it would be in the hands of the donor or the last preceding owner by whom it was NOT acquired by gift. If a gift tax is paid, the basis of the property is increased by the amount of the gift tax attributable to the net appreciation in value of the gift. The net appreciation for this purpose is the amount by which the fair market value of the gift exceeds the donor's adjusted basis immediately before the gift.
Holding period of property acquired by gift:

The holding period of property acquired by gift or transfer in trust includes the time the property was held by the donor and the donee, if the donee is required to use as his/her basis the basis of the donor. When the fair market value at the time of the gift is used to determine the loss and such fair market value is greater than the donor's basis in the property, the holding period of the donor may not be used.

In your case, a gift of appreciated stock to your son (who is now age 14 or older), and sold by him would have the gain (net sales price, less YOUR cost basis) taxed at his capital gains rate of either 10% or 20% determined by the amount of total net taxable income showing on his own income tax return (under or over $44,000).

Under "today's" laws, you and your wife can jointly gift to any donee as much as $20,000 of asset VALUE each year without a gift tax liability. Any value of gifted assets above $20,000 would be subject to gift taxes. The $20,000 annual limit would include any transfer of ANY asset for less than value, including the gifting of publicly held stock at market value.

Perhaps you, your wife and I should meet to discuss this further. A formal gift tax plan for your family may be the correct method to permit the lowest possible income tax liability for the family as a whole. I know you and your wife could use some formal estate tax planning, which may give you another opportunity to reduce income and estate tax burdens for your family as a whole. We could meet at your home or at my office. Please call to arrange a mutually convenient time to meet.
This is all a part of effective tax planning.

Many accountants view their goal as minimizing their clients' taxes. NOT ME! I like to see my clients pay more taxes - because their earnings and profits are increasing dramatically. I can make a major difference in achieving those profits. Talk to me and find out more.

CPAs do much more than just prepare tax returns and "count beans."   A Certified Public Accountant can assist with all of your personal financial planning needs to help you achieve your goals.

Whether you're saving to buy a house, send your children to college or secure your retirement, you need a member of the Massachusetts Society of CPAs to assist you.   Roger A. Kahan is an active member of the Massachusetts Society of CPAs and maintains the financial planning licenses and experience to help you.

No one is required to pay more in taxes than the law demands.   If you pay too much, you have less resources to meet your other financial goals.   We can help find tax deductions and credits, and help you plan so your taxes will be as low as possible, year after year. And we can also assist you with business and estate tax planning.

TAX TIPS AND FACTS is published periodically by Roger A. Kahan, CPA.  Subscription is free to clients, prospective clients and friends of Roger A. Kahan, CPA.   If you know of someone interested in a subscription to TAX TIPS AND FACTS allowing him or her to obtain valuable comments on national, Massachusetts or local tax issues, call (781) 963-RAK-1.

The information contained in this publication has been obtained from sources I believe to be reliable at the time of writing, but I do not guarantee its accuracy or completeness.   Neither the information nor any opinion expressed constitutes a solicitation by me of the purchase or sale of any securities or other investment.   This material, or any portions thereof, may not reproduced without prior written permission of Roger A. Kahan, CPA.