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Insurance review time?
Cafeteria Plan
Revised depreciation forms
529 educational plans
Student loan interest
Tax tip of the week
Mass IRA's and qualified plans
Certified?
Brokers and investment advisors
Two score and some years ago

When was the last time you reviewed your liability and catastrophic insurance coverages? You know you should review both coverages and premiums at least every three years. This risk and its related cost is usually the least item looked at by a businessperson. Since you have not looked at it in a while, now is the time to call in your insurance agent to review coverages and to quote the renewal or change of existing coverages.
It would also be wise to ask two other insurance agents to review coverages and offer a quote. You may be very pleasantly surprised to see what is wrong with your existing coverage. Be sure to tell your current insurance agent that you will be soliciting two other quotes so he/she knows where he or she stands.

A cafeteria plan allows an employee to choose between cash and certain nontaxable qualified benefits that are not included in income. These benefits include coverage under an employer provided accident or health plan, group-term life insurance, elective contributions under a qualified cash or deferred arrangement, dependent care assistance, and adoption assistance. For additional information or help with the establishment of a cafeteria plan, call our office.

Many accountants view their primary 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. In addition to minimizing clients' taxes, I can offer clients strategies designed to help them achieve those profits. Talk to me and find out more.

Revised 2001 tax forms relating to depreciation, which reflect law changes made by the recently enacted Job Creation and Worker Assistance Act of 2002 (P.L. 107-147), are now available on the IRS's website at www.irs.gov. The IRS plans to add new instructions for claiming net operating losses (NOLs) soon.

Taxpayers that acquired new depreciable property after September 10, 2001, may be able to claim additional first-year depreciation of 30% of the basis of the property. The Act also raised the limitation on first-year depreciation for automobiles by $4,600 for new cars placed in service after September 10, 2001. Taxpayers may choose not to use the increased deductions for qualifying property.

Taxpayers eligible for the additional depreciation should use revised Form 4562, Depreciation, and Amortization, or revised Form 2106, Employee Business Expenses, as appropriate, with their tax returns. Parties that have already filed their 2001 returns can file amended returns using Form 1040-X or 1120-X, together with the new revised forms, to obtain the tax benefits available under the Act. Taxpayers that claim depreciation, but that did not acquire new property after September 10, 2001, may use the earlier versions of the 2001 7

Parents and grandparents are looking to save for their children's and grandchildren's higher education, and get some tax breaks for themselves.

High net-worth individuals may reduce their federal estate taxes (yes, it has not yet disappeared from view).
Some of the benefits are:

• No federal income taxes will be imposed on earnings used for qualified withdrawals.
• You may contribute UP TO $50,000 in a single year for each beneficiary. Some plans have a high contribution limit of up to $250,000 (five years at once).
• Contributions are excluded from estate taxes
• Control of the account rests solely with the donor, not the beneficiary.
• Most plans offer professional management from investment companies you know and trust.
  
  Call us for more information about 529 plans
  

If the student is no longer a dependent, can the parent continue to deduct the interest?

With respect to the deduction found on line 5 of Schedule Y (which is based on the federal deduction), the parent can continue to deduct the interest so long as the educational debt was incurred while the student was the parent's dependent, even if s/he has ceased to be a dependent. The deduction based on the federal deduction is not allowed, however, if the former dependent is currently claimed as another taxpayer's dependent.

The state student loan interest deduction for undergraduate debt also requires that the student have been a dependent when the loan was originated. The parent can continue to deduct interest on this loan even after the student is no longer a dependent.

I am now writing TAX TIP OF THE WEEK that is distributed over the Internet to a select list of people each week. Items may also appear in the printed monthly version. If you would like to be included in the weekly electronic distribution, just send me your e-mail address with the subject of: "TTW subscribe" and include your name, city, and state of residence in the content of the message.

QUESTION TO Massachusetts Department Of Revenue: There are differences between federal and state rules on deferral limits, age 50 catch-up contributions, and rollovers resulting from the EGTRRA changes to qualified plans and IRAs. Must taxpayers keep records for 20-30 years?

ANSWER FROM MASS DOR: From year to year, taxpayers must keep records of their contributions to tax-favored retirement plans in order to determine the amount of deduction allowed in subsequent years when distributions occur. Distributions are tax-free to the extent they relate to contributions previously taxed by Massachusetts.

MY RESPONSE: Since many Massachusetts IRA and retirement rules date back to what was in the Internal Revenue Code as of 1998, I believe this means you have to keep records for as long as you have made contributions to IRA's and other non-deductible retirement plans. Without that information, ALL distributions will appear as taxable on your Massachusetts income tax return. If you do not have that information now, consider going back through your records and make a list of Massachusetts non-deductible contributions.

Your doctor is certified.
Your lawyer is certified.
Is your accountant certified?

If your accountant isn't a Certified Public Accountant, think twice about where you are getting your advice. Who do you want handling your financial and business matters?

If your accountant isn't a CPA, it's time to seek professional help.

For more information, call my office 781.963.RAK-1 or email me at kahan@rak-1.com

THE WORLD JUST GOT MORE COMPLICATED. When you could make money by throwing a dart at the NASDAQ listing, nobody needed a broker or advisor. Now, investors are hungry for professional advice and service.

BOOMERS WILL INHERIT IT! It has been called the greatest transfer of wealth in the history of the financial world. The greatest generation dies off, leaving their baby boomer offspring trillions of dollars over the next 20 or so years.

THE GOOD THING ABOUT LAYOFFS (if there is a good thing about layoffs). Downsized workers have billions in 401(k) and retirement money to roll over. Between that and a surge of early boomer retirees, $500 billion or so will flow out of plans into rollover IRAs.

SOARING COLLEGE COSTS. Tuition keeps rising and thanks to the enhanced advantage of "529 educational plans," parents and grandparents have already placed over $10 billion in kiddie accounts.

THE RIGHT PRODUCTS. Clients want a custom fit and, for those who qualify, separately managed accounts should be an easy sell. No wonder the business has jumped from a blip on the financial scale just five or so years ago to over $275 billion in assets.

THE RIGHT MARKETING APPROACH. The move to fee-based accounts (starting at $100,000 of market value) can make it easier for clients to truly believe that "brokers live to help them achieve financial independence."
What do you think about these concepts?

We can suggest products that may help you create and grow wealth; protect and preserve wealth; and to distribute wealth tax-efficiently, both in life and upon death.

For more information about an investment product, including risks, charges and expenses, please write or call for a prospectus or other offering material.

Mutual fund shares are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Shares are subject to investment risks, including possible loss of principal invested.

...our fathers brought forth upon this nation a new tax, conceived in desperation and dedicated to the proposition that all men and women are fair game.

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.

Did you know we do more than just prepare, compile, and crunch numbers?

We are not "bean-counters."

We can also advise you on estate and business planning and offer financial strategies to meet your goals. As your CPA, we know your needs better than any other professional.

DON'T FORGET: "IT'S NOT WHAT YOU MAKE THAT COUNTS; IT'S WHAT YOU KEEP!"