YES, WE HAVE MOVED AGAIN! After many years located in Randolph, our office recently moved to Stoughton. All of our old "RAK-1" (7251) phone/fax numbers are still being used.

Mass tax refunds – US tax returns
Are all your eggs in one basket?
Advantages to home ownership
Certified?
Gift disadvantages
Why individuals and businesses needinsurance
Tax Tip of the Week

Did your state tax refund get stuck in the state’s budget crunch? Two months after the state tax-filing deadline, the Massachusetts Department of Revenue said that some 650,000 taxpayers are still waiting for refunds totaling an estimated $325 million. Staff cutbacks mean some taxpayers may not see their refunds until August or maybe even later. Last year, the Internal Revenue Service “misplaced” about 40,000 paper tax returns.

If you filed your income tax returns electronically, you would have received your state refund within FOUR DAYS, not FOUR MONTHS and the IRS would NOT have lost your income tax returns.

Each year, I ask clients if they want to file their returns electronically. In the coming tax season, I will file US and Massachusetts individual income tax returns (showing a refund) electronically unless you tell me otherwise. This may eliminate many telephone calls from you, the frustrated taxpayer.

What’s the single determinant of investment performance? Many financial advisors will tell you it’s an asset allocation plan. An asset allocation plan is a valuable tool that may help you achieve your financial goals. Without a plan, you’re gambling with your life savings-and your future.

Asset allocation, simply put, means that you’re not putting all your eggs in one basket. Instead, when you use asset allocation, you actually distribute portions of your investment into different asset classes: stocks, bonds, and money markets.

The money market and bond classes are two vehicles that help you preserve your capital, since they involve the least amount of investment risk. Stocks on the other hand, present greater investment risk; however, they may also offer a greater potential for growth.
Generally speaking, the younger you are, the more risk you can afford to take with your investments. Younger investors, with a long time to recover from market setbacks, may choose to focus almost exclusively on the stock market. As you approach retirement age, preserving capital will most likely become more of a priority for you, so you may want to put less money into the stock market and a greater percentage of your assets in bonds and money markets.

Choosing the right investment mix will not only provide you with the potential for return on your investment-if one class does not perform as well as you hoped, you’ll likely be more protected from loss.

It’s wise to periodically review and rebalance your portfolio. However, rebalancing too often may do you more harm than good. Most experts recommend an annual review of your holdings. Your advisor may alert you if it’s advisable to adjust your mix.

Keep in mind that it’s never too late to establish or revise an asset allocation plan. Begin by scheduling an appointment with a qualified financial advisor. We can assess your goals, risk tolerance, and the time frame in which you’re hoping to achieve your goals - and suggest an asset allocation strategy that may well work for you.

For complete information on any of the above investments, including charges and expenses, obtain a prospectus. Read it carefully before investing. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be higher or lower than their original cost.

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.

Whether you buy a single-family house, townhouse, condo, or a boat containing sleeping, eating, and toilet facilities, it may open the door to new tax savings. The Massachusetts Society of CPAs explains some of the tax breaks associated with homeownership (specifically for your primary or second residence), making "Home Sweet Home" seem just a little sweeter for homebuyers.

Home Mortgage Interest And Points Provide The Big Payoff - The biggest tax savings available to the majority of homeowners come from mortgage interest. Each year, taxpayers who itemize can deduct interest paid on up to $1 million in mortgage debt incurred. In addition, the interest you pay on up to $100,000 of home equity debt is also fully deductible, regardless of how you use the funds. Even late-payment fees assessed by your lender are deductible. Keep in mind that these tax deductions and certain other itemized deductions are phased out for some high-income taxpayers.

If you paid $600 or more in mortgage interest during the year, you should receive Form 1098, Mortgage Interest Statement. Box 1 on the statement shows the total interest paid on your mortgage during the year and should reflect the interest you paid at settlement. If it does not, add the amount of mortgage interest from your settlement statement to the amount shown on Form 1098, report the total on Schedule A, and attach a note to your return explaining the

difference. The amount shown in Box 2 on Form 1098 represents the amount of points paid. The term "points" is used to describe certain charges you pay to the lender upon taking out the loan. Each point is equal to 1% of the loan's value and is treated as prepaid interest under the tax law. In most cases, points charged for the acquisition of a personal residence are fully deductible by the buyer in the year they are paid, regardless of whether the buyer or seller paid the points.
Property Taxes Are Fully Deductible - While real estate taxes can add substantially to your monthly mortgage payment, the amount you pay to local and state authorities (for the right to own and use a home) is fully deductible, subject to high-income phase-out rules. Many lenders include in monthly statements an amount placed in escrow for real estate taxes. Your deduction for real estate taxes is equal to the amount the lender actually paid from escrow to the taxing authority. Add to this, the amount paid or subtract the amount credited as indicated in the "settlement sheet" given to you when you purchased or sold your home. Be aware that this amount may be more or less than what you contributed to escrow during the year.
Additional Tax Breaks Available For Selling - If you've just bought your home, selling it may be the farthest thought from your mind right now. However, it's nice to know that, when it comes time to sell, there's another great tax break awaiting you. You can exclude up to $500,000 in gains from the sale of your home if you're married and file jointly ($250,000 for single taxpayers and married taxpayers filing separately), provided that you have owned and resided in the home as your principal residence for at least two of the prior five years before the sale. There are, however, conditions when some of the gain may be excluded even though you did not comply with the two-year ownership and use.

Finally, we recommend to homeowners to keep accurate records documenting improvements and additions made to their homes. That's because the costs of certain home improvements and added items can be used to offset capital gains realized on the sale of your home.

If you are not sure what records to keep or what qualifies as an improvement or addition, call us.

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

Although gifts up to $11,000 per donee ($22,000 when given by married taxpayers) and in some cases an additional $1,000,000 (one million dollars) per donor can be exempt from gift taxes, making gifts may not be such a nice thing to do.

When you make a gift, you give up income, control and use of the property; your tax basis carries over to the donee for capital gains tax purposes (lower of value or basis for capital losses), there is NO stepped-up basis; the gifted property could go down in value and that could increase the ultimate total of your estate or gift taxes on that property.

In summary, only gift property that will go up in value; or property that you don't want. Don't give away your assets in order to save on estate taxes. Instead, give away your taxes and keep your estate intact. Wouldn't that make more sense to you? Call us to arrange an appointment to discuss your estate and our thoughts on how to keep the estate intact for your heirs.

Many people often wonder -- Who needs life insurance? Perhaps another way to phrase the question might be: What can life insurance help you accomplish? When you look at in this way, life insurance can be used to help you achieve a variety of important financial objectives. Let's look at few of life examples and we'll see the benefits of life insurance.

First, consider a young married couple that have just had their first baby. The mother, previously employed full-time, has decided to work part-time so she can devote most of her time to being with their new child. How would she manage financially if her husband, now the primary means of support in the family, were to die unexpectedly? Since most couples just starting out in life together have not had enough time to accumulate a lot of money, life insurance can provide an instant estate, thereby assuring that money will be available in the case of an early death of either or both spouses. Based on the specific needs to be met, an instant estate could provide annual income for the surviving spouse, money to pay the mortgage on a house and funds to pay for a child's education.

Next, let's consider two partners who together have worked hard to build a successful business. How could they protect their respective business interests should one partner die or wish to sell? In this situation, the two partners could set up a buy-sell agreement funded with life insurance. Simply put, a buy-sell agreement establishes the conditions under which one partner would buy, and the other (or the partner's heirs in the event of death) would sell, shares of the business. Because partners typically may have much of their personal wealth tied up in the business, life insurance can provide the means (i.e., the cash) to accomplish their objectives.

Finally, let's consider the owner of a family business who wishes to keep the business in the family. How could the family business be protected from potentially high estate taxes, which might require selling the business to raise the necessary cash? Again, life insurance could be used to provide cash to pay estate taxes when a significant amount of personal wealth exists in an illiquid (meaning not readily convertible to cash) form.

Now, back to the question posed at the outset: "What can life insurance help you accomplish?" The examples above, while described in very basic terms, demonstrate how life insurance relates to specific needs. For most people, needs typically involve attaining and maintaining a comfortable lifestyle, including buying a home, educating children and securing income for retirement. By identifying the short-term and long-term financial needs of you and your family, you can develop a plan to help assure that money will be available to meet those objectives.

For more information about any of the suggested life insurance programs, call me.

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 please include your name, city, and state of residence in the content of the message. We will not accept a new name without a location.

Thanks.

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.