The IRS has released its list of the Dirty Dozen Tax Scams to watch for when preparing and filing returns for 2011. “Illegal scams can lead to significant penalties and interest and possible criminal prosecution,” according to the IRS website. The list is published as a way of increasing public awareness and cautioning people to be on the look-out.
While identity theft and phishing top the listing, of particular interest are these two items:
- Abuse of Charitable Organizations and Deductions, and
- Misuse of Trusts
Intentional abuse of 501(c)(3) organizations includes: arrangements that improperly shield income or assets; attempts to maintain control over donated assets or the income from donated assets; over-valuing non-cash assets; arrangements to buy back the donated asset at a time and price set by the donor; and inaccurate appraisals.
Misuse of trusts include: questionable deductions of personal expenses, and promises of reduced income, estate, and/or gift tax.
IRS personnel have witnessed an increase in the abuse and misuse of these entities. Organizations should be aware of the possible motives behind some donor objectives and strive to not be complicit in such activities. Penalties and the damage to the organization’s reputation might not be worth whatever temporary benefit received.
See the full listing here.
|Opportunities to Achieve Efficient Wealth Transfer in 2011 & 2012|
|Looking for ways to maximize your tax savings through smart wealth transfer? Join Aronson’s wealth planning experts on Tuesday, September 27th for an instructive webinar designed to help you better understand the intricacies of the current estate/gift tax planning climate, explore planning techniques and learn more about the implications of state and federal estate tax laws as they relate to wealth transfer.
Harry Harrison and Michael Yuen of Aronson’s Tax Services Group will discuss:
There are limited windows of opportunity to transfer wealth efficiently in 2011 and 2012, so don’t miss this complimentary and time-sensitive webinar! RSVP today to reserve your spot!
With the passage of the new 2010 Tax Relief Act, Congress just made it easier for business owners intending to make a substantial wealth transfer. Given the current political environment, this is the prime time to take advantage of this opportunity, because the law might get changed without much advance notice.
The 2010 Tax Relief Act has increased the lifetime gift exemption cap to $5M from $1M, but just for 2011 and 2012. In the past, business owners structuring a major wealth transfer to their children often ran into the problem of not having enough lifetime gift exemption… and business owners were generally reluctant to pay gift tax on such a transfer. The increased lifetime exemption cap provides business owners with a great (albeit temporary) opportunity to reduce the size of their estates.
Also of note… Although restrictions on the use of common valuation discounts in valuing business interests have been proposed recently by legislators, the 2010 Tax Relief Act contains no such provisions.
As always, a properly executed estate planning strategy involving transfers of business ownership interests will require an objective and well-supported valuation analysis. For information about how Aronson’s Forensic & Valuation Services Group can provide assistance in this area, please contact Stuart Rosenberg or Bill Foote at 301.231.6200.
Although people cannot control the timing of death to take advantage of the new estate tax law changes, they can surely control the timing of making gifts to children and/or grandchildren. The way the new Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 works makes gifting between now and the end of 2012 both exciting and challenging and may require some creative planning and quick actions before year-end (only three days left!). Below are a few important features in the new estate and gift tax law:
- The new law confirms that there is no GST tax on gifts to grandchildren in 2010. That means unlimited GST exemption in 2010.
- Starting in 2011, the GST tax will come back at a 35% rate and the GST exemption will be at $5 M only.
- The gift tax exemption in 2010 is still capped at $1 M but it will increase to $5 M in 2011.
- The gift tax rate for 2010, 2011, and 2012 is all the same at 35%.
As you can see, the tax result would be quite different if you were to make large gifts to children and/or grandchildren in 2010 v. 2011.
President Obama and the GOP reached a tentative deal on taxes last night. This agreement will still need to pass through Congress and is being touted as a framework; however, it has some welcome news. Below are the main points :
- Extension of the Bush tax cuts for 2 years;
- Re-establishment of the estate tax rate of 35% for estates over $5m (Note: Consensus is that this will likely be increased to 45% as the proposal works through Congress);
- Reduction of the FICA tax due by employees from 6.2% to 4.2%. This effectively acts as an economic stimulus since working Americans will receive a larger net income on their paychecks;
- Extension of unemployment benefits for the long-term unemployed.
|Aronson & Company’s Tax Services Group is pleased to share with you these two important tax alerts to help you remain informed and up-to-date!
2010 Haiti Earthquake Relief Contributions Deductible in 2009
Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.
Donors should take care to make sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even if they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID. Please also note that contributions to foreign organizations generally are not deductible.
The Temporary 2010 Federal Estate Tax Repeal
New Roth IRA Conversion Opportunities
If you have any questions regarding any of the above information or any other tax issues or questions, please do not hesitate to contact Aronson & Company at 301-231-6200.
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