April 29, 1998 Retirement Saving Up-Except by Boomers People are saving more for retirement. Generation X is saving. Seniors are saving, but not the baby boomers. Overall, Americans boosted their retirement savings by 2 percent in 1997 to $203 per month from $199 per month. This is not counting pension benefits and Social Security. Still, workers said they would need to save $660 monthly to meet their retirement needs. Don`t be among those caught short. Call us to see what you can do to raise your savings. Interest Rates Drop for NYC Interest rates on various New York City taxes drop from 9% to 8%, effective April 1, 1998. This will be on underpayments. Interest to taxpayers due to overpayment on general corporation tax and unincorporated business taxes decreases from 8% to 7%. New Jersey Federal Sale of Principal Residence The gain realized from the sale or exchange of a taxpayer`s principal residence after May 6, 1997 is now excludable from New Jersey gross income up to a maximum of $250,000 for an individual or $500,000 for a husband and wife, filing jointly. This change conforms with similar changes made to the Internal Revenue Code. Like the federal rules, to qualify for the exclusion, during the five year period ending with the sale of the property, the property must have been used by the taxpayer as the principal residence for periods aggregating two years. If you filed your 1997 tax return and paid tax on the sale of your New Jersey residence you can amend your tax return to come under the new New Jersey law. Gore is a Cheapskate!! Vice President Al Gore and his wife Tipper made $197,729 last year and contributed only $353 to charity, less than two tenths of one percent. Gore and his wife are known for their advocacy of environmental and religious causes. I guess they just don`t put their money where their mouths are. Americans typically give an average of two percent of their earnings to charity. Clintons Need Tax Advice President and Hillary Clinton who made $569,511 last year donated $8,300 to charity other than royalties from Mrs. Clinton`s book. $281,898 of their income came from royalties from Mrs. Clinton`s best selling book, It Takes A Village. All income from the book, net of taxes and administrative charges, is being donated to charity since the Clintons promised not to profit from the book. The Clintons earned royalties of $1,024,750 in 1996 and 1997, of which the Clintons have given away $840,000 or 82 cents on the dollar, (82%) after paying taxes on the income. But that is not the smartest way to give away royalties. They could have given every penny of the royalties to charity (100%) by giving it to a community foundation through which they could have channeled the money. The lack of proper tax advice cost the Clintons an additional $32,000 they could have donated. A timely gift to a community foundation would have been the best tax planning for this gift. In the New York area, the largest foundation is the New York Community Trust which charges a fee of 0.16% which in the Clintons` case would have been $1,600. Other foundations typically charge 1.5% of assets. If you want more information on tax efficient ways of donating significant sums of money or assets such as copyrights (as in the case of Hillary Clinton), please contact us. A New Privilege? Except for South Carolina, no state has an accountant client privilege. Certainly there is no such federal privilege. Maybe not for much longer. In the proposed IRS Restructuring and Reform Bill which is working its way through the Senate, Senator Roth (of IRA fame) has proposed an accountant client privilege for all IRS proceedings and somewhat beyond. This is a landmark in legal and tax history, which, if passed would potentially affect how accountants will interact with clients. Stay tuned! The Law of Unintended Consequences Regardless of your political persuasion, there are many lessons learned from the case of Paula Jones v. William Jefferson Clinton. The one that, I believe, is most important to the small businessman, is that the ever-present threat of a sexual harassment assertion has been lessened with the dismissal of the case by Judge Wright. I believe that the current state of law is that boorish, even offensive conduct is to be tolerated; even if only for the proverbial "one grope" rule. A man will now be able to get the benefit of the doubt for the first physical pass and touching. I believe that it will now not be held as a physical assault or as sexual harassment. If you, the reader, whether male or female, believes you may have been involved in such a situation or might be because of your workplace, I suggest you contact an attorney specializing in such matters. If you have any questions about these or any other financial matters, please call me.