April 30, 2016
Pending Retirement Crisis
According to Barry Ritholtz of Ritholtz Wealth Management, author and guest commentator on CNBC and Bloomberg Television, potentially 81% of middle-aged individuals do not have enough savings for retirement. Think Taxes Are Too High?
We are in agreement, seeing that most individuals we see who are not government employees do not contribute on an annual basis to their IRAs, Roth IRAs, SEPs, 401ks and individual brokerage accounts. Instead, people are living too well today and not planning for tomorrow.
Then, you will want to know what Hillary Clinton is proposing. She would cap the value of itemized deductions at a tax benefit of 28% as well as the deduction for IRA contributions and moving expenses.
She would reduce the benefit for contributions to 401ks, tax exempt interest income and employer provided medical insurance. She believes that “millionaires” should pay a 30% minimum tax and supports restrictions on how much a person can accumulate in their retirement plan.
She wants to raise the estate tax to 45% and lower the lifetime exemption amount to $3,500,000 from over $5,350,000, hurting small businesses and farms. On gift taxes, she would lower the limit to $1,000,000.
She proposes to raise the tax on capital gains to 43.4% on assets held for two years or less and the rate would gradually drop to 27.6% for assets held for six or more years.
If she wins the election and you feel these proposals would harm you, we suggest you seek our advice on how to structure your affairs to minimize the pain.
So Long Old Hickory
Andrew Jackson has been on the $20 bill (the double sawbuck) since 1928. He is due to be replaced by Harriet Tubman. The discussion centers around whether people are for the replacement or are upset to see his image depart. I am glad to see him go and ambivalent about the replacement. Jackson created the modern Democratic Party and political system but was an abomination as President since he violated the Constitution. Article II Section III states as regards the President “….he shall take care that the laws be faithfully executed…..” Jackson, like President Obama, selectively chooses those laws he wanted to enforce and ignored others.
Most prominent was the Supreme Court decision in Cherokee Nation v. Georgia, which stated the Cherokee Indians could not be forcibly removed from their lands and relocated to Oklahoma along the “Trail of Tears.” Jackson famously ignored the Court’s decision by stating “(Supreme Court Chief Justice) John Marshall made his decision, now let him enforce it.”
President Obama has selectively enforced immigration, national defense, and other laws because, like Jackson, they conflict with his personal sensibilities. Unfortunately, those actions violate his job description, are unconstitutional, and might put the nation at risk like Jackson did to the Cherokee. Jackson will soon be gone and so will Obama in January 2017. Let us hope the next President, whomever he or she might be, will faithfully execute the laws of the United States whether or not they personally agree with them.
Goodbye To The Tampon Tax
Growing opposition to taxes on sanitary item such as tampons and pads is partly aimed at remedying what is seen as the injustice of taxing women for products that are basic necessities while at the same time exempting medical items from tax. MA, MD, MN, NJ, and PA have already done away with the tax. Among the states considering dropping the tax: CA, CT, IL, MI, NY, OH, and WI.
Not Getting a K-1 Is No Excuse
A man who wrote an online gossip blog formed a partnership with an investor who put up the cash and managed the business. The investor filed a late Form 1065 for the venture that reported income. But, the blogger, who had already filed his Form 1040, did not include his share of the partnership’s income because he never received a K-1 and was not aware that the partnership had any profits. He is still taxed on the income even though he claimed he had no knowledge of it. Lamas - Richie T.C. Memo 2016-63.
The IRS struck down the 20% penalty imposed by the IRS on understatement saying the blogger acted in good faith and reasonably relied upon the advice of his tax preparer.
As always, if you have any questions about these or any other matters, do not hesitate to call us.
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