Broker Check

February 19, 2001

This is Why We Use Averages

            We are  pleased  with our  performance  in that we went up relatively more than the averages and when the market turned we went down equal  to or less than them.  We note here that past performance does not guarantee future performance. For more details, please contact Howard Lisch and Lisch Investment Services, our money management division.

IRS Lowers Interest Rates

            on refunds to 8%  for individuals and 7%  for corporations.   For corporate refunds exceeding $10,000,  the rate on the excess is 5 ½%.  On balance dues, the IRS will charge 8% to individuals.  

The Tax Cut Fight is a Class War

            The  bottom  50%  of   all  taxpayers  (family income below $26,000)  pay 4.2% of total taxes.  The top 1% (family incomes above $270,000) pay 35% of all taxes,   the  top 5%  pay 54%  of  all  taxes.   The top 25%  (family  incomes  over $51,000) pay more 83% of all taxes.  Investors Business Daily 2/19/01.

            The Democrats are trying  to paint Bush and  the  Republicans as  heartless and rapacious.  They’re wrong,  if  you are to lower taxes, you must benefit the top 25% of Americans because they pay 7/8 of all taxes.  The bottom 75% simply pay too small a percentage to count!

Hiring Your Spouse

            to get a tax break does not always work.  A sole proprietor put his wife on  the payroll so the family’s medical costs could be deducted as a business expense.  He  gave  her family coverage so  that  his  medical  would  also  be      included.  She answered the telephone in his home office and kept the work space clean.  He paid her  $2,000 a  year  in  a  lump sum a the end of the year,  regardless of  how many hours she had put in.

            The  spouse’s  medical  is not  deductible according to the Tax Court.  She was not  a  true employee of the husband.  Her duties were like those performed by  family  members  living  in  the  house.   There  was no employment contract and her pay was not based upon time worked.   Haeder, TC Memo 2001-7

Tax Relief is a Woman’s Issue

            The marriage penalty has a real-world effect.  It goes deeper than the strain brought  on  by  lost  earnings  which  range  from $1,100 to $1,450 per couple.  It strikes  at  the  very  roots of a married couple’s life.  Take the situation of a couple where the husband earns $60,000 per year.   The wife takes a job to earn $30,000 per  year  to support  the  family.  In reality, her job adds only $1,000 to the family income.  How?  Her  salary  is  taxed  at  50%  (FWT,  SWT,  CWT,  FICA and Medicare).  Child care  for  two  children  required  $10,000  per  year before the $1,000 child tax credit.  Other  costs  such  as dry cleaning, commuting, meals and other expenses caused by  her being out  of  the house eat  up  the rest.  Investor’s Business Daily 2/19/01.

            Democrats   across   the   land  have  blocked   the   lowering  of  this   tax. Republicans have favored cutting the penalty.

            The choice is up to you!  Call your elected representative.

New Extension Form For Exempt Organizations

            An  exempt  organization  can  use  the  new  Form 8868.  Application for Extension of Time to File an Exempt Organization Return, to request an automatic 3 month extension of time to file its return.  Organizations can also use Form 8868 to apply for an additional 3 month extension if  the  original 3 month extension was not enough time.  Federal Taxes Weekly Alert 2/15/01.

Taxpayer Wins First Timely Mailing Case

            involving an overnight carrier.  The  law  was changed several years  ago to permit Tax Court petitions sent by private delivery services designed by  the IRS to qualify under the  timely-mailing-as-timely filing rule.   In  the first case,  in which the IRS and  a taxpayer clashed over whether  a petition  sent  by a private carrier was timely,  the  Tax  Court  ruled  in  favor of  the taxpayer even  though  the  taxpayer incorrectly filled in the carrier’s airbill.  Federal taxes Weekly Alert 2/15/01.   

            This may mean that a taxpayer may be assured of using a private carrier to deliver a tax return to the IRS.

            If you have any questions about these or any other tax or financial matters, please call me.