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.