Broker Check

February 10, 2003

Know Your Tax Preparer

          Recently, customers who used an H & R Block tax preparer to prepare their tax returns over the  past two years received more than they bargained for.  The four employees apparently stole their identities in order to redirect tax refunds and set up credit card accounts for their own shopping sprees.
          The U.S. Postal Inspection Service said that at least twenty seven customers were victimized between December, 2000 and April, 2001.  The employees allegedly stole names, addresses, Social Security numbers and other confidential information. Accounting Today 1/27-2/9/03, p.12

          We suggest that you carefully consider the character and reputation of the tax preparer before using that person.

Your UBS Paine Webber Broker

          may be calling because they were told that the bonuses they receive for assets under management were being cut as well as expense accounts.  Paine Webber producers will see a 50% cut in bonuses for assets under control, dropping bonuses for producers with less than $100 million under management to 50 basis points from 1%. Registered Representative 1/03, p.22

Statutory Employees

          can deduct their expenses without itemizing.  They can use Schedule C of Form 1040 as if they are self-employed.  Unlike regular employees, they need not cut their business expenses by 2% of adjusted gross income.  This tax break is available to home workers, agents or commission drivers, as well as full time traveling salespeople and sellers of life insurance.

          But, there is a new rule for drivers who deliver products on commission. According to a recent Tax Court case, the drivers need a substantial investment in their operations to qualify.  The ruling denied favorable tax treatment for a bakery truck commission driver who paid nothing to acquire his route and was not liable for any operating costs. Kiplinger Tax Letter Vol. 78, No.2 1/17/03

Keep A Copy of Everything

          Last time, it was the IRS employee who flushed tax returns down a toilet at the Philadelphia Service Center.  Now, it is the Immigration and Naturalization Service where the data processing center in Laguna Niguel, California had a 90,000 document backlog disappear because the 24 year old manager and the 34 year old supervisor, under her, ordered their lower level workers to shred every one of those 90,000 documents so that they would appear to be current.  Not only that, but by March, 2002 after shredding the documents, these same two geniuses ordered continued shredding so that the service center could stay current.  The service center handles paperwork for residents of California, Arizona, Nevada, Hawaii and Guam. New York Times 1/31/03, p.A22

          We always suggest you keep a copy of everything that you submit because I do not trust my government.  I see that they have justified my confidence in them.

New 60 Day Rollover Rule

          You do not pay current tax on eligible rollover distributions from qualified pension plans and certain distributions from traditional IRAs if they are rolled over to an eligible retirement plan (which includes qualified plans and traditional IRAs) within 60 days of receipt of the distribution.  A distribution rolled over past the 60 days generally will be taxed and also may be subject to a 10% premature distribution withdrawal penalty tax.

          In a new set of rules, the IRS said they may waive the 60 day rule if an individual suffers a casualty, disaster or other event beyond his reasonable control and not waiving the 60 day rules would be against equity or good conscience (THEIRS).  The IRS has explained that it will automatically waive the 60 day rule if a financial institution’s error caused the rollover to be untimely.  For the automatic waiver to apply, the funds must be actually deposited into an eligible retirement account within one year of the beginning of the 60 day period. RIA Federal Taxes Weekly Alert 1/23/03, p.57

Life Insurance Scenario I

          We were recently able to help one of our clients triple the life insurance on his life at no additional cost to him.  The facts were that he had a variable life insurance policy on his life and there was a life insurance policy on his spouse for a lesser amount.  There was also a pension payable to him that would expire upon his death.  The problem was that upon his death his wife would not be able to live on the expected income to be generated from life insurance proceeds on his life.  Upon her death, the life insurance proceeds would generate an expected income that would be immaterial to affect his lifestyle.

          We suggested that the life insurance policy  be canceled on the life of the wife and applied the cash surrender value to an exchange of his life insurance policy to a variable universal life insurance policy.  Together, the variable universal life insurance policy acquired provided for approximately triple the death benefit for the same annual life insurance premium that was being paid upon his life only.  Upon his death, the wife will be able to have triple the income she could have had otherwise.

          If you feel we can be of help to you with regard to reviewing your life insurance policies in light of your financial objectives, please call Howard Lisch for a free review.

          Call as soon as possible to schedule your tax return appointment so you can get the time of your choice.

          If you have any questions about the foregoing, or any other financial matters, please call us.

          Remember, We’re Here For You!