May 31, 2005 IRS to Close Walk In Centers After widely publicized hearings seven years ago, Congress passed a law ordering thje Internal Revenue Service to enhance services to taxpayers, improvements that were financed by cutting enforcement of tax laws to make sure telephones were answered and forms were readily available. That era is now ending. The IRS will close up to 105 of its 367 walk-in centers which dispense forms and advice. The hours when the IRS answers telephone calls will also be reduced. People with simple tax returns will no longer be able to file using a touch-tone telephone. The IRS will steer taxpayers to use the internet to obtain forms and automated answers. NY Times 4/10/05 p.20 It looks like taxpayers will need tax professionals like us more than ever. Employee Benefits to Shrink A poll of CPAs in New York State determined, in an attempt to contain costs, many New York State employers are likely to ask employees to contribute more money to pay for their benefit plans. Health insurance is the most susceptible to budget cuts followed by retirement plans, dental coverage, prescription coverage, vision coverage, life insurance coverage and automobile use. The Trusted Professional 10/04 Vol. 7 #13 p.1 Outsource Your Tax Returns To India? CPAs must tell clients if their tax returns are prepared abroad according to new ethics rules adopted by the American Institute of Certified Public Accountants. Clients must be given the chance to veto the use of foreign tax preparers. Kiplinger Tax Letter 11/14/04 We do not outsource any tax return abroad or otherwise! Private Annuities Can Aid Medicaid Eligibility Clients sometimes ask CPAs how they can qualify for Medicaid. With monthly nursing home costs between $5,000 and $10,000 for many older adults Medicaid is the only way to pay for long term care. Each state sets income and asset limits to qualify for Medicaid, such limits may require many people to impoverish themselves in order to reduce their assets and income levels in order to qualify. Often, this entails giving property away to children, grandchildren or others. However, because Medicaid requires full disclosure of certain recent gifts, and because other problems can occur (for example, gift taxes), many clients may be better off creating a private annuity to shed excess wealth. An annuity is a contract under which a taxpayer gives money to a third party who agrees to a schedule to pay the money back. A parent can purchase an annuity from his or her child. The child receives the parent's money in exchange for a written contractual promise to pay a stated monthly benefit. When the owner/annuitant dies, the remaining money rests with the contract issuer/child-which is exactly what the taxpayer/client wanted. Journal of Accountancy 7/04 p.88 If you are interested in pursuing this idea please call Howard Lisch in our office. Don't Tap IRA to Buy Out Ex-Spouse Tapping an Individual Retirement Account to buyout an ex-spouse is a big tax mistake. The withdrawal is taxable. A divorce court split the husbands IRA and half of it was transferred to an IRA in the wife's name. She then took all the funds from the account to purchase her ex-husband's interest in the marital residience. In addtion to owing tax on the distribution, she also owes a 10% penalty because she was under age 591/2. Cohen TC Memo 2004-227 We suggest you engage us to review your proposed divorce arrangements in order to minimize your tax consequences. Longer Refund Claim Time Under a new law, owners of worthless securities will now have seven years to file a federal amended return and claim a loss, up from the regular three year limit. However, investors in partnerships do not get this benefit. Draper Ct of Claims Kiplinger Tax Letter 10/22/04 If you think you are eligible, please call our office to file a claim for the worthless stock loss. Post Divorce Mortgage Payments are Alimony The IRS says, in a private ruling that an ex-husband who made the mortgage payments on his former spouse's home after divorce were deductible as alimony since both remained jointly liable on the mortgage and each continued to own one half of the residence. One half of each payment on the house is treated as alimony to his ex, so he can deduct that amount on his 1040. The other half of his payments of mortgae interest and property taxes can qualify as itemized deductions. Kiplinger Tax letter 10/22/04 If you have any questions about the foregoing or any other financial matters, please call us. Remember, We're Here For You!!