June & July Blog Entries

07/19/06

Social Security Statement

If you are employed and are 25 years or older, the Social Security Administration should automatically send a report of your earnings. These statements usually arrive a few months before your birthday. This record shows a year by year account of your earnings along with estimates of your current and future benefits. If you don't recall seeing this statement come to you, contact the Social Security Administration. 

Also - make sure it's accurate!  One person I know showed doulbe his earnings on the statement, so he contacted SSA.  Sure enough, they had inadvertantly doubled an entire run.  You're better off correcting the error NOW.

If you are a victim of identity theft, your account can be voided until the investigation is over.  Make sure you keep up on your own account - it's in YOUR best interest to do so!
 

07/12/06

Copyright Fee Increasing

Those who register their work with the U.S. Copyright Office should prepare to spend a few more dollars since a price increase on July 1st.

The copyright office is raising the fees for registering single works and groups of photographs from $30 to $45. This is the first increase since 1999.

Also of interest to storytellers and speakers: the fee for having the copyright office staff conduct a records search is doubling from $75 to $150 per hour. And the office will begin charging $100 to provide an estimated search fee.

The fee for preregistration – a new type of registration that protects a creative work before it is completed – remains $100.

Creative works are automatically protected by copyright, but registering with the copyright office provides greater assurance of legal protection in case of infringement.

The copyright office says it needs to raise fees to keep up with rising costs. More fee changes are expected next year when the copyright office will make it possible to register works online.

For a complete list of fee changes see their website: 

 www.copyright.gov/reports/fees2006.html

07/11/06

Inheriting an IRA From a Spouse

If you inherit an IRA from your spouse, you can treat is as your own. This means the contributions can be made to the IRA and you can roll it over. You are free to designate your own beneficiaries and usually will not owe tax until you start receiving distributions.

If you inherit an IRA from your spouse, you also have the option to begin receiving distributions. These distributions can begin on the later of the date on which the owner would have reached 70 ˝ or by December 31 of the calendar year following the year in which the owner died.

07/07/06

Inheriting an IRA From a Parent or Other Non-Spouse

When you inherit an IRA from someone other than your spouse, you have two options:

1.  transfer the inherited IRA to an Inherited IRA Beneficiary Distribution Account, or

2.  disclaim all or part of your portion of the inherited IRA.

Only a spouse can treat an inherited IRA as his or her own.

If you opt to transfer your inherited assets to a beneficiary IRA, you can begin making the minimum required distributions by December 31 of the year following the IRA owner’s death. Your minimum required distributions are based on your life expectancy or the five-year rule depending on whether or not you are a designated beneficiary. If you share the inheritance with others, each must set up his/her own account for his/her portion of the inheritance within a specified time frame following the owner’s date of death. The distribution rules for the beneficiary are slightly different if the owner of an IRA dies before reaching age 70 ˝ than if he or she dies after reaching that age. (whew!)

If an IRA owner dies before age 70 ˝ or has not started withdrawing the minimum distributions, those inheriting the IRA must follow either the one year rule or the five year rule.


One year rule: If the beneficiary is the designated beneficiary, distributions must begin by December 31st of the year following the owner’s death. Distribution withdrawals are based on the beneficiary’s life expectancy.


Five year rule: The beneficiary must receive the full interest in the inherited IRA by the end of the fifth year following the owner’s death. There are no minimum annual distributions required with the five year rule.

These rules are complicated and should be discussed with a professional.

If you opt to disclaim all or part of your inherited assets, you must do this within nine months of the IRA owner’s death. Once you disclaim your assets, they will pass to the next eligible beneficiaries. Once you disclaim the inheritance, it would be passed on to the next eligible beneficiaries. A disclaimer is irrevocable so you should consult with a tax attorney before taking this step.

06/29/06

New Tax Law Regarding IRAs

The tax law permits you to make a withdrawal from a qualified retirement plan and "roll over" the funds to a traditional IRA without any current tax, provided the rollover is completed within 60 days.  
Otherwise, the distribution is taxable as ordinary income in the year it is received. In addition, if the taxpayer is under age 59 1/2 at the time of the distribution, any taxable portion not rolled over may be subject to a 10 percent additional tax on early distributions. .

In the past, the IRS has been adamant about taxpayers complying with the 60-day deadline. However, a "kinder, gentler" IRS is now more likely to grant an exemption due to extenuating circumstances.

The IRS may agree to waive the 60-day requirement if an individual suffers a casualty, disaster or other event beyond his or her reasonable control. In addition, the deadline may be waived if it would be inequitable to not waive it.

 IRS ruling: In one exception, the IRS granted a rollover waiver to a private citizen working for a U.S. company in several foreign countries. During the time he was required to complete a rollover from his qualified retirement plan to an IRA, he was working in a war zone. Due to these circumstances, the IRS granted a waiver to the 60-day deadline. It also tacked on an additional 60 days to allow the taxpayer to make at least a partial rollover to the IRA.(IRS Private Letter Ruling 200502052) Some of the factors the IRS will consider in waiving the rollover deadline are the inability to complete the transaction due to death, disability, hospitalization, incarceration, restrictions imposed by foreign countries, and errors committed by financial institutions or the U.S. Postal Service.

06/28/06

Hybrid Cars and Tax Credits~

 Last year's Energy Policy Act replaced the $2,000 clean-fuel burning deduction with a tax credit that is potentially worth much more. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.The credit is only available to the original purchaser of a new, qualifying vehicle. (If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.) The amount of the credit varies based on the fuel efficiency of the vehicle.

These models have been certified by the IRS for the credit in the following amounts:

2007 Ford Escape Front WD Hybrid — $2,600

2007 Ford Escape 4 WD Hybrid — $1,950

2007 Mercury Mariner 4 WD Hybrid — $1,950

2007 Toyota Camry Hybrid — $2,600

2005 Toyota Prius — $3,150
2006 Toyota Prius — $3,150
2006 Toyota Highlander 4WD Hybrid — $2,600
2006 Toyota Highlander 2WD Hybrid — $2,600
2007 Lexus GS 450h — $1,550
2006 Lexus RX400h 2WD — $2,200
2006 Lexus RX400h 4WD — $2,200
2006 Ford Escape Hybrid Front WD — $2,600
2006 Ford Escape Hybrid 4 WD — $1,950
2006 Mercury Mariner Hybrid 4 WD — $1,950
2005 Honda Insight CVT — $1,450
2006 Honda Insight CVT — $1,450
2005 Honda Civic Hybrid MT and CVT — $1,700
2006 Honda Civic Hybrid CVT — $2,100
2005 Honda Accord Hybrid AT and Navi AT — $650
2006 Honda Accord Hybrid AT w/updated calibration and Navi AT w/updated calibration — $1,300

Another hurdle: If you're interested in the tax break, you may want to buy soon because the full credit is only available for a limited time. Taxpayers can claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. The IRS and manufacturers are tracking these amounts. For example, for the quarter ending March 31, 2006, the IRS announced that Toyota (which owns Lexus) sold 41,779 qualifying vehicles to retail dealers and Ford (which owns Mercury) sold 6,192 qualifying vehicles.

For the second and third calendar quarters after the manufacturer records its sale of the 60,000th vehicle, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit.

For more information about the tax credit for hybrid vehicles, contact your tax adviser.