Robert W. Craig, E.A. Tax and Business Services
January 5, 2012
There are lots of things going on with all the turmoil in Congress
and Washington as a whole. As you’ve probably heard, the
payroll tax cut has been given a two-month extension. The
feeling is that this being an election year, neither Democrats or
Republicans want to be responsible for lowering workers take-
home pay, and the cuts will most likely apply to all of 2012.
As for the Bush tax cuts, which are set to terminate after 2012,
we forsee Congress approving a one-year extension giving
Congress time to look at a larger overhaul of the tax current
tax system in 2013. This is not a slam dunk but it appears the
most likely scenario at this point. I will keep you updated as the
year unfolds and developments surface.
As always, feel free to forward this newsletter to anyone you
know who you think may benefit from the information.
The 4th quarter 2011 estimated tax vouchers are due to be post-
marked no later than January 17, 2012.
Estate Tax Alert – Deadline Approaching
If you are an executor, trustee, or a beneficiary of an estate or
trust for a decedent who passed away in 2010, be aware that
there may be a deadline on January 17, 2012 to file a Form
8939 to elect zero estate tax. This is complex so if you are
involved in an estate or trust with decedents who died in 2010,
be advised of this and get counsel on it if necessary.
Are Living Trusts Still Necessary?
A lot of people ask me if revocable living trusts are still some-
thing to have or think about because of the new estate tax laws
and increased exemption amounts.
My answer is usually that yes, they are still a great vehicle in
estate planning. You see, estate tax savings is not the only
reason for having a living trust. There is privacy, probate
avoidance (big savings), ease of transfer, reduce family or
beneficiary squabbles and more.
It’s important to get it done correctly and to make sure
that everything necessary is included in the trust and titled
properly. You may be able to get by without one but, as
I always say, “you don’t know what you don’t know” so
it’s best and less expensive to get great advice.
It is best to discuss your particular with a competent lawyer
experienced in this specialized area of law. I’ve seen some
terrible trusts drawn up or critical items left out of the trust and
these are headaches at best and can be very costly to your loved
For more information and a great recommendation for an
attorney specializing in this area, call Sara A. Henry at (805)
693-9100 or check out her website at: www.VintageLawyer.com
There is also an article on this website at “Do you need a professional
fiduciary or living trust” under Recent Posts to the right.
New Developments in Real Estate Financing
These newsletters are not just about taxes, they are about improving
your overall wealth and success. In talking with David Brown of
Residential Mortgage here in the Santa Ynez Valley, I discovered
that there are some intriguing happenings in financing. I’ve included
a sample of his article below.
If you could not refinance due to the lack of equity in your home the
new Obama HARP 2.0 program may help. If your loan is serviced by
one of the following GSE servicing entities you may be able to refinance
to a lower rate. Unlike the first HARP program that limited the loan to
value the new 2.0 program has higher or no limits. In fact many will not
require a new appraisal. Click on the below links to see if your home loan
is now with either of these servicer’s. If so, give me a call to discuss the
economics of securing a lower interest rate.
For the entire article, look under Recent Posts on this website, “Time To
Review Your Mortgage”, it’s very timely and important, and pass it along to
friends as well. Or visit David’s website at RELoans.com.
Gift Tax Alert – IRS Crackdown!!
Sometimes real estate is transferred from one person to another for
little or no money or consideration. This can be parent to child or
friend or another person for another reason.
This is okay but if the value transferred is greater than $13,000, a
Form 709 Gift Tax return is required to be filed reporting the
transaction. Apparently, in a study, the IRS has found that many
times (50% to 90% of the time) the required forms are not filed.
In California and many other states, disclosure of this information
must now be made available to the IRS. So, the IRS will get the
names of people who transferred realty for little or no money, and
will be able to go after them. Note that the Forms 709 must be filed
even though no tax is due (which is most often the case) because
this is an estate tax issue and by not reporting the excess of the
annual exclusion of $13,000, the government may lose out on
estate tax when the person giving away the property passes away.
Offshore Account Alert – Have An Offshore Account? Read!!
For many legitimate reasons you may have a foreign bank account.
On the other hand, there a many illicit reasons that one may have
offshore or foreign bank accounts (drug and terrorism money,
laundering money, and tax evasion) and these illegal activities
have given the government reason to become very ‘interested’
in any and all people with foreign bank accounts.
UBS, the giant Swiss bank, has ratted out over 4,500 U.S.
citizens who were using the secrecy of Swiss banks to evade
U.S. taxes. Many account holders, as many as 30,000 or so
came forward and confessed under special IRS programs.
It has always been required to check a box on your tax return if
you held a bank account in a foreign country. I assume this has
been disclosed properly but, in case it was missed know that
offshore foreign accounts are at the top of the IRS hit list.
U.S. citizens and residents are taxable on their worldwide
income and are subject to all U.S. tax laws. The world is
shrinking and this is really true when it comes to taxes,
especially since 2008 when Senate hearings revealed that
Americans were hiding assets in Swiss and other foreign banks.
To comply with the Bank Secrecy Act, you may be required to
file as many as three disclosure forms depending on how much
in aggregate asset balances one may have and where you reside.
The penalties for ignoring these rules and filing requirements are
severe, comprising of monetary penalties and potential jail time.
They are serious about this. I know this probably affects a
small percentage of my clients but it is so important that I feel
it necessary to spend considerable newsletter space to it. You
may also know someone who this may affect and would wish
to make sure they are aware of the rules.
That’s it for now, more to come.
Thanks for reading this months newsletter. If you have any ideas
for topics or would like to feature information from your business
that would be of interest, please shoot me an email and a blurb
or article on your topic.
Remember, if you know or happen upon anyone who needs tax
planning advice, tax preparation, or tax problem resolution
services, feel free to give them my name and numbers and I
will assist them in any way I can.
Robert W. Craig, E.A. Tax and Business Services
1444 Aarhus Drive
Solvang, CA 93463