The Importance of Tax Planning During the Year

Being a tax consultant and preparer for over 20 years, I can tell you that there have been a number of times that I’ve had clients who were surprised by how much they money they owed at tax time. Why did they wind up owing so much money? There are numerous reasons. What it all comes down to tax planning or the lack of.

Tax planning is very similar to financial planning. It involves taking a close look at your tax situation from one year to the next. People who have financial investments are always checking with their financial advisors to improve their financial situation. If you’re going to check with your financial advisor, you should also check with your tax advisor and so see how your financial investments are going to affect your taxes.

Tax planning is not only for those people with financial investments. Tax planning is for everyone, especially if you’re undergoing financial changes that could affect your tax situation. Some of these financial changes could be the purchasing of a home, it could be the purchase or sale of rental property, it may be the withdrawal of money from a retirement account, or it may be starting a business. Anyone of those financial changes as well as others could significantly affect your tax situation.

The best time to check with your accountant is before you take any kind of financial action to see how it could affect your taxes. Many times people call their accountant after the fact. That’s like closing the door after the horse has left the barn.

There are two things that I always tell my clients. First, I always tell them if that if they have any tax questions to call me. The second thing I tell them is if they are going to do anything that they think could affect their taxes to contact me.

Why is it important to check with your accountant before you do something? It’s important because your accountant can advise you of the tax consequences of your actions. They can analyze your tax situation and tell you what action to take so you don’t get caught owing a lot of money at tax time.

Here’s a story that I always tell my clients to emphasize this point. Several years ago I had a client who took money out of retirement account (which was fully taxable) in late December. I was not aware of this action until he came to see me at tax time. As a result, he ended up owing a lot more money than he anticipated.

I told my client that I wish he had consulted with me prior to making the withdrawal, because I would have advised him to wait until January to take the out the money. Why should he have waited? By waiting until January, the money he withdrew would not have been taxable until the following year. By waiting a few weeks to the next year, we could have done tax planning on ways to reduce his taxes during the year and save him some money. This is why it’s important to consult with your accountant during the year.

Tax planning is also important when it comes to paying your taxes. Many people are under the assumption that they have until April 15th to pay their income tax. That is not entirely correct. April 15th is date when your taxes must be paid in full.

The law requires that you pay your taxes as your earn the money during the year. For those of you who are paid as employees, you have your taxes withheld from your paychecks. Your employer withholds the income tax from your paycheck and he pays that money to the government throughout the year. However, for those of you who are self-employed (work for yourselves) or have passive income from investments, you may be required to pay your taxes during the year by making estimated tax payments.

What are estimated tax payments? Estimated tax payments are quarterly tax payments made throughout the tax year (January through December). The law requires that you make an estimate of your tax liability and pay it as you go during the year. The tax laws require that you make your payments on April 15th, June 15th, September 15th and January 15 (of the following year).

Top 5 Sales Tax Nexus Issues for Technology Companies

Sales Tax Checklist for Technology Companies

Do you make internet sales? (On all internet sales, sales tax is due…assuming the product/service is taxable. The issue is whether the seller has a duty to collect and remit or whether the buyer is required to self report.)
Do you have affiliate relationships (for generating sales) with out-of-state companies?
Do you have sales representatives travel outside of your home state?
Do you engage in trade shows outside of your home state?
Do you have employees or agents that perform services on your behalf outside of your home state?

If you answered “yes” to one or more of these questions, you could be creating a sales tax liability outside your home state. Also, remember income tax nexus is not equal to sales tax nexus. The rules apply differently.


Nexus is a “connection” or “link”. Sales and use tax nexus refers to the connection between a person or entity and a taxing jurisdiction sufficient for that jurisdiction to require the person or entity to comply with its sales and use tax laws.

The current basis for determining when sales and use tax nexus exists is found in two Supreme Court cases; Quill Corp. vs. North Dakota [May 26, 1992], and National Bellas Hess, Inc. vs.Department of Revenue of the State of Illinois [May 8, 1967]. In both Quill Corp. and National Bellas Hess, Inc., the Supreme Court ruled in favor of the taxpayer, limiting the states’ ability to impose its taxing authority over interstate commerce. The guidance derived from these two cases can be employed in today’s markets to manage sales and use tax compliance responsibilities.

While most States continue to reference these cases when defining sales tax nexus thresholds, the States continue to pursue expansion of their sales and use tax authority. With nexus being the foundational element that requires a company to collect and remit sales tax, it’s important to note some of the difficulties in determining whether a company has sales tax nexus or not.

As with most sales and use tax related matters, determining whether or not sales tax nexus exists requires some level of interpretation of a state’s statute as it applies to the activities of the entity. With that backdrop, here are the most common issues that technology companies struggle with from a sales tax nexus perspective. Also, it should be noted that sellers do not actually “charge” sales tax. Rather, seller’s “collect and remit” sales tax. This can be important. For example, as in the case of internet sales, sales tax is always “due”. This issue becomes whether the seller has the obligation to collect and remit the tax or if the buyer is obligated to self report.

#1. Affiliate Nexus, “Amazon Laws”, and Click-Through Nexus

The internet has resulted in a shift in our buying patterns and a decline in sales tax revenues. With our current tax system and the nexus rules as outlined above, an out-of-state retailer (translation – a retailer without nexus in the state) selling goods to a consumer or business over the internet is not required to collect sales tax. It is the buyer’s responsibility to self-assess the tax and voluntarily remit use tax to the state. Most businesses are aware of this nuance but many consumers are not.

States ensure compliance with these laws through business audits; however, the states don’t have the bandwidth, nor is it practical, to audit every consumer. So instead of going after the consumer, states are looking to implement taxing rules that require the out-of state business to collect the tax.

This is why “affiliate nexus”, and the “Amazon Law” or “click through nexus” have evolved. These are ways in which states have tried to use the existing nexus standards to require out-of state retailers to collect the tax that otherwise would not have been collected. The typical scenario occurs when an out-of-state business forms a relationship with an in-state business (often referred to as an affiliate) for the sole purpose of customer referrals via a connection to the out-of-state business’s website. For this referral, the in-state business receives some type of commission or other consideration. The relationship established through the affiliate programs creates nexus for the out-of-state business, creating an obligation to collect and remit local sales tax. Multiple states including Illinois and California have introduced recent affiliated nexus legislation mainly targeting large internet retailers such as Amazon, hence the title “Amazon Law”. In reaction to this legislation, Amazon has dropped their affiliate programs in most of these states. By dropping the affiliate programs, the company intends to terminate its nexus with the state and avoid prospective sales tax collection responsibility. However, this can be problematic as most states deem nexus to exist for a period of at least twelve months subsequent to the activity that created nexus.

The State of New York has passed legislation, called the “commission-agreement provision,” that creates a rebuttable presumption that a person (seller) making sales of tangible personal property or services is soliciting business through an independent contractor or other representative if the seller enters into an agreement with a New York resident under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller (click through nexus). The presumption applies if the cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents with this type of agreement with the seller is in excess of $10,000 during the preceding four quarterly periods ending on the last day of February, May, August and November. The presumption may be rebutted by proof that the resident with whom the seller has an agreement did not engage in any solicitation in New York on behalf of the seller that satisfies the nexus requirement of the U.S. Constitution during the four preceding quarterly periods. N.Y. Tax Law 1101(b)(8)(vi).

Technology companies should review their affiliate programs and understand which states, specifically, have “Amazon Laws”, “affiliate nexus” rules, or “Click-Through Nexus” rules. This is a constantly changing area that requires close monitoring. At the time of publication, California passed a 1-year repeal of their “Amazon Law”.

#2. Traveling Sales Representatives

The idea of a sales representative sitting in a home office in a state other than where corporate headquarters is located is a clear example of an activity which establishes sales tax nexus in the state where the sales representative is based. However, what happens when that sales representative travels into other states to meet with prospects or customers? This type of activity frequently occurs with technology businesses as the sales representative meets with the prospect to demonstrate their product. Whether or not this type of activity creates sales tax nexus will depend on the state and the frequency of the activity. Each state’s rules are slightly different in terms of the threshold that needs to be met to create nexus. However, for some states, a sales representative traveling into the state for a single day will create sales tax nexus. While other states have more lenient thresholds, a general rule-of-thumb is that three days of activity of this type will create nexus for sales and use tax purposes.

Texas prescribes that out-of-state sellers engaged in selling, leasing, or renting taxable items for storage, use, or other consumption in Texas must collect use tax from the purchaser. “Retailer engaged in business in this state” can include, in addition to other activities, any retailer: Having any representative, agent, salesman, canvasser or solicitor operating in Texas under the authority of the retailer or its subsidiary to sell, deliver or take orders for any taxable items. Texas Tax Code Ann. 151.107(a)(2); Texas Tax Publication 94-108, Engaged in Business (Sales and Use Tax), 11/01/2006.

Nexus Strategy: Instead of face to face customer presentations, technology businesses may consider conducting product demonstrations via the Internet through Webex, GoToMeeting, or another similar application.

#3. Trade shows

Technology companies are frequent participants in trade shows. Typically, companies attend trade shows to promote their products and services. A company may promote its products and services via representative employees or agents and/or display its wares via a kiosk or booth. In either of these scenarios, the company is performing a type of solicitation.

It is the solicitation activity that determines whether or not nexus has been created. However, a number of states have established specific thresholds (number of days in attendance at a trade show) in order to establish when a company attending a trade show has created nexus in the state. For example, California has set a standard of more than fifteen (15) days – i.e. if you attend trade shows in California for fifteen days or less, you have not created nexus in the state of California (assuming this is your only activity within the state). Cal. Rev. & Tax. Cd. 6203(d); Cal. Code Regs. 18 1684(b).

Nexus with Michigan is not created if the only contacts a person has with Michigan consists of: (1) attending a trade show at which no orders for goods are taken and no sales are made or (2) participating in a trade show at which no orders for goods are taken and no sales are made for less than 10 days cumulatively on an annual basis. However, this rule does not apply if a person also conducts the following activities: soliciting sales; making repairs or providing maintenance or service to property sold or to be sold; collecting current or delinquent accounts, through assignment or otherwise, related to sales of tangible personal property or services; delivering property sold to customers; installing or supervising installation at or after shipment or delivery; conducting training for employees, agents, representatives, independent contractors, brokers or others acting on the out-of-state seller’s behalf, or for customers or potential customers; providing customers any kind of technical assistance or service including, but not limited to, engineering assistance, design service, quality control, product inspections, or similar services; investigating, handling, or otherwise assisting in resolving customer complaints; providing consulting services; or soliciting, negotiating, or entering into franchising, licensing, or similar agreements. Michigan Revenue Administrative Bulletin 1999-1, 05/12/1999.

Technology businesses should carefully plan where they will attend trade shows and understand the sales tax nexus thresholds associated with each state for this type of activity.

#4. Employees or Agents Performing Services

Technology businesses that send employees into a state to provide implementation, installation or repair services are creating nexus for sales and use tax purposes. The fact that this is a non-selling or non-solicitation activity does not mean this activity does not create sales tax nexus. On the contrary, these activities are more likely to create nexus for sales and use tax purposes.

The Washington State Supreme Court, in a recent ruling, asserted that a manufacturer whose employees traveled into the State with the sole purpose of meeting with customers simply to manage the relationship was sufficient to create nexus. This activity was seen as a mechanism that created a market in the State and as a result created nexus for the manufacturer. R W R MANAGEMENT, INC., Appellant, vs. STATE OF WASHINGTON DEPARTMENT OF REVENUE, Respondent, 10-332, 06/27/2011.

Using non-employees to support clients can have a similar effect. For example, a technology hardware business that uses a local resource to repair or perform other maintenance for its customer is providing the service via an affiliate and is deemed to have created nexus for sales and use tax purposes. Whether the person providing the service to the customer is an employee of the business or not is immaterial to the states. The fact that the person is present in their state and performing a service on behalf of the out-of-state business is sufficient to create nexus for the out-of-state business.

Technology businesses should evaluate non-selling related activities they perform in each state including installation and maintenance/support services as well as services provided via a third-party representative when assessing their sales and use tax nexus foot print.

#5. Income tax nexus does not equal sales tax nexus

There’s often an assumption that where a company has income tax nexus, they also have sales tax nexus. End of story. This is true, but only partially true. The second half is that a company can have sales tax nexus without having income tax nexus. The threshold for sales tax is much lower than that of income tax. For example, the solicitation of sales is generally considered a sales tax nexus creating activity whereas this same activity will not, by itself, create income tax nexus (See P. L. 86-272). The most well-intentioned CPA firms are prone to assuming that because nexus has not been created for income tax purposes, sales and use tax nexus doesn’t exist. This is certainly not intended but is the result of limited knowledge of sales and use tax laws.

In Pennsylvania, out-of-state vendors/sellers who maintain a place of business in Pennsylvania and sell or lease taxable tangible personal property or taxable services must register and collect Pennsylvania sales and use taxes. Pa. Stat. Ann. 72 7202; Pa.Stat. Ann. 72 7237(b); Pa. Code 61 56.1(a) “Maintaining a place of business” in Pennsylvania includes, in addition to other activities: Regularly or substantially soliciting orders within Pennsylvania through a solicitor, salesman, agent or representative regardless of whether the orders are accepted in Pennsylvania; Pa. Stat. Ann. 72 7201(b); Pa. Code 61 56.1(b).

Technology companies should be aware of the specific expertise their CPA firms have in providing sales tax advice. Sales tax is a unique discipline with differing rules from state to state.


Establishing sales tax nexus is often the culmination of multiple nexus creating activities. For example, a technology business may spend three days in a state, soliciting orders, two days at a trade show, and a day or two implementing their products. Each of these activities can create sales tax nexus by itself but should also be viewed in relation to other nexus creating activities.

An important note is that once sales tax nexus has been created, the need to collect and remit sales tax is triggered (assuming what you are selling is taxable in the particular state). Sales tax nexus is associated with the legal entity and spans all sales channels. For example, if you have a direct sales channel and an internet sales channel, once nexus is established in a state both channels are subject to the sales and use tax laws of that state.

How to Choose a Tax Problem Service Provider

Can You Do It Settle Your Tax Problem Yourself?

Most people try to resolve tax problems on their own or with the help of their tax preparer. They think that a tax attorney is too expensive, they can save money by doing it themselves and if they owe a little bit more, they’ll just pay it.

In an IRS Audit, many taxpayers go into an IRS audit totally unprepared and simply hope for the best. Some think that if they can impress the IRS auditor that they are nice, law-abiding, decent human beings and not common criminals, the IRS auditor will mellow, be sympathetic, and politely let them off the hook. Forget it! IRS auditors are nice, decent human beings too, but most importantly, they pay their taxes… and they don’t think too kindly of others who don’t. If you are selected for an IRS audit, or owe taxes you just can’t pay, you’ll probably need professional tax representation.

Dealing effectively with the IRS or other state or local regulatory authorities requires specialized knowledge and experience. Your tax preparer is usually NOT your best choice if you have an IRS examination or problem with back taxes.

Do You Need Professional Representation?

Each case is different, but the more tax debt you may owe, or the more information the Internal Revenue Service (IRS) is requesting, the more likely you should hire a taxpayer resolution provider. Tax relief services are generally classified in two categories – IRS Collection Matters and IRS Audits.

IRS Collection Matters concern the payment of back taxes owed, tax penalties and tax settlements. It usually doesn’t pay to hire a tax attorney when your tax debt is under $1,000. Most national tax relief companies will not help you when you owe $10,000 or less.

IRS Audits concern an IRS audit of tax returns you previously filed and are done simply by IRS letter, IRS office visit or IRS examination at your place of business. In tax audits by IRS letter, or IRS correspondence examinations, taxpayers are notified of specific, questionable tax matters they reported and are given the opportunity to object or just pay the proposed IRS assessment. IRS office visits and IRS small business tax audits are generally more comprehensive and require a review of most, if not all, of the income and deductions reported.

Who Do You Go To For IRS Help?

Only a licensed tax attorney, certified public accountant or enrolled agent can represent you before the IRS.

Tax Attorney – In the most advanced cases of IRS representation, you will probably need the services of a tax attorney. You will need to hire a tax attorney if you have committed tax fraud, are under criminal investigation by the IRS, plan to bring suit against the IRS or need to bring your case to court.

Certified Public Accountant (CPA) – A local CPA firm is your best choice where you need to prepare business tax returns or compile financial information needed in a tax audit. Only select CPAs have the knowledge and experience to represent you effectively before the IRS.

Enrolled Agent – Enrolled agents are also federally-authorized tax practitioners with technical expertise in taxation authorized to represent taxpayers before the IRS.

Choosing whether to work with a tax attorney, certified public accountant or enrolled agent will depend upon the nature of your case. In some cases, you may need the services of more than one professional.

How Much Does Taxpayer Representation Services Cost?

The cost of taxpayer representation services vary widely from a few hundred to thousands, and sometimes even tens of thousands of dollars, dependent upon the type of tax problems you have and the settlement options you can obtain.

In matters concerning a late tax return, the cost of income tax preparation is only slightly higher than that you would normally pay for tax return preparation. To properly prepare a late tax return, you should generally take additional steps to contact the IRS, asking for an extension of time, obtaining and reviewing your IRS transcript.

In help with tax debt problems, you will generally need to file all back tax returns before you can negotiate a settlement. If you’re able to pay the taxes owed the costs of representation are minimal. If you’re just looking for a little more time, or a tax payment plan and don’t owe much, professional fees are quite affordable. The costs of paying back taxes will increase significantly depending on how much you owe and the terms of the settlement agreement.

In an IRS audit, it will usually cost you the least in an IRS examination is as a result of an IRS letter and the issues and years under examination are limited. If your audit is more comprehensive, such as an IRS office visit or IRS audit at your place of business, the costs of professional fees are almost always more. If you owe taxes and do not agree, you can usually appeal the IRS audit results or take your case to court. The cost of services can vary greatly depending upon how far you need to take it, if you owe taxes, how much you owe and the difficulty associated with each tax audit.

In many of the simpler IRS audit or tax debt cases, you may be able to contract the services of a tax attorney for a fixed fee. The estimated cost of tax attorney services will be ultimately dependent upon the difficulty of your case and how much time is required to settle your tax problems. Reputable tax attorneys will never charge you based on how much they can save you and can never guarantee your results.

How Do You Get Started?

Many tax attorneys, CPA firms and tax debt relief firms can be easily found on the Internet. Often, the initial consultation from many tax debt relief companies is FREE. Be wary of Internet marketers when looking for IRS representation services on-line. Avoid calling 1-800 phone numbers to IRS audit matters, because you must be represented by a local CPA or tax attorney. Always ask to speak with a licensed CPA, EA or tax attorney before discussing any confidential information. You can to this! Good luck.

Claiming a Tax Refund As a Student Or Recent Graduate

There’s a popular misconception here in Britain that nursing students are exempt from paying income tax. In this article, we uncover the fact and the fiction behind student nurse taxes, and take a look at how to claim back any overpaid tax that you’ve already paid.

We have a popular misconception here in Britain that nursing students do not have to pay Income Tax – and whilst we hate to be the bearer of bad news, we’re not going to lie. You students are just as liable to pay Income Tax as anyone else in Britain.

The confusion is most likely down to the fact that a great many nursing students earn less than the annual tax-free allowance – the threshold which determines whether you earn enough to have to pay tax in the first place. It’s currently set at a little over £8,000 per year, and with most students earning far less than this figure, the fact that you’re a student nurse is completely irrelevant.

And yet, despite the overwhelming majority of nursing students earning less than £8,000 per year, a ridiculous number of you end up paying too much tax each year.

Nursing students applying to our service have generally paid too much tax for one of three reasons;

– They’ve paid tax on the wrong tax code

– They’ve left a job prior to the tax year end

– They’ve failed to claim the correct nurse tax relief allowances

We’ll cover the issue of tax on savings income in a later article. For now, let us consider the first two scenarios – how they arise, how they can be avoided, and what to do if you’ve already overpaid.

Paying tax on the wrong tax code

This situation often arises where nursing students are holding down multiple jobs. Complications arise because your annual tax-free allowance is not split up and shared across all of your jobs. HM Revenue & Customs generally allocates your tax-free allowance to the first job in full – so the first £8,000 or so that you earn with this employer will be tax-free. But by doing this, none of your tax-free allowance is set against the income on your second job. Any income earned here will therefore be taxed at the full basic rate, and you’ll need to claim it back manually.

If this sounds familiar, it’ll be worth checking the tax codes you’ve been given for each job – whether that’s with the NHS or down your local pub – they should be printed on your pay slip. A ‘810L’ tax code indicates that you are receiving the tax free allowance, and a ‘BR’ tax code indicates that you’re not. If you have two jobs, you’ll probably have one of each.

If your combined income for both jobs does not exceed the tax-free allowance, this situation will almost certainly lead to an Income Tax overpayment and you’ll need to apply for tax relief at the end of the tax year.

If you’re just about to take on a second job, it might be worth speaking to the tax office about splitting your personal allowance between the two of them. If you have an estimate of how much you’ll earn in each job, this arrangement will generally avoid the need to pay any income tax at all.

Leaving your job prior to the tax year end

The second scenario is just as common, and tends to occur when nursing students have taken on full time work over the summer (such as bar work). HMRC rather primitively calculates your tax on the assumption that you’ll be in that same job for the rest of the tax year (i.e. through to 5th April), so when you finish at the end of summer you’ve not earned as much as the tax office had anticipated – and have therefore almost certainly overpaid. Again, you’ll need to claim for nurse tax relief yourself if you want to obtain a rebate sooner than later.

This situation is particularly common for nursing students who take part in summer work placements, where pay tends to be higher than with most temporary summer jobs.


Lets suppose your 12-week nursing placements starts on 1st June, paying 1,500 a month. Throughout the placement, HMRC will tax you on the assumption that you’ll earn 15,000 by the tax year end (1st June – 5th April). When you finish the placement in late August, and have only earned 4,500, it’s almost certain that any tax paid will have been taken in error because your 4,500 income is far less than the annual tax-free allowance.

How to avoid paying tax as a student nurse

If you’re applying for a nursing placement or internship for Summer 2013, or if you’re looking at taking on some part-time work during term time, be sure to provide your employer with a P38(S) form before your first payday.

This is a student nurse tax relief concession, allowing your employer to pay you without tax provided your annual income does not exceed the personal allowance. (Just bear in mind that employers are not obliged to play ball – some are not prepared to process students’ pay separately).

How to get your tax back as a student nurse or recent graduate nurse

If you are studying nursing at university or have graduated as a nurse since April 2007, and have been given the wrong tax code, not worked for the full tax year, or earned less than the tax free allowance (currently around £8000) whilst at nursing college, you can almost certainly claim nurse tax relief from HMRC – right back to April 2009.

Tax Increase Or Tax Relief: It Is Your Choice

Pondering today’s current economy and the likelihood that capital gains and income tax rates will increase next year ignites fear and confusion for countless numbers of Americans. For many taxpayers, the future appears to be downright frightful, resulting in a new wave of terror that strikes their hearts. They may even take an impaired view and see only one result when they read the letters I…R… and S. Have you ever noticed that the words “The” and “IRS” when coupled together spells “THEIRS!”?

The reality, though, is that those who view the current circumstances from this perspective are only victimizing themselves. The trick in maintaining sanity during this time of economic and tax upheaval is to forget about what you cannot control and focus on those things you can. The fact is you can manage your taxes and most likely win out in the end.

Solving Tax Problems and Gaining Greater Benefit

To illustrate, concerns about capital gains and other taxes may be troublesome. You may have owned an apartment building for several years and now would like to sell, relax and enjoy the equity and income benefits your hard work has earned you. Your CPA, however, has reported that you would be obligated to pay substantial capital gains taxes if you sold your property. What do many property owners do when they get this news? Unfortunately, they do nothing, except remind themselves of what their accountant told them: “Nothing can be done but to pay the taxes.” Right? WRONG!

Before you list your property for sale, it is important for you to learn what tax planning alternatives are available to meet your specific needs. If you search them out, you will discover that tax law does offer some pretty great solutions. You may, for example, be able to defer the taxes for up to 30 years or eliminate them entirely. If your mortgage to be paid off is greater than what your basis is for the property, you’ll learn that the taxes for “debt relief” can be solved. And at close of escrow, you may find that it is possible to enjoy greater income than what you had by owning the property you sold. But you will never know unless you take charge of your circumstances and learn your options. You must become proactive and find out the right solutions for you. Here is what one real estate investor experienced:

Troubled about her real estate portfolio valued at $800,000, this 54-year old lady wanted to sell the properties, replace the income she received from the real estate and reduce her income taxes. She was stunned to learn, however, that, according to her CPA, she would be obligated to pay more than $200,000 in capital gains and other taxes if she sold her properties and little, if anything, could be done to lower her income taxes. Discouraged, she mentioned her concerns to a friend who suggested that she seek a second opinion diagnosis of her circumstances by a qualified tax planning advisor. She did this and was delighted to discover that her financial condition was far different that what her CPA had thought:

1. Rather than paying $200,000 in taxes when she sold her properties, she would pay no taxes at all.

2. Her income would significantly increase above what she was receiving by owning the properties.

3. Instead of paying excessive income taxes, she would receive an immediate refund of taxes that she unknowingly overpaid; and,

4. She discovered other tax-saving opportunities that she could take advantage of about which her CPA was unfamiliar.

How could her CPA be so wrong? As is true of many accountants, he was never trained in the discipline of tax planning. In fact, according to CPAs with whom I have spoken, candidates for the Certified Public Accountant designation are not required to take tax planning courses to earn this title–and most do not bother doing so. Consequently, although they can become very skilled in identifying tax problems, few of these professionals acquire the experience and know how to solve them. They can be viewed as being “financial historians” who take what a client has done after-the-fact, filter that information through the required tax codes and generate, hopefully, an accurate tax return. This is great accounting but it is not tax planning. You are always better served when you meld together the advice of a trained tax planning professional with that of your CPA or accountant.

If you want to find the most appropriate resolution to your tax concerns, it is essential that you first learn what your true tax problem is and then search out the most viable options available to eliminate, defer or reduce the taxes for the year of sale. After you identify potential solutions and understand how each can be tailored to your specific circumstances to meet your objectives, the last step before implementation is to validate them under tax law through independent tax and legal authority. Following this approach will prepare you to be better informed on how best to approach the sale of your property and maximize your profit and income at close of escrow. Once this is done, you can confidently move forward to sell and then enjoy the benefits of the plan you implemented.

Finding effective tax remedies can be more easily achieved by following the advice of an experienced tax planning specialist who will guide you through a simple step-by-step process that works. Your tax-planning advisor facilitates the tax solutions; tax attorneys and your CPA or accountant jointly validate the solution you choose and its structure; and your real estate professional guides the sale of the property. It is a synergistic team effort that is focused on benefiting you in the most effective ways possible.

Whatever the new tax laws might be, we all should prepare ourselves to take full advantage of them. How? By plotting out a common-sense approach to tax planning through which we can:

1. Gain the foresight needed to confidently pay less in personal income taxes; and,

2. Significantly reduce, defer or eliminate the capital gains, depreciation recapture and other potential taxes you would otherwise be obligated to pay when you sell your appreciated real estate or other assets.

Here is the Good News

Taxes can dramatically cut away at any chance for you to successfully meet your financial goals and objectives. It makes no difference how old you are, if you are working or now retired. If you earn enough money or want to sell appreciated assets such as real estate, you will probably be obligated to pay taxes. The good news is you have choices.

We have all learned from childhood that it is prudent to get a second opinion if we are diagnosed with a serious illness. Wouldn’t you agree that paying more in taxes than you are legally required is a serious threat to your financial health? If you have appreciated real estate or other assets that you would like to sell but are concerned about paying taxes, doesn’t it make sense for you to learn what options are available to you to solve them? If you do, you will find out that you, too, have choices that can help achieve your dreams in spite of a wavering economy and changing tax law.


Bruce Jones entered the financial services industry in 1970 and has taught the subjects of tax management and financial planning since 1974. He is President and Chief Executive Officer of TaxWealth, a tax advisory firm which provides comprehensive tax solutions for owners of real estate, privately-owned businesses and other appreciated assets. In addition to serving its own clientele, TaxWealth supports CPAs, attorneys, financial advisors and real estate professionals in helping to solve their clients’ tax problems.

Tax Software Decisions When Starting Your Own Tax Business – Online Vs Installed

Be aware; the attributes discussed in this article are relating to tax software used to prepare individual tax returns for profit, NOT personal use tax software (AKA TurboTax).

Online Tax Preparation Software

Positives: Online software applications allow your office freedom and mobility in both return preparation and management reporting. Many startup tax business owners choose this option for its ability to empower their employees to be able to prepare returns outside of the office. Mobile tax preparation allows for a variety of marketing programs aimed at growing your customer base by bringing tax services directly to the client. Several positive examples of mobile tax preparation programs are preparers setting up for a given time period at their church or organization and preparing members taxes a discounted rates. Many elderly clients value the service of a tax preparer coming to their home to prepare their taxes. Churches, Organizations, Nursing Homes, and Schools provide a target market where multiple clients can be taken care of in one visit. With an online software program, multiple preparers can operate under 1 IRS license given that there is 1 managing party referred to as the “Responsible Official”. Many tax offices choose online software programs due to the sheer cost savings of not having to purchase multiple software packages to allow their preparers the same freedom, and the Online programs also allow for return and productivity tracking without having to manage multiple EFINs. Where ever you have an internet connection and a printer to produce any signature documents, you can prepare, file and check status of a tax return. With the prices for mobile broadband cards and smartphones with WiFi connectivity becoming more and more affordable it is becoming very common for mobile tax preparers to bring their own internet connection with them. For management one of the biggest advantages of the online programs is the ability to do reporting from home without having to use a third party software application to access your office network. As busy as a typical tax office manager is during tax season, the more time they are able to be away from the office, the better!

Negatives: While online software allows for mobility and preparer freedom, it also produces limiting factors to that every tax business owner should consider. Informational Security of all online software platforms have to be approved by the IRS before the transmitter will be approved for using the IRS e-file system, but many tax office managers are not comfortable with allowing their preparers the access to their office system and returns from any outside the office PC with a simple username and password. One of the biggest complaints I see is preparers submitting returns for pay off the clock and not reimbursing the tax office. Don’t forget the office owner (responsible official) is on the line for all activity preformed under that tax office EFIN. Online tax software also handcuffs your tax business to the uptime of your software provider. Every online provider will concede state that there will be downtime during the season. The question is, how does downtime affect your tax preparation business? Almost all preparers who have used online products in past seasons can recall awkward moments when sitting with a client and having to explain that your software was down and they would have to come back into the office at a later time. If the software providers servers are down, or if your internet connection goes out, you are out of business! There is no preparation, no document printing, no submitting of return, no reporting…Your tax business is dead in the water!

Traditional Installed Desktop Tax Preparation Software

Positives: Desktop installed software is as reliable as your computer or tax office network. This allows you to control your backup procedures, and puts the power in your hands to control outages. Desktop tax software also allows the tax office to maintain a more controlled environment for return preparation. A preparer cannot access return information or preparer returns from any PC other than a PC that has the software hard installed on it. Desktop tax software allows for mobile tax preparation service, but would require that the preparer bring their own laptop with the program installed on it. In a mobile tax preparation setting, with hard installed software, you are not reliant upon having an internet connection to be able to prepare tax returns or print signature pages. You or your mobile preparer can simply prepare the return and wait to get back to the office to transmit any returns to be electronically filed. Desktop installed software platforms are also the oldest versions of tax software programs available and have been through many more years of testing and revising than their online alternative options.

Negatives: To utilize more than one preparer or more than one PC for tax preparation in an office setting you must network your office PCs and designate one as the “server”. If a PC leaves the office network, such as taking a laptop home, you lose access to your tax program unless additional home to office networking is setup. Software that is installed on your office network or personal computer is only as safe as the safety parameters you physically have in place. Hard installed programs should always have a backup program running to an off-site storage option in the case of a complete system crash or office disaster such as a fire or theft.


Both Online and Hard Installed tax software have their respective positives and negatives, but after 7 years in the tax preparation business I can tell you that being out of commission due to an internet outage, or a server crash somewhere on the other side of the country is absolutely unacceptable. Online software takes the control out of your hands and puts it in the software company’s home. Many tax businesses can attest to the frustration of not being unable to prepare returns the first 2 weeks of last tax season due to online software issues from one of the largest tax software providers in the industry! If I am making the choice for my start-up tax preparation office, I want to be in control, and if something goes wrong, I have the ability to fix it! Hard installed software is my choice when starting a tax preparation business.

My job is helping rookies get into the tax preparation businesses and be profitable their first year. I would like to give you some more insight on what is working for others in the tax preparation industry. Click here for more information on non-franchise tax office startup options and low cost – high return on investment marketing programs

Albanian Central Tax Administration, Composition and Developments of Its Structures

The administration of taxes belongs to the central and local tax administration. The Albanian Central Tax Administration of 2012 includes General Tax Directorate and Regional Tax Directorates. The Albanian Local Tax Administration includes all the tax offices of municipalities. The Central Tax Administration administer indirect and direct taxes, national taxes, and social contribution collection.

The Local Tax Administration administers all the local taxes as: taxes on property, on infrastructure, on hotels and tax on agricultural land.

The overall level of the staff of the tax administration is based on a model, which ensures that the report personnel / taxpayer to be higher in control than in other functions and higher in Large Taxpayer Directory, than in the Tax Regional Directories. The structure of directories on the regions has been simplified over the past two years and now consists of 14 regional directories and 24 service agencies. These public employees have to deal with more than one hundred and twenty thousand taxpayers, which include the small and medium taxpayers to large taxpayers.

The tax administration is composed based on functions as: anti corruption, internal audit, tax appeal, and is based on:

– Operational functions – services for taxpayers, assessment of tax returns and VAT refunds, tax arrears collection,tax audit, tax investigation and

– Supporting activities for operational functions – technical issues, legal office, education and training, international relationship.

The headquarter includes 14 Directories and 12% of total employees of tax administration;

The regional tax directories are 13 and Large Taxpayer Directorate and include 88% of total employees of tax administration.

The composition of tax administration based on gender issue is near to 50% – 50%.

The mission of the taxation administration is to contribute the tax revenue to pay for the government’s public expenditures through effective and efficient collection of taxes, insurance contributions and other duties. In addition, we supply information to support the development of the Government’s economic policies.

With a view to attaining these goals, the taxation administration assists taxpayers through high quality services so that they can be voluntarily in compliance with the law and their obligations and duties. Simultaneously the taxation administration acts against those whose behavior does not meet the requirements of the law.

The total tax revenues collected for 2011 were € 1.21 billion, from which € 821 million as tax revenues and € 400 million as social contributions. The result from tax audit and tax investigation operations resulted with more than 144 million euro tax dues and fines.

The tax revenues structure consist in social contributions with 32%, P.I.T. with 17%, V.A.T. with 16%, C.I.T. with 12%, excises with 10% and other taxes with 11%.

In line with international best practices, tax administration has established a Directory for large taxpayers to manage the problems of a small number of taxpayers, whose payments constitute the largest tax revenues (50.2% of all tax revenues in 2011).

Large Taxpayers Directory administers 800 taxpayers. Since 2009, taxpayers are classified as “large” when they have an annual turnover in excess of the amount of 180 million Albanian Lek (1.5 million euro), number of employees and level of investment or capital.

One of the main goals of the creation of LTD is to strengthen the expertise on staff in order that the tax agency to increase its ability to have the same skill level as well as private sector consultants engaged by large taxpayers. Productive Large Taxpayers Units effectively achieve this through:

– Providing the most qualified personnel to work in the Large Taxpayers Units

– Employees holding the same position for a sufficient time to have the opportunity to acquire skills to a level much higher (and if necessary through “isolation” of Large Taxpayers Units from policies or practices of regular rotation staff)

– Creation of control units specialized in certain industries, and

– Creation in many of them specialized units for technical advice that create expertise about complex problems and serve control units.

As in other countries, the problems encountered during the process of administering match:

– Cross-border transactions between related parties and transactions in countries with tax benefits not in accordance with the principle of neutrality in transactions (transfer prices)

– Complex structures and intro-group transactions associated with the realization of tax benefits unrelated to the economic substance of business

– Problems to avoid taxes (e.g. overseas entities, hybrid entities, the executives of foreign tax credit, insurance within the group)

– Customs to include rights for exceptions, incorrect classification of goods, assessments and importer of high value)

– Method of working certain tax matters which ensure internal control and / or external.

– The degree of control that businesses have on their tax processes

– Distortions and inconsistencies in market valuation

– Classification Office (hybrid or not)

– International Arbitration

– Assessment of fuel

– Problems with permanent business center

– Structured financing

– Transactions for the importation of losses

– Agreement to use abusive trust cash values in life insurance policies to provide benefits from public assistance

– Inter-corporate financing that uses guaranteed payments

– Agreement for intermediate foreign tax credit

– Tax evasion through the use of contracts with option for compensation of foreign currency

-Agreement abroad for delay compensation

– Earnings from the sale of assets

That’s a summary of Albanian tax administration, the tax branches and their developments during 2012.

Six Things To Ask Your Tax Preparer

Even though tax season is over, it will return again in future years and the same issues may pop up as in the past. If you do your own taxes, you can ask yourself the same questions when you prepare them to see if any of the ideas apply to you. This article serves as a handy reference of things to have at your fingertips for any tax season.

There are some assumptions being made here which will be stated in this paragraph. The tax rules being assumed here are the Canadian Tax Code, using Ontario as the province levying the taxes. These ideas can be applied to the other provinces of Canada, but always check with the Canada Revenue Agency or applicable tax agency for changes, which occur frequently. These concepts can be applied to other countries, but the same caveat applies. The situation referred to here as a personal income tax situation. For self-employment or any kind of business, some of the rules may be different.

Does my refund depend on the income taxes I have paid throughout the year? The answer is yes. The government will only give you money as a refund if you have paid income taxes during the year, or you paid more than the amount of income taxes you “should pay” according to the tax calculations. The refund is calculated only on your taxable income, and not on other money you receive from the government. Examples of money that would not be taxed are lottery winnings or gifts. Other monies that are not taxed are credits like the GST/HST credit, Ontario Trillium Benefit, or the Child Tax Benefit. What this means is that if you are thinking of claiming a credit, or putting money into an RRSP, you should check the money you earned during the year and see how much taxes you have actually paid. The taxes in question here are only the income taxes – not property taxes, HST or taxes in the form of registrations or fees. How do you know if you are paying income taxes? Your pay stub will show the taxes being deducted. If you have a casual job, a temporary job or self-employment, there may not be any taxes deducted because you are either not expected to make much money, or you are expected to pay all the taxes when you file them at the end of the year. If you haven’t paid any income taxes throughout the year, do not expect a refund at tax time.

Can my tax return be changed in a following year? The answer is yes. When would you do this? If you discover a credit that you could have claimed after the fact, but did not claim it, you can file for an adjustment and have the return recalculated at any time. Many people believe that once a tax return is calculated that it is carved in stone. This simply is not true, however it is easier to claim credits in the current year versus going back into previous years. The rules sometimes change if you are going back to previous years versus claiming in the current year because adjustments may affect credits that you received, or because the income used to calculate the credits would be changed. You can also file for an adjustment if you made a mistake, or if you something happened in a later year which affects the tax returns of prior years. An example of this would be a tuition amount from going to school that was not claimed in the year in occurred.

Do I have to file taxes by the April 30th deadline if I am getting a refund? The answer is no in most cases. If you are receiving a refund, you can usually file after the deadline and not have any issues with paying interest or penalties. This is because interest will not be charged when the government owes you money. The ideal thing to do however if you are getting a refund is to file taxes well in advance of the April 30th deadline. You will get the money sooner, not be in long lineups, will not have as many mistakes on your tax return, and will likely receive the money faster because the government is not as busy processing returns. If for some reason you cannot file taxes by April 30th such as being out of town for example – you can file them after April 30th, but you may have to pay interest or penalties if you owe money to the government.

Should I file taxes if I don’t owe any money and I am not getting a refund? The answer is generally yes. If you are not paying taxes or getting a refund, filing taxes on time would be advantageous for you if you are receiving credits from the government. Examples of these credits are the GST/HST credit, the Ontario Trillium Benefit, and the Canada Child Tax Benefit. Whenever you receive money from the government, you should keep your records with them up to date and accurate. If you file taxes late, or have issues with your records, credits may get withheld or reduced because if there is a possibility that you may owe the government money, you will have delays receiving the money.

Should I keep track of carry forward amounts? The answer is yes. A carry forward amount is a credit that would allow you to get taxes paid back in a future year. Examples of this are tuition fees or RRSP contribution room. If you go to school in 2010 as an example, and you did not earn much money in 2010, you can carry forward that tuition credit to the following year. You can use the credit in 2011, 2012 or any other year until the credit is used up. The same applies for RRSP contribution room. If you do not contribute to an RRSP in 2010, the room is still available. You can put money in 2011, 2012 or future years until the room is used up. Keep the documents that show what you have left until the room or situation has been used to offset taxes that you would have paid. Bring this information to your tax preparer so they can update whatever tax credit was started in previous years. The good news is that the government keeps track of carry forwards in the Notice of Assessment statement that is given to you after filing your taxes. Therefore, it is not mandatory that you have to keep track of these carry forwards, but it is easier for you if you do.

Is getting a refund a good thing at the end of the tax year? The answer is that it depends. In a given tax year, for whatever money you make, you will pay a given amount of taxes by April 30th. You may pay more taxes during the year and then get some of it back at the end of the year, or pay less in taxes during the year and then have to pay more at the end of the year. Either way, the same amount of money is paid throughout the year, but the timing is different. You can influence the refund by paying taxes earlier, or getting more deductions which will be accounted for later in the year. You can get more deductions using popular methods like RRSP contributions, tuition credits, medical expenses or business expenses. If this option is not available for you, you can ask your employer to take more taxes off each pay cheque, thereby paying taxes in advance. This would generate a refund if you paid more taxes than you should by the end of the tax year. Why would you do this? The majority of people like to get a refund instead of paying taxes at the end of the tax year. Two reasons for this are that saving money is difficult, or if it is difficult to anticipate how much money will be needed to pay the tax bill at the end of the year. If this is your situation, you can essentially get the government to hold money for you until tax time, and then get some of your money back as a refund. If saving money is not an issue, you are better to pay as little tax as possible and pay more at tax time, because you can invest the money during the year.

New Tax Rules, Responses In 2013

Recent tax law changes will impact many taxpayers in 2013, even those who don’t meet the government’s various definitions of “high-income.”

Income Taxes

As has become customary in the last couple of years, Congress waited until the eleventh hour to pass new tax legislation – in this case, the American Taxpayer Relief Act of 2012 (ATRA), signed into law on Jan. 2, 2013. Had Congress not acted, the tax component of the “fiscal cliff” would have taken effect, resulting in higher income tax bills for all taxpayers.

For income tax purposes, Congress has defined high-income taxpayers as single individuals, heads of households and married couples filing jointly who have taxable incomes of at least $400,000, $425,000 and $450,000, respectively. Under ATRA, all taxable income above these thresholds is now subject to a maximum federal rate of 39.6 percent on ordinary income, which includes wages, interest income, business income and short-term capital gains. ATRA also increased the tax rate on long-term capital gains (realized upon the sale of investments held for more than one year) and qualified dividends for these top earners from 15 percent to 20 percent.

For those with taxable incomes below the aforementioned amounts, ATRA made the once-temporary Bush-era marginal income tax rates permanent. These include the 15 percent rate on long-term capital gains and qualified dividends for most taxpayers. Further, taxpayers in income tax brackets of 15 percent or lower will continue to enjoy long-term gains and qualified dividends completely free of federal tax.

ATRA replaced the top federal income tax rate for estates and trusts, formerly 35 percent, with the new 39.6 percent rate. Because tax brackets for estates and trusts are compressed compared with brackets for individuals, the top rate applies to any taxable income in excess of $11,950 that remains in a trust or estate.

Stealth Taxes

The tax rate increases described above are straightforward. Much less so is the revival of limitations on itemized deductions and the personal exemption phaseout, both of which had been temporarily eliminated under the Economic Growth and Tax Relief Reconciliation Act of 2001. The reinstatement of these provisions will result in higher tax bills for many individuals and families below the top 39.6 percent tax bracket.

Itemized deductions and personal exemptions are subtracted from a taxpayer’s adjusted gross income (AGI) to determine his or her taxable income. The reinstated provisions limit the total amount of itemized deductions (such as mortgage interest, property taxes, and charitable contributions) and personal exemptions that households may claim after their AGIs exceed certain thresholds. The thresholds for 2013 are $300,000 for married couples filing jointly and surviving spouses, $275,000 for heads of households, $250,000 for unmarried individuals and $150,000 for married taxpayers filing separately. These will be adjusted for inflation annually.

The “Pease” limitation, named after the late Rep. Donald Pease, D-Ohio, reduces a taxpayer’s itemized deductions by 3 percent of his or her AGI above the threshold, but not by more than 80 percent of total itemized deductions. For a married couple with adjusted gross income of $425,000 and $50,000 in itemized deductions, their allowed deductions would be reduced by $3,750, resulting in additional income tax of about $1,240.

The personal exemption amount for 2013 is $3,900. A family of four’s exemptions could total as much as $15,600 of untaxed gross income. Under the phaseout, however, the total amount of exemptions a taxpayer may claim is reduced by 2 percent for every $2,500, or portion thereof, by which her AGI exceeds the applicable threshold. Assume that the married couple mentioned in the previous example has two young children. Their personal exemptions will be reduced to zero under the phaseout, resulting in additional income tax due of about $5,150. Although they would not be subject to the 39.6 percent income tax rate (their taxable income, $378,750, is below the applicable threshold), they would see their tax bill increase by as much $6,390, assuming their AGI and deductions stayed constant between 2012 and 2013.

The Patient Protection And Affordable Care Act

In addition to the tax law changes that took effect under ATRA, a Medicare surtax on earned income and net investment income now affects high-income taxpayers. This surtax is imposed under the Patient Protection and Affordable Care Act to help pay for health care reform. However, the definition of a high-income taxpayer has a much lower threshold under the Affordable Care Act than under ATRA.

Unmarried employees and self-employed individuals with earned income above $200,000 (above $250,000 for married couples filing joint tax returns and above $125,000 for married couples filing separately) will pay an additional 0.9 percent on wages surpassing that threshold. Employers are responsible for withholding this additional Medicare tax once an employee’s wages and compensation reach $200,000 for the year. However, the employer is not responsible for taking into account any compensation the employee may earn outside of the company, or the wages of the employee’s spouse, when determining its withholding requirement. In either of these cases, the taxpayer must be aware of her exposure to the surtax and either request that additional taxes be withheld from her compensation by filing a Form W-4, Employee’s Withholding Allowance Certificate, or remitting the additional tax by making estimated tax payments. The self-employed or their tax preparers will also need to factor in the additional tax when computing quarterly estimated tax payments for 2013. Otherwise, they may incur underpayment penalties and interest charges.

The Affordable Care Act also imposes a 3.8 percent tax on unearned net investment income. The act broadly defines unearned investment income to include interest, dividends, annuities, royalties, rents and capital gains that are not derived in the ordinary course of trade or business. The tax will apply to the lesser of net investment income or the modified adjusted gross income (MAGI) amount exceeding the $200,000/$250,000 thresholds established for earned income. For example, an unmarried taxpayer has $230,000 of MAGI, including $50,000 of net investment income. She would pay health care tax of $1,140 on $30,000, the amount of investment income that pushes her MAGI above the $200,000 threshold, rather than the entire $50,000. Combining the tax law changes of ATRA and the Affordable Care Act, taxpayers subject to the 39.6 percent income tax rate will now pay top effective tax rates of 23.8 percent on long-term capital gains and qualified dividends and 43.4 percent on short-term gains and other investment income. An increase in tax rates of 8.8 percent and 8.4 percent, respectively, is quite significant. These rates also apply to trusts and estates.

Reducing Exposure To The Additional Tax Bite

To minimize the blow of these additional taxes, reduce your adjusted gross income. Maximizing contributions to qualified retirement plans, such as 401(k)s, Simplified Employee Pensions (SEP) IRAs, SIMPLE IRAs and cash balance plans is a great start. Consider making gifts of appreciated securities to children and other family members in the 10 and 15 percent income tax brackets, especially if you are subject to the 39.6 percent income tax rate and to an effective long-term capital gains rate of 23.8 percent. The qualified dividends paid by these securities, as well as the long-term gains realized from selling them, will be tax-free for lower-income taxpayers, increasing your gift’s value while reducing your income.

Going forward, trustees should strongly consider whether it would be more tax-effective to distribute income to trust beneficiaries in lower tax brackets. Trusts don’t have to generate much income to pay top marginal tax rates, because trust income tax brackets are so compressed. If the beneficiaries are subject to the 15 percent tax bracket or lower, and including trust distributions in their incomes wouldn’t push them into higher brackets, the trust income may escape taxation entirely. Even if the beneficiaries are in higher tax brackets but are not subject to the top tax rate, distributing the income may at least avoid exposure to the Medicare surtax. Similarly, if trustees plan to sell appreciated securities to cover trust distributions, they should consider distributing the securities directly to the intended beneficiaries so that they may sell them instead.

Federal Estate And Gift Taxes

Many estate-planning attorneys and financial advisers, including those at Palisades Hudson, were working at a frenetic pace to help high-net-worth clients establish and fund irrevocable trusts before 2012 ended. We were concerned that, without congressional intervention, the $5.12 million federal gift and estate tax exemption would be reduced to $1 million per taxpayer and that the top marginal gift and estate tax rate of 35 percent would increase to 55 percent in 2013. Instead, ATRA made permanent the $5 million exemption, adjusted for inflation annually (the figure is $5.25 million in 2013) and a maximum federal estate tax rate of 40 percent for estates of decedents dying in 2013 or later.

Under ATRA, the $5 million generation-skipping transfer (GST) tax exemption was also indexed for inflation. For 2013, the GST exemption is also $5.25 million, and amounts in excess of the exemption are taxed at a rate of 40 percent. The GST tax, however, is separate and levied in addition to the federal gift and estate tax. It applies to transfers made to grandchildren and more remote descendants.

ATRA also made portability permanent. Portability is a mechanism that allows a surviving spouse to apply any remaining exemption that her deceased spouse did not use to transfers she may make during her lifetime and upon her own death. Therefore, portability can be an effective estate-planning tool for married couples. The deceased spouse’s estate must file a federal estate tax return (Form 706) to make the portability election. It is important to keep in mind that portability does not apply to the GST tax exemption, so if the first spouse to die does not use all of his GST exemption, the remainder could be wasted without careful planning.

For 2013, the annual gift tax exclusion amount, which adjusts for inflation annually, was increased to $14,000. As a result, taxpayers can make gifts of up to $14,000 per person (and married couples may make gifts of up to $28,000 per person) without using any of their available lifetime exemption or triggering any gift taxes.

Because of the significance of the tax law changes in 2013, it is best to consult an experienced tax adviser to determine how they will impact your personal situation. Effective planning early in the year will likely save you some money come April 2014.

North to Alaska – Again and Again

The scenery is unlike anywhere else we’ve been and we just can’t seem to get enough of it. Our second cruise to Alaska was a cruise tour with my parents in September of 2006. We began our adventure by flying from San Diego to Fairbanks, Alaska. This is the farthest north in Alaska that I’ve been. Flying north over the ice fields and across Canada into Alaska was breathtaking. From San Diego we flew to Seattle – then Seattle to Anchorage and then Anchorage to Fairbanks. It is alongside the Chena River and has a gorgeous outside deck with huge pots of flowers making it very colorful.

While in Fairbanks, part of our tour was The Riverboat Discovery Cruise. We boarded a paddlewheel boat on the Chena River and took a leisurely trip along the Chena and Tanana Rivers. We cruised alongside the house of the famous winner of the Iditarod Susan Butcher and watched her family explain about the sled dogs and their training. As we continued on down the river a bush pilot demonstrated take offs and landings from shore next to where we were cruising. We visited an Athabascan Indian Village and saw examples of their beautiful and intricate bead work and hand made parkas.

Another day we took a tour of the El Dorado Gold Mine and got to pan our own gold! We all did quite well and both Mom and I now have a beautiful gold necklace with a small cylinder holding “our” gold flakes. We enjoyed the train ride through the actual mine and the explanations of how life was working in the mines. We also enjoyed some delicious homemade chocolate chip cookies while we were waiting for our necklaces to be finished. As we left the mine and headed back down towards Fairbanks, we drove along the Alaska Pipeline.

The next morning we boarded a motor coach and headed south out of Fairbanks through some of the most beautiful and picturesque country I’ve seen. It was September when we visited Alaska this time, and so we were treated to some beautiful fall colors. As you looked out the window of the bus, you could not help but enjoy the scenery. There were rivers around every curve with rolling hills full of low green bushes and flowers. The Alaska fireweed, which blooms at the end of summer indicating that winter will be coming soon, was ending its blooming season; but there was enough left that we could still see and enjoy the bright magenta colored flowers.

As we drove south and got close to Denali National Park, we looked up on the side of the cliff wherewe saw herd of Dahl Sheep. The bus stopped on the road so that everyone could get pictures if they wanted.

The Princess Denali Lodge is also constructed out of logs and is an absolutely beautiful complex of buildings along the river in Denali National Park. Though you cannot see Mt. McKinley from this particular lodge, the views are stunning. The deck of the lodge overlooks the river below where you can go white water rafting if you care to.

We enjoyed a plentiful dinner and a lot of fun at the Musical Dinner Theater at the resort. While we were dining family style on barbecued ribs, salmon, corn, potatoes and coleslaw, the waiters and waitresses began to entertain us with the story about the first men to conquer Mt. McKinley. It was quite entertaining and fun and the food was very good.

We took a wagon train ride into Denali Park the next day. Again, we traveled through some beautiful areas and were able to see what autumn is like in Denali. Though we could not see Mt. McKinley, we could see far back into the mountain range across beautiful meadows full of colors of yellow, green and rusty orange with the skies above us dotted with puffy white clouds. As we reached the end of the road, so-to-speak, we found ourselves at a small gathering house where we could smell the barbecue. Unbeknownst to us, we were about to receive a delicious lunch prepared by the tour directors. We had chicken and salmon along with baked beans and corn and a delicious apple crisp for dessert.

From the Princess Lodge in Denali, we also took a ride into the park to the Visitor’s Center, where we listened to the park rangers talk about the wildlife in the park. Though we did not take the full day bus tour into the park, it is something we have put on our “Bucket List”. After visiting the Visitor’s Center, we started on a part of our tour that all of us felt was probably one of the best things we’ve ever done in Alaska. We boarded the Alaska Railroad and headed south to Whittier where we would board our ship and continue on the cruise portion of our trip.

We were lucky the day we traveled on the railroad, because it was a perfect day. There was not a cloud in the sky, and Mt. McKinley was there for us to see in all of her glory. As we looked out the windows of the domed cars on the railroad, enjoying our reindeer chili and other fun goodies to eat, you could not help but be in awe of this beautiful wilderness – so pristine and untouched. It was spectacular in every sense of the word – and then some. Our train ride was eight hours long and took us down through Wasilla and Anchorage, south through Girdwood and then on to Whittier where we boarded our ship for a 7-day southbound cruise on the same itinerary that Jim and I had taken on our first Alaska cruise in 2003. You know the end of your train ride is coming when you enter the long 2 ½ mile tunnel that lets you out in the town of Whittier. There was our ship just waiting for us! We traveled across very tall bridges and over rivers. Our trip on the train ended far too soon; and we cannot wait to be able to do that again.

Being that this cruise was later in the year than our last cruise, the sunlight in our days was a bit shorter than last time and more “normal”. It only stayed light until about 10:00 this time. Unfortunately, there was a storm in the Gulf of Alaska, and the Captain said it was not safe for us to try to navigate into College Fjord. So, we did not get to visit College Fjord on this cruise but instead enjoyed a day aboard the ship, relaxing and sailing slowly down to Glacier Bay.

As we entered Glacier Bay, the ship slowed down and the National Park Ranger boarded the ship as they had done on our previous cruise. Again, we passed tidewater glacier after glacier until we reached our ultimate destination of Marjorie Glacier. This time, there was a bald eagle perched on top of one of the spires of the glacier who seemed to entertain everyone for quite awhile. The crew served us warm soup on deck. We did not see as much calving of the glaciers this time, but you could definitely hear the moans and groans of the massive ice fields as they moved closer to the waters’ edge.

Because we had already been on this cruise itinerary before, we did not take many shore excursions but instead enjoyed walking around the towns and looking in museums and enjoying the ambience of Alaska. We enjoyed a few meals in small cafés in Skagway, Juneau and Ketchikan. In Ketchikan, we have become “regulars” at Steamers Restaurant which is directly across the street from the cruise ship dock. Sitting at a window table enjoying a big plate of Alaska king crab legs and an “adult” beverage and people watching is one of our favorite things to do.


Since then, when we travel, I started writing Travelogues and sending them home to family and friends because everyone wanted to know what we were doing and seeing on our trips. We took a 14 day cruise from San Francisco to Alaska visiting many places that neither of us had ever been to before. The 14 days went by far too fast for both of us.

Below are some excerpts from those Travelogues:

Travelogue #1
Celebrity Mercury
Golden Gate to Alaska Cruise – May 2008

We just wanted to let you know that all’s well so far on our cruise. We arrived in San Francisco relatively early but it ended up being a good thing because they said the lines getting on the ship later in the day were awful. So we lucked out. We explored the ship, had a little lunch and took a little nap before we got underway. San Francisco was clear and warm – about 80 degrees – so sailing out of the Bay was gorgeous. Passing by so closely to Alcatraz we could see all the buildings and then sailing under the Golden Gate Bridge was quite exciting. We took LOTS of pictures, hoping to get a few good ones. There was a couple who had just gotten married, so they were all around the decks taking advantage of the beautiful photo ops.

Monday we were in Monterey. The ship was anchored out in Monterey Bay – local regulations because of the marine preserve and all, we could not drop anchor nor could they sound the horn when we left – so it was a little unexciting. We visited family during the day and enjoyed our time with them. It was a great day – but as always – too short.

Travelogue #2
We are having a really relaxing and wonderful cruise so far! After being in Monterey on Monday and having a great day with family, we had a relaxing day at sea on Tuesday. We didn’t do much of anything except what grown ups are supposed to do on vacation – nap!

Wednesday found us in Astoria, Oregon on a partly cloudy, brisk day. It was gorgeous. We took off out towards the city of Seaside and Cannon Beach which is about 30-45 minutes from Astoria. Of course, everything along the side of the road was plush and green – so unlike where we live. We got out to Cannon Beach and parked the car and walked up and down the street – all of about 2-3 blocks long, but went through the boutiques and shops along the way. Then we headed a little farther south to Tollavana where we had lunch at Mo’s – right on the beach. It was very good food. Then we decided to go for a walk on the beach. Something we have never done up here. The sand was so firm it was like walking on pavement. And, there were sand dollars – mostly broken ones – but we were lucky enough to find three whole ones! That was really beautiful down there. The monolith was to the north of us with Tillamook Lighthouse in the far distance. We took some pictures and just had a nice, relaxing walk. After all of that, we went back to the ship and eventually sailed out of Astoria.

Today we were in Victoria. Again, partly cloudy and quite brisk. We took the shuttle bus into town and then walked along Government Street walking through the shops. We went into the Christmas store looking for the glasses that I lost last year, but didn’t find them. Oh well…Then we went into a nice restaurant right on Government Street and had a wonderful lunch overlooking all the people passing by. We both had French Dip Sandwiches. Yummy. The bread was wonderful – crunchy on the outside and soft and warm on the inside. The meat was thinly sliced and just melted in your mouth. From there we walked over to the British Columbia Natural History Museum where we walked through there for a couple of hours. From there we look over to the Parliament Bldgs. and there was a huge Harley Davidson gathering of motorcycles out front. Nothing more than that. Just lots of Harleys and people. We walked back to the shuttle bus stop and were in a line of over 100 people waiting to get a bus ride back to the ship. There are two ships in port now and when we leave, there is another coming in tonight. The weather forecast was for rain from Astoria north, so we have REALLY been lucky. We saw another whale spout off the starboard side of the ship last night as we were leaving Astoria.

Our table is the farthest back aft that you can be. We have a great view but lots of vibration. And, now we will be in protected waters of the Inside Passage from here for awhile – so that will be nice.

Today we have a day at sea. BINGO is at 11:15. Whew hew! We are enjoying our table mates at dinner. A mother/daughter couple originally from England now living in San Francisco and another man and woman who are both widowed but found each other and have a long distance relationship right now. Other than that, there are about 500 Europeans on board so when we get into an elevator and we say something, most times the other people just stare back. Kind of funny. We will be in Astoria tomorrow and looking forward to seeing Jennifer and spending some time with her.

~ Email Travelogue – Saturday, May 3rd, 2008 ~

Well – we got up EARLY this morning and had breakfast delivered to our room as we had to be off the ship and on short at 7:50 a.m. to catch our shore excursion of the day – which was a float plane trip. Initially, the gal had said that the clouds were low and that if anyone wanted to cancel their trip because they could not guarantee us going to a glacier, then they would give us a full refund. We decided to go for it and hope that the clouds would lift – and that is exactly what they did. There were 8 of us on the plane plus the pilot ~ Francois ~ We took off and it was smooth flying all the way. We flew over the beautiful valleys and rivers and lakes all doted with snow capped mountains and many waterfalls along the way. They have a very diversing tide here in Prince Rupert and it changes up to 24 ft. – much like the reversible rapids in St. Johns New Brunswick. As we flew over a large lake there was a beautiful, huge waterfall off to one side, so we landed the plane on the water and we were able to take some pictures. Personally, it was too close for me to get any really good pictures as we had to deal with the wings of the plane and all as well. A little farther out would have been nicer. Then the clouds began to lift and up the mountain we flew – up above snow-capped mountains, way above the tree-line up to Glacier #1 and Glacier #2. Simply breathtaking views anyway you looked. Deep valleys and gulleys with rivers, jagged mountains jutting out of the earth and then capped with pure white snow. The clouds doted the sky and we had a few spotted raindrops here and there. We lucked out and got the whole tour. We were up in the air about 1 1/2 hours all total. It was really something else and we are both so glad that we did it.

Because that tour was so early in the day, we came back to the little wharf area and walked around a bit then came back onto the ship and got some lunch. The ship itself does not offer a whole lot of activities unless you want to pay $30 per person for 4 games of BINGO or to go to the spa for some pretty pricey treatments. We have played a lot of cribbage and made our “donations” to the casino. Yesterday, though, I played a penny slot machine for 2 1/2 hours – so that was a really good run and fun! We leave here at 5:00 today in hopes of seeing some humpback whales as this is one of the greatest concentration of the whales here near Prince Rupert. It could still be too early in the season as they all migrated up to Alaska for feeding first and then are headed down this way. We’re keeping our fingers crossed. As we came back into town today from our float plane trip, there was a HUGE deer right along the side of the road. The taxi driver told us they are so tame that they will take an apple out of your hand and eat it. And, up in the tall pine tree on the corner across from where the ship is docked were two bald eagles perched up high and cleaning their feathers. I tried to get some good pictures. As usual, I have taken a lot of pictures in hopes of getting a few good ones. Tonight we leave Prince Rupert and will arrive in Ketchikan tomorrow morning.

Travelogue Email – Sunday, May 4th, 2008 – leaving Ketchikan ~

It is 6:00 p.m. and we are underway to Juneau. Our time in Ketchikan was rainy and wet but enjoyable. We got off the ship relatively early and did a little shopping. We got on our “Duck Tour” at 10:30 this morning. It was nothing spectacular until we got onto the water and as we were passing by some of the boats in the small harbor, the captain said there was an eagle on top of the of the masts. I was lucky enough to be able to get up and lean out one of the windows with another woman and I got some FABULOUS shots of this majestic bird perched on the wharf. Then, he began to take flight and I was lucky once again to get some pictures of him/her just as it took off from the wharf. The pictures show his feather colors and are just wonderful.

After leaving Ketchikan we headed north into stormy weather. The clouds are low, but we still have relatively good visibility as we can see land on both sides of the ship as she heads up this passage. We passed an almost Thomas Kinkade like lighthouse on a little island after leaving Ketchikan.

Tomorrow we will be in Juneau and have a whale watching excursion scheduled. There have been many sightings of whales thus far in our travels – in fact, some whales were performing off the port side at dinner last night, but because of the location of our table, we did not see them.

Travelogue – Juneau and Hubbard Glacier
What a spectacular last two days we have had! Yesterday, we were in Juneau. There was a cool, misty rain when we arrived in town, but that did not stop our whale watching excursion. We took a motorcoach about 5 or so miles our of town to where we caught our whale watching vessel. It was a double decker totally enclosed catamaran with outside areas for viewing and picture taking as well. We took off going north into Stevens Passage. We saw some bald eagles at first and a couple of sea lions playing in the water.

The water was like glass, so it was very easy to spot anything in the water. There was the mainlain on the right side and Admiralty Island on our left side with many tiny islands dotting the landscape in between. About an hour away, the captain spotted one humpback whale on our right side. He was the only humpback we saw but I managed to get some good pictures of one of his dives and a great picture of his tail dripping with water as he dove back down again to feed. He would stay down about five minutes because he was feeding. After that, we continued north along Admiralty Island and actually got into the Lynn Canal where the crew spotted a pod of orcas! They kept telling us how lucky we were, because this was not the norm. Actually, this was their first whale watching excursion for the season, so the crew was quite excited as well as all of us! On our return back to Juneau, we passed a small island full of huge sea lions – some laying and basking in the sun and others quite playful jumping off the rocks and splashing in the water. When we got back into Juneau after 3 hours, it began to rain again – oh well – and we were dropped off in town where we walked through a few of the shops and had fish and chips for lunch on the water at the Twisted Fish. It was after 3:00 by then and we were tired – so we walked back to the ship. The casino was VERY nice to me last night as I hit a jackpot on one of the machines! Whew hew! That was fun! We took the money and ran.

Today was our day for cruising in Hubbard Glacier. The skies were dotted with clouds, it was quite brisk outside with a minimal amount of wind if the ship was still. We slowly glided into Yakutat Bay and it took about an hour to get back to within about two miles of Hubbard Glacier. The ocean water was full of ice and icebergs, some larger than others and some quite a beautiful deep blue color and others just white. As we got closer to the glacier, the ice in the water became thicker and thicker and the captain chose not to go any further, which was a shame. Jim did not think it was dangerous enough for him to have stopped so far away from the glacier. We could not hear any cracking or moaning of the ice as it moved and saw no calving from so far away at all. But, the ocean waters were as calm and still as they could be and the reflections from the snow capped mountains was spectacular in the water with the icebergs.

We are ahead of schedule today and were not supposed to be in Hubbard Glacier until 11:00 a.m. We arrived there at 9:00 a.m. and left by about noon. On the upper pool deck, the crew was serving hot seafood soup in bread bowls to everyone and that was quite a nice warmer upper around noon. Inside, there were demonstrations by the kitchen staff on fruit art, napkin folding and a few other things – nothing real impressive. Jim is going to go to another geological lecture this afternoon. I don’t know what I’m going to do – maybe nap! Tomorrow we will be in Skagway and will have our mushers camp/sled dog experience. We’re looking forward to that. We feel very lucky to have had the weather that we have had on this trip. Although it has been quite cool, the rain has not kept us from doing anything. The rain has been misty for the most part. It is absolutely beautiful up here and we can’t wait to share our pictures with you – of which we have many.

Travelogue from Skagway –
Today we are in Skagway. As luck would have it, I woke up at 4:10 a.m. this morning and looked outside to a beautiful dawn in the Lynn Canal heading towards Skagway. The first thing I saw was a beautiful little lighthouse on it’s own little island in the middle of Lynn Canal. It was still kind of darkish out but definitely getting lighter and as the ship literally glided down the canal on the glassy waters, the snow capped mountains began to brighten up and their reflections in the waters was simply gorgeous. I kept hoping to see a whale put on a show for me – but that didn’t happen. Now THIS would have been a picture to have – picture this – me standing on our balcony in my nightgown, parka with furry hood up, snow boots and legs wrapped in a plaid wool blanket with my camera in hand!! Honestly, I’m glad no one could see me!!! But, it was beautiful and I felt so lucky to have woken up and been able to see the morning come alive. But, what I did experience was the most beautiful Alpenglow sailing down through the Lynn Canal to Skagway. As the sun began to rise, the color on the snow-capped mountains began to turn beautiful colors of pink. It was spectacular and something that I am so blessed to have been awake to see. The pictures truly do not do it justice, but they do serve as a wonderful reminder of a very spectacular morning.

Our excursion today was a mushers camp and sled dog “experience”. It was really nothing exciting and had we had the choice to do it over again, we wouldn’t. It was not what we expected at all. This was a “mushers” camp several miles out of town in the “bush” that was set up with about 300 sled dogs – strictly there for the cruise ship tourists. A large van/bus holding 24 people picked us up at the cruise dock and drove us out to the site. We saw several different sleds and the dogs were all around us. From that point, they put groups of 12 of us at a time into a smaller van and drove us up a steep hill to where they had teams of dogs hoked up to “sleds” which were a six person metal “sleigh” – three rows of two people – on treds that the dogs pulled up a muddy dirt road and back again for about a mile up and a mile back. That was it. We have really been so lucky with our weather. Today it was about 45-50 degrees during the day with spotted clouds. The mountains are so beautiful with all of their snow and so spectacular against the blue sky.

After that we were dropped off in town and we strolled the streets looking in the shops and we stopped for lunch, then walked back to the ship along the small boat harbor (about a mile). We were walked against a very brisk, cold wind on our way back to the ship so getting back on board and into the warmth of the enclosed spaces felt wonderful. We will be here until 8:30 p.m. tonight and then will sail out of Lynn Canal over to Icy Point Strait/Hoonah where we will be tomorrow. It is only about 95 miles from here so will not take us long to get there. We have heard several people talking about seeing lots of whales in Icy Point Strait – so we are keeping our fingers crossed that we get to see some as well.

Travelogue from Hoonah/Icy Point Strait and Sitka
Well – our wonderful vacation is coming to an end… It just seems like yesterday that we were packing and getting ready to start this vacation. Oh well…all good things must come to an end – and so it is with us. We tendered in to the small Indian village of Hoonah which is on Port Frederich and walked out to the tip of the island where there was a fire built and a Hoonah Indian tending to the fire. As we stepped on shore we were each given a cedar chip of wood which had a poem and we were told to put the chip in the fire for good luck and a safe journey home. Then, we walked to the very end of the island where the landing for the zip line adventure was. We could see the people coming down the 5300 foot zip line (longest in the world) and landing on the beach. What a thrill that was for them. But, we saw the older woman who got stuck in the middle – which wasn’t much of the adventure she was actually looking for!

Yesterday, we arrived early in Sitka. It was a beautiful day with gorgeous blue skies and a few clouds hanging around. We were told it was supposed to rain – so we felt really lucky – again. Last night was our last formal night at dinner. They served a choice of lobster, prime rib and cornish game hens. We opted for the lobster – and they were quite nice. Then, the lights turned down and the waiters and staff came out with the Baked Alaska and sang Auld Lang Syne. Jim ate his and the rest of mine. Today we will get back into the Inside Passage at the north tip of Vancouver Island. We have gone to the disembarkation talk this morning and are pretty much all packed. Jim is going to a lecture on Glaciers in the Arctic later this afternoon and I will probably play a little more in the casino. Jim won a jackpot the other night too – so we are holding our own. Win a little, loose a little… We will be home tomorrow late afternoon and are looking forward to looking at our pictures and sharing them with you at some point. We still miss you and REALY wish you could have come along with us as we had such beautiful weather and scenery that we would have loved to share it with you all.