Recently in Tax Problem Category

August 12, 2010

Most High Income Bracket Taxpayers Won't See Big Increases From Eliminating Bush Tax Cuts

The nonpartisan congressional Joint Committee on Taxation found that the proposed maintenance of the Bush tax cuts for all but individuals earnings at least $200,000 and couples earning at least $250,000 would not have a particularly significant affect on the tax bills of those in the upper two brackets. The report found that the average tax increase for those earning between $200,000 and $500,000 would be $532.

For those earning between $500,000 and $1 million, their tax bill would increase by an average of about $10,000, and the average tax bill for those earning over $1 million would increase approximately $100,000. There are approximately 608,000 taxpayers who earn between $500,000 and $1 million, and 315,000 taxpayers who earn more than $1 million.

The Joint Committee on Taxation expects that there will be approximately 161 million tax returns filed for 2010 with less than 5,000,000 (about 3%) returns filed by those earning more than $200,000. The plan would raise about $38 billion.


Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney

Paul A. Nidich
http://paulnidich.webs.com/

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Posted In: 2010 Tax Return , Budget , Tax Increase , Tax Information , Tax Problem

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July 16, 2010

Tax Problems - Expenses of Service Animals May Be A Tax Deductible Medical Expense

In a letter to a member of Congress, the Internal Revenue Service recently re-iterated its position that the costs related to buying, training, and maintaining a service animal may be a deductible medical expense for a taxpayer. The tests regarding the deductibility of expenses for service animals are not different from other expenses that qualify for medical expense deduction.

Medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of a disease or affecting any structure or function of the body. Service dogs have been widely used in the past to mitigate the effects of physical disabilities. More recently, service animals are being used to mitigate the effects of conditions such as autism and other types of mental disabilities.

The expense must be for a mitigation related to the diagnosed medical condition and not merely the general health of an individual.

To learn more or to discuss tax issues, please contact me at 513.563.1595.

Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney

Paul A. Nidich
http://paulnidich.webs.com/

Posted by Paul A. Nidich | | Email This Post

Posted In: 2010 Tax Return , Aging , Disability Planning , Elder Law , Estate Planning , Social Security , Special Needs Trusts , Tax Problem , Tax attorney

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July 14, 2010

Elder Law -- Is Avoiding Probate Enough?

I had a new client come to my office recently. She was looking for Medicaid planning advice for her husband's parents. (This is a very frequent occurrence.) Her mother-in-law was suffering from dementia but was still able to live at home. Her father-in-law was 85 years old but in good health and led a fairly active life.

She told me that about 7 years ago, her in-laws had wills, a living will, and a revocable living trust drafted. She said her parents' total assets were worth about five hundred thousand dollars, and the revocable trust was drafted solely to avoid probate. I was dumfounded that the attorney who drafted the plan did not draft a durable financial power of attorney nor discuss Medicaid planning with the couple. After all, the husband was already 78 years old!

I explained that Medicaid had a five-year look-back period on transfers of assets for less than fair market value. I suggested that her in-laws might want to have a new irrevocable trust drafted. We also discussed the possibility of an irrevocable grantor trust, a special type of irrevocable trust that causes income to the trust to be taxed to the individual's personal return, rather than taxed at the higher trust rates.

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Posted by Paul A. Nidich | | Email This Post

Posted In: Aging , Elder Law , Estate Planning , Irrevocable Grantor Trust , Medicaid , Medicaid Planning , Special Needs Trusts , Tax Problem , Trusts

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July 1, 2010

Elder Law -- Keep Beneficiary Designations Up-to-Date

Failure to keep beneficiary designations up-to-date can be a very costly mistake. Most people have some life insurance, retirement accounts, IRAs, and other contracts that designate a recipient or beneficiary. When the primary beneficiary becomes disabled, enters a nursing home, or dies, the owner of these contracts frequently fails to update the beneficiary designation. This can cause problems with probate, estate taxes, especially state estate taxes, and inheritances.

Your Cincinnati Elder Law Attorney

Paul A. Nidich
http://paulnidich.webs.com

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Posted In: Disability Planning , Elder Law , Estate Planning , Estate Tax , Special Needs Trusts , Tax Problem , Trusts

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June 1, 2010

Election to Expense Certain Depreciable Assets

Section 179 of the Internal Revenue Code permits a taxpayer to elect to treat certain property that would otherwise be required to be depreciated to be treated as a deductible expense. Previously, the limits of the amount of the deduction were limited to $125,000 reduced by the amount the property cost that exceeded $500,000. These two figures were to be adjusted for inflation with the last adjustment increasing the $125,000 to $135,000 and the $500,000 to $530,000.

The 2008 Stimulus Act changed these two figures to $250,000 and $800,000, respectively, without any inflation adjustment for 2008 and 2009. The HIRE Act extended the $250,000 and $800,000 limits for 2010.

If you are in a position to purchase depreciable property in 2010, remember these Section 179 provisions when you file your 2010 income taxes.

Your Cincinnati Tax Attorney

Paul A. Nidich
http://paulnidich.webs.com

Posted by Paul A. Nidich | | Email This Post

Posted In: Business taxes , Depreciable property election , HIRE Act , Section 179 , Small Business , Tax Problem , Tax attorney

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May 12, 2010

Estate Tax Problem -- A Possible Resolution

On April 22nd, the Senate Budget Committee approved and sent to the Senate its Budget Resolution for Fiscal Year 2011 that begins on October 1, 2010. There are many provisions that deserve notice, but one issue that has plagued estate planners and taxpayers alike has been the issue of the estate tax.

The budget resolution contains a provision that would make the 2009 estate tax provisions applicable to 2010 and 2011. These include the $3.5 million exemption (which would now be indexed for inflation) and a top rate of 45%.

The existing law, left over from President Bush's administration, has no estate tax applicable to 2010, but the tax would be restored in 2011 with a top rate of 55% and an exemption of $1 million.

Your Cincinnati Tax Attorney

Paul A. Nidich
http://paulnidich.webs.com

Posted by Paul A. Nidich | | Email This Post

Posted In: Elder Law , Estate Planning , Estate Tax , Tax Information , Tax Problem

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April 27, 2010

Tax Problem -- Identity Theft -- Someone Stole My Social Security Number

Identify Theft logo.jpgTaxpayers can have major problems with the Internal Revenue Service when someone steals their social security number and gives it to their employer. The key is two-fold: protect your social security number from theft and respond aggressively to any notification by the IRS.

Typically, a taxpayer will first become aware of someone using his or her social security number by receiving a notice from the IRS. This notice, CP 2000, informs the taxpayer that income reported to the IRS associated with the taxpayer's social security number was not reported by the taxpayer on a certain year's income tax return.

The notice also gives the taxpayer specific information about the discrepancy, such as how much was earned and the employer. This information alerts the taxpayer that someone else gave his or her social security number to the employer for whom the taxpayer did not work.

If you get this notification, immediately take the following action:

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Posted by Paul A. Nidich | | Email This Post

Posted In: IRS Notice , Identity Theft , Social Security , Tax Information , Tax Problem

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