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Recent Tax Court decision could wreak ha

Glover v. Comm, a recent tax court decision, presents several issues to Merchant Mariners. Mr. Glover worked for Reinauer Transportation. His tugs pushed oil coastwise as far as Virginia. The tugs wou

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Recent Tax Court decision could wreak havoc on Mariners

State Taxes and Mariners

Suz asked this question So, what about if you live in one state (TN) and work as a merchant mariner in another state (HI), 45 days on/45 days off rotation? Do you pay HI state taxes, or does the payro

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State Taxes and Mariners

Mariner Tax Update January 2011

E-Filing alert! How many times have you read that mariners cannot E-File? How many websites have posted this. Year after year. And then all of a sudden preparers start proclaiming “mariners can

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Mariner Tax Update January 2011

Employee vs. Non-Employee LLC and S-Corp

I’ve been a client of yours for a few years now and I had a general tax question concerning my wife’s job status. She currently works full time for a marketing firm in “Deleted”

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Employee vs. Non-Employee LLC and S-Corp Planning for Mariners and their families

Maritime Tax Preparers and the Alternati

What they don’t want you to know… This video points out the tremendous effect of the AMT on merchant mariners. Seamen taking business deductions and offsets may very well be realizing litt

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Maritime Tax Preparers and the Alternative Minimum Tax

Why the housing bulls are wrong

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by on November 22, 2010 at 5:15 pm

Four reasons by housing is still not a good investment

A number of notable investors presented thoughtful and well-researched ideas at the Value Investing Congress last month. The one idea that we would take the other side of, though, was one from Bill Ackman of Pershing Square Capital, which was unveiled in a presentation titled “How To Make a Fortune”: to go long U.S. housing. To state it bluntly, we think Ackman is wrong on housing.

According to several reports, his thesis on U.S. housing focuses on a few key points. First, affordability is at its highest level in decades due to low mortgage rates. Second, household formation will rebound and go back to long-term trends, which suggest growth in demand. Third, supply of housing, which Ackman admits is high, will start to decline since builder production rates are as low as they have ever been. Finally, he believes the downside in housing is limited because at a certain price, institutions could step in and soak up the excess inventory.

via Why the housing bulls are wrong – Fortune Finance.

in Investing

Earning their paycheck

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by on November 22, 2010 at 12:41 pm

Senate Finance Committee Chairman Max Baucus (D., Mont.) plans to propose renewing a slate of tax breaks that have expired or are about to expire, Senate Democratic aides said.

Included are popular items such as a measure protecting millions of middle-class taxpayers from the alternative minimum tax, as well as a college-tuition tax break. The proposal also includes dozens of corporate-tax reductions benefiting specific industries and companies.

via Routine Extension of Tax Breaks Poses Test of Deficit-Cutting Resolve – WSJ.com.

in IRS Updates

IRS Seeks to Return $164.6 Million in Undelivered Checks to Taxpayers

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by on November 18, 2010 at 4:14 pm

The Internal Revenue Service is looking to return $164.6 million in undelivered refund checks. A total of 111,893 taxpayers are due one or more refund checks that could not be delivered because of mailing address errors.

“We want to make sure taxpayers get the money owed to them,” said IRS Commissioner Doug Shulman. “If you think you are missing a refund, the sooner you update your address information, the quicker you can get your money.”

A taxpayer only needs to update his or her address once for the IRS to send out all checks due. Undelivered refund checks average $1,471 this year, compared to $1,148 last year. Some taxpayers are due more than one check.

via IRS Seeks to Return $164.6 Million in Undelivered Checks to Taxpayers; Recommends E-file and Direct Deposit to Eliminate Future Delivery Problems.

in IRS Updates

Municipal Bonds Falter After a Long Winning Streak

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by on November 18, 2010 at 4:12 pm

That is the question investors are asking after munis — those old faithfuls of investing — took their biggest hit since the financial collapse of 2008.

Concern over the increasingly strained finances of states and cities and a growing backlog of new bonds for sale overwhelmed the market last week. After performing so well for so long, munis and funds that invest in them fell hard. One big muni fund, the Pimco Municipal Income Fund II, for instance, lost 7.5 percent. The fund is still up 6.75 percent so far this year.

While the declines were relatively small given the remarkable gains in these bonds over the last two years, the slump was swift enough to leave investors wondering if this was a brief setback or the start of something worse. For months, some on Wall Street have warned that indebted states and cities might face a crisis akin to the one that brought Greece to its knees.

“I think it’s too early to say that it’s more than a correction,” said Richard A. Ciccarone, the chief research officer of McDonnell Investment Management.

via Municipal Bonds Falter After a Long Winning Streak – NYTimes.com.

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Bipartisan vow: We’ll fix AMT and other fairy tales

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by on November 16, 2010 at 7:13 pm

On Tuesday, the Democratic chairmen of the House and Senate tax committees teamed with those committees’ top Republican members to tell the IRS they are working on a bill to provide taxpayers with temporary relief from the Alternative Minimum Tax.

They advised the agency to “take all steps necessary” to adjust tax forms to reflect the anticipated changes.

“We will work to craft the AMT provision so that, in the aggregate, not one additional taxpayer faces higher taxes in 2010 due to the onerous AMT,” the lawmakers wrote in a letter to IRS Commissioner Douglas Shulman.

Putting a temporary “patch” on the AMT to shield middle- and upper-middle-class taxpayers has become an annual event for Congress, although lawmakers have left this year’s fix to the last minute.

via Bipartisan vow: We’ll fix AMT – Nov. 9, 2010.

in IRS Updates

Mariners Beware – Sailor Credits and other bogus Magic Deductions

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by on November 16, 2010 at 7:08 pm

Too good to be true?

#1 – I went to another preparer and they got me an extra $4,000 back…

Red Flag!!! Short of the original preparer missing a very obvious deduction/deductions/credits this doesn’t happen.

#2 – My tax preparer discovered this deduction – so others don’t know about it…

Just remember – the IRS won’t likely know either…

#3 – Mariners cannot E-File because “special paperwork” needs to be attached to the return

Serious snake oil. Luckily most preparers have jumped off of this band wagon after a lot of insistence. Truth is these preparers felt there was better presentation for their high fees if the returns were mailed in with the unnecessary attachments. Virtually all preparers will be required to E-File in the upcoming years. There’s fewer eyes looking over your private information. You get your refund quicker. And you’re generally informed of errors and issues quicker.

#4 -The IRS called because I owe back taxes and say I have to pay up

Possibly not a scam. But beware… A slick person pretending to be an agent can steal your private information. If they need to verify it’s you, so they want your social, date of birth, address, maiden name, red flag… Even if you did have issues with the IRS I would be wary. There are ways to acquire lists of individuals in financial difficulty. Personally I would insist on calling back on one of the published IRS numbers.

#5 – “payments made by the taxpayer through EFTPS have been rejected”

You’re sent this message in an email. It looks as though it’s linking back to the IRS. It’s actually a shell site looking for your financial information. Again, I’d call.

#6 – “I work with the charity, you can sign the title over to me”

Yes this happens… Folks pretend to be a non-profit and drive away with your car. Go to the charity you’re donating to. Sign the title to the charity. Make sure you have their non-profit info.

#7 – Energy Credits – salesmen aren’t accountants

“But the salesman said I could get it”… Almost as common as the real estate broker saying you probably won’t owe taxes on that vacation property you sold. Many… Actually most boilers (especially oil) that are “energy efficient” do not qualify for the energy credit. You need a very high fuel vaporization efficiency rate to qualify. If the plumber is giving you the deal of the century on the new boiler, you probably don’t qualify.

#8 – The Sailor Tax (luckily this has moved down the list)

We know merchant seamen are different. They have different tax treatment than others regarding specific definitions. First they are generally liable only to their State of residence for State income taxes. Second, they have to pay into California and Rhode Island SDI programs even though they are often considered ineligible for benefits under the Jones act and denied. (Can you tell that one’s personal???) Third, they are generally not considered transients for tax purposes. This lowers certain documentation requirements with respect to employee business expenses.

There is no law that says mariners get deductions for expenses they never had – PERIOD

You have to incur an actual expense in all cases. A preparer stating otherwise is flat out wrong.

Obama to Congress: Extend American Opportunity tax credit

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by on November 16, 2010 at 2:27 pm

“[Obama] believes that it is important for this to be extended and for families to have the certainty and confidence that this [credit] will be there when they are making the choices about sending their children to college,” said Gene Sperling, Counselor to the Treasury Secretary.

The tax break, introduced under the government’s 2009 Recovery Act and applicable to 2009 or 2010 college tuition, expands the existing Hope Credit to include more lower- and higher-income Americans.

Unlike the Hope Credit, the AOTC is also partially refundable and covers more of the expenses associated with sending a child to college, like textbooks and computers. It is available for the first four years of post-secondary education, up from two years under the Hope Credit.

via Obama to Congress: Extend American Opportunity tax credit – Oct. 13, 2010.

in IRS Updates

Estimated Payments

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by on November 13, 2010 at 4:34 pm

Why do we pay State quarterlies?

Here’s an outstanding cartoon, brought to us by Walt Disney…

That was then, this is – well then also

The government smartened up. They realized a lot of taxpayers can’t be relied upon to set money aside and send in quarterly payments – hence, mandatory withholding. It has saved everyone a lot of headaches. The burden of withholding is placed upon the employer. We receive a statement with our paycheck explaining how our money was allocated to different government agencies. Nice and clean cut. We get a W-2 in the mail, file our taxes, and get our refund.

Mandatory withholding works quite well in almost all applications. One exception is with merchant mariners. Seamen are protected under section 11,108 of the US Code. Employers cannot withhold taxes for States. It’s a two sided coin that shields us from State tax liability under many circumstances. A burden is placed upon mariners as taxpayers to make sure they are paid up and in full with the State.

How do I determine quarterly liability

We’re going to try to get a calculator up shortly. There will be a link in place when it’s finished. It’s tricky because every State has different rules and regulations on this matter.

White House Gives In On Bush Tax Cuts

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by on November 13, 2010 at 4:30 pm

WASHINGTON — President Barack Obama’s top adviser suggested to The Huffington Post late Wednesday that the administration is ready to accept an across-the-board, temporary continuation of steep Bush-era tax cuts, including those for the wealthiest taxpayers.

via White House Gives In On Bush Tax Cuts.

in IRS Updates

Integrated Financial Partners – Time to Get Back to RMDs

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by on November 9, 2010 at 1:45 am

Time to Get Back to RMDs

If you took advantage of the temporary reprieve that allowed you to skip required minimum distributions from traditional IRAs and employer-sponsored retirement plans in 2009, be aware that no such exemption exists for the 2010 tax year. The deadline for taking required minimum distributions for 2010 is December 31, 2010.

Even if you didn’t take advantage of the opportunity to skip your RMD in 2009, you may want to keep reading. Failing to take the appropriate minimum distribution from tax-deferred retirement plans carries one of the highest tax penalties in the tax code.

What Is an RMD?

Tax-deferred retirement vehicles allow participants to defer paying current taxes on their contributions and earnings until they begin taking withdrawals, generally in retirement. To ensure that investors don’t postpone their income taxes indefinitely, the tax code stipulates that they must begin taking RMDs from traditional IRAs and qualified retirement plans after reaching age 70½ or face a tax penalty equal to 50% of the amount that should have been withdrawn.

The amount that must be withdrawn in 2010 is calculated based on the account owner’s life expectancy (generally based on an IRS uniform lifetime table) and the account balance(s) on December 31, 2009.

One Time Only

Congress suspended RMDs in 2009 to give investors time to recover from losses they may have experienced in 2008. However, Congress did not extend the suspension of RMDs beyond the 2009 calendar year.

Because RMDs are derived from complex calculations and the tax penalty for mistakes is so high, it may be a good idea to consult a tax professional before taking required minimum distributions. In the meantime, use the table to help calculate the date when RMDs must begin.

via Integrated Financial Partners – Time to Get Back to RMDs : Newsletter: Time to Get Back to RMDs.