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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

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.

Long Term Care Insurance

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by on November 5, 2010 at 3:21 pm

Choosing Long Term Care Insurance

I have many clients who have long term care insurance, and many who don’t.  From what I’ve seen, my clients with long term care insurance have many more options when it comes to choosing care and choosing where they live than my clients who don’t.  The New York Times has a recent article about how to choose a long term care insurance policy.
One of the first questions people always ask about long term care insurance is “how much does it cost.” The costs vary widely depending on the age you are when you obtain the policy, how much the policy will cover (they usually cover a certain dollar amount per day) and how long the policy will pay for care.  Other policies may give you a “bucket” of money and your coverage lasts until it is gone.
Long term care insurance covers things that traditional Medicare and health insurance don’t – medical care in the home, longer term care at a nursing home, and even pay for assisted living costs.
The time to start looking into policies is in your 50′s, since the premiums will be lower than if you start later, and there is less of a chance that you will suffer from a health problem that could cause your premiums to be extremely high or prevent you from getting coverage all together.
A long term care insurance policy will kick-in when the policy holder is unable to perform one or more activity of daily living (bathing, dressing, eating, walking).  Check your policy since they can vary in terms of how many ADLs you must be unable to perform before coverage will start.
Things to look for in a policy:

  • Where can the care be provided? Home, nursing home, assisted living.  Most people want flexible options.
  • What types of caregivers can be paid by the policy? The article recommends a policy that covers
  • “skilled, intermediate and custodial care,” which would include someone who could assist with laundry and meal preparation.
  • What illnesses are covered? Be sure that illnesses such as Alzheimer’s aren’t excluded from coverage, which was common in some of the older policies.  Read the list of exclusions on any policy before you buy it.
  • Does the policy provide inflation protection? What seems like adequate coverage now, may not be what you need in 20 or 30 years if it doesn’t keep up with inflation.

To control the costs of the policy, the article has the following tips:

Avoid lifetime benefits. Opt instead for a policy that covers a set amount of time, like four or five years, suggests Ms. Driscoll. The average nursing home stay is two to three years, she points out, and only 12 percent of patients live longer than five years once they enter.

Look for a policy that pays a monthly sum. Most policies specify a daily benefit — anywhere from $50 to $500. Recently insurers have begun using a monthly amount so you have the flexibility to receive more care on some days, when no family member is available, for example, and less care on others.

Consider a front-loaded policy. With these, you pay the entire cost of the premiums before you retire. You’ll pay more upfront, but payments will end just as your income decreases.

Look into cash benefit policies. Once benefit payments kick in, these policies will send you a regular cash payment, say $200 a week. Instead of filing claims for specific care (with specific requirements to qualify for coverage) you are free to use the payout however you see fit.

You may still pay the nursing home or home health care attendant with the money when the need arises. But you can also use the cash to pay a family member for care, pay travel expenses for a visiting relative and take care of other expenses that would not be reimbursed under a traditional policy. You’ll pay more for these policies, but some families find the extra flexibility is worth it.

Find a good agent. You’ll need someone who is experienced in long-term care, Ms. Driscoll says. This might be the same insurance agent who sold you your life and auto policy, or you may need to find a specialist. Either way, make sure the person fully understands your needs and is active enough to be selling at least a dozen policies a year.

Paying for in-home or nursing home care privately can often exhaust a person’s resources leaving them far fewer options when their funds run out.  By obtaining long term care insurance, a person often can remain in their home far longer than without the insurance, and make sure that a spouse or other family member doesn’t become impoverished by the cost of care.  In addition, many people find that it allows them to preserve assets to pass on to the next generation, and that it fits in well with their overall estate plan.

Integrated Financial Partners – HOT TOPIC: Risks of Relying on Social Security

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by on October 18, 2010 at 1:43 am

Consider the Risks of Relying on Social Security

The 58 million Americans who currently receive Social Security benefits will not receive a cost-of-living adjustment (COLA) in 2011. This is the second consecutive year in which payments were frozen because the Consumer Price Index measured little or no inflation.1

Although the decision to freeze benefits in 2011 is not directly related to the social insurance program’s projected funding shortfall, consider it a lesson in the risk of relying too heavily on a program that has a potentially uncertain future. Millions of Americans who rely on Social Security just found out that they won’t receive an anticipated benefit increase — and they learned this only a few months in advance, too late for them to do much about it.

Given that nothing like this has happened before, the disappointment among Social Security beneficiaries may have been compounded by an element of surprise: 2010 was the first year since 1975, when Social Security instituted automatic COLAs tied to the rate of inflation, in which benefits did not increase year-over-year.2 It’s likely that many retirees believed that the lack of a COLA in 2010 meant that one would be virtually guaranteed in 2011 because it would be unheard of for the government to go two years without increasing benefits. But that is exactly what has happened.

Going forward, it might be prudent to expect more surprises from Social Security. The program’s already fragile situation has deteriorated further in the face of widespread unemployment and a significant reduction in the payroll tax receipts that fund the government’s largest program. The Congressional Budget Office now expects that in 2010, Social Security outlays will exceed tax revenues for the first time since Social Security was amended in 1983. Although the CBO expects that revenues will generally equal outlays over the next few years, growing numbers of retiring baby boomers will eventually overwhelm the system and cause outlays to regularly exceed tax revenues by 2016. The CBO also projects that Social Security’s so-called trust funds, which are actually IOUs issued by Congress for borrowing Social Security’s surplus revenues in years past, will be exhausted by 2039 if no changes are made to current laws.3

What if It Happened to You?

Imagine what your own financial situation might look like if Social Security announced shortly before your anticipated retirement date that, because of underfunding, it would cut benefits and raise eligibility requirements.

Although these measures have not been adopted, it’s worth noting that they are being considered. The Congressional Budget Office has studied policy options that include reducing benefits, raising the retirement age, limiting future COLAs, and increasing payroll taxes.4 Because there is little consensus among lawmakers or the public, a solution reached by political negotiation could combine several different measures.

Fortunately, Social Security’s precarious financial situation has not gone unnoticed. Seventy-seven percent of Americans now believe the enormous cost associated with entitlement programs like Social Security and Medicare will eventually create major economic problems for the nation if they are left unchecked.5 Fifty-six percent of retirees believe they will eventually suffer a cut in their benefits, and 60% of workers have expressed doubt they will ever receive Social Security payments.6

It seems clear that, at the very least, Social Security will not be able survive without making some adjustments. The good news is that you are already aware of the likelihood, so it might be wise to prepare for your own retirement on the assumption that Social Security won’t be able to provide the same level of benefits that you might currently be expecting. Better to make such an assumption now, and begin seeking ways to offset the potential shortfall, than wait until it’s too late to do anything about it.

via Integrated Financial Partners – HOT TOPIC: Consider the Risks of Relying on Social Security : Newsletter: HOT TOPIC: Consider the Risks of Relying on Social Security.