What direction is Obama going to take on tax issues?

As the holiday season approaches I am reminded of that sick in the gut feeling I used to get when the credit card bills came in January. Time to pay up for all the holiday gifts and extras that seemed a great idea at the time. What was I thinking? Similarly, I think Obama and Congress are thinking that some bills are coming due. I'm sure Obama thought his recent trip abroad would result in some good news at home in the way of new markets and jobs which was to translate into a positive political muscle at the tax bargaining table. I'm sorry Mr. President, but you obviously misread the situation. It seems that everyone is concerned about the money you and your Democrat controlled Congress has spent and is concerned on how that issue is going to be resolved. I don't think printing new money was what they had in mind. It seems it just devalues what is already out there.

So now the President has a real bona fide issue to resolve. Does he remain true to his campaign promise of raising taxes on people making over $250,000 thereby ensuring the jobless rate stays near ten percent. Or does he crawfish and keep the current tax structure in place for a while longer. Either way, someone else will get the blame, it will be politically costly, the debt does not go away and Bush 43 will still be smiling.

Look out sole proprietors

$8 million. That's what The Inspector General says that the IRS has missed in revenue generation from sole proprietors. “Tests for unreported income during IRS audits of sole proprietors are critical to the process of verifying that the correct amount of tax is reported,” said TIGTA Inspector General J. Russell George in a statement. “Our results indicate that sole proprietors may have avoided tax and interest assessments of over $8 million in fiscal year 2008.” So now the IRS is going to spend some extra effort into looking into the books and lives of these thieves and ne'er do wells called sole proprietors. Never mind that $8 million is only .001% of the stimulus. What will these cats think of next?

Solution? Incorporate. How? The process is simple. The choices are few i.e. LLC, C Corp, S Corp. Limited Partnership or a regular partnership. Pick the one that is right for you and go to the Secretary of State's website for your state and follow the instructions. Or enlist the aid of a QUALIFIED professional. Like me. www.robideaucpa.com

Traditional vs Roth IRA - Part 2

Roth IRA accounts are subject to the same limits as a traditional IRA which we discussed last week. The way a Roth works differently than a traditional IRA is that if you keep your investment in a Roth IRA for at least five years then none of your withdrawals are taxable, even the money you have earned on your investment is tax free.

You could be on the cusp of a great opportunity. With the stock market poised to rocket upward in the next 18 months now might be a great time to convert your Traditional IRA to a Roth IRA. First let's talk a bit about the market. There have been numerous studies done by the large investment houses that indicate huge market gains after midterm elections. It does not matter which political party is in power or who is going to take over. The results are the same. In fact the smallest increase after a midterm election in the last 100 years was 14+%, the average was around 50%.

Now some news about conversions. This year is the first in which taxpayers may convert funds in regular IRAs (as well as qualified plan funds) to Roth IRAs regardless of their income level. What's more, taxpayers have the choice of paying the tax on the conversion when they file their 2010 returns, or deferring the tax hit on the conversion to the 2011 and 2012 tax years.

How do you know if this conversion is right for you?

The consensus view is that the conversion route should be considered by taxpayers who:
... have a number of years to go before retirement (and are therefore able to recoup the dollars that are lost to taxes on account of the conversion);
... anticipate being taxed in a higher bracket in the future than they are now; and
... can pay the tax on the conversion from non-retirement-account assets (otherwise, there will be a smaller buildup of tax-free earnings in the depleted retirement account). This issue is made much more convenient now due to the ability to spread the burden over the next two years.

One thing to be a little careful of your tax brackets. It is considerably more certain as to what your tax bracket will be in 2010 than it will be in 2011 and beyond. Time is running out to figure out what to do so let me know if I can help you. http://www.robideaucpa.com/