Archive for the ‘Taxes’ Category

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To Roth or not Roth? 44% are undecided.

Thursday, December 10th, 2009

In January investors in retirement plans with incomes over $100,000 will for the first time have the opportunity to convert their individual retirement accounts, or IRAs, to Roth IRAs.  Have you figured out whether it’s right for you?

A survey by TD Ameritrade of 1,000 retail investor clients found that 44% of those with a retirement savings account that could be converted to a Roth IRA said they are still undecided on whether they would convert.

From my perspective, the decision should be based on whether your taxes will be higher in retirement or higher now.    The first hurdle is that it takes a fairly knowledgeable forecast to predict your future taxable income so you can predict your tax bracket.   (What other sources of income will you have in retirement?)  Then you need to guess what the tax rate will be at that bracket.

I have software that makes the guesswork more manageable.  Give me a call if you’d like help working through this decision.  We’ll set a fee before the work is started, and I won’t pressure you to move your assets to my management.

Mike Dayoub is a fee-only planner in Alpharetta/Milton and a tax preparer at H&R Block. 770 361-3139 website

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A surprise tax payable because of the stimulus package?

Tuesday, November 17th, 2009

You might want to check your work if you think you’ve planned correctly for the reduced withholding instituted via the “Making Work Pay Credit” of Obama’s stimulus package in February.

MWPC was implemented using new income tax withholding tables. However, the changes to the withholding tables did not take into consideration the dependents who receive wages; single taxpayers with more than one job; and joint filers where one or both spouses have more than one job or both spouses work.

The IRS worked assiduously to address those cases, but did not eliminate the potential for some taxpayers to be surprised they did not withhold enough.

If you think this applies to you, see a tax preparer now or buy a preliminary copy of tax software to plan now for your 2009 tax bill.

There is one bright spot in this situation: the IRS says they will waive penalties if you underpaid withholding due to the above gaps in the tables.

Mike Dayoub is a tax preparer and financial planner in North Fulton, Georgia.  770 361-3139 website

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Amnesty for offshore accounts

Wednesday, August 12th, 2009

The IRS is bearing down on tax evaders who hid investments (and income) in Switzerland. Today UBS AG agreed to give the IRS about 10,000 names. (LINK)

If you’ve decided to get into compliance, get it done soon. The IRS amnesty program ends on Sept 23, 2009.

If you decide to take the amnesty program, here are some caveats:

1) The amnesty program reduces the penalties, it does not eliminate them. The penalties for tax due are reduced from 75% down to 20%. And the FBAR penalty is reduced from 50% down to a single 20% penalty on your maximum 5 year balance. So there are still penalties, but at least there’s an incentive to disclose now, voluntarily.

2) Don’t call the IRS until you talk with a tax attorney. Notice I did not say accountant. That’s because your attorney cannot testify against you on this matter, but a CPA is obligated to do so. Let the attorney hire the accountant who will work through the tax issues.

3) Clean up the rest of your taxes. The amended return you file for amnesty must be 100% correct on all other matters. Any other hidden items on the amended return can exposie you to possible prosecution for a fraudulent return.

4) There are several other requirements needed to be eligible for amnesty. (The income cannot be illegally obtained, you cannot be currently under criminal investigation or under IRS audit, for example).

There are lots of reasons clients “fall into” hidden accounts. Inheritance, immigration, marriage, etc. Your attorney can help you minimize the penalties.  Have a friend call me if you want a pointer to a good tax attorney.

Mike Dayoub is a tax preparer and financial planner in North Fulton, Georgia.  770 361-3139 website

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Plan now for a 2011 tax change if you own a C corp with a retained payout

Tuesday, July 21st, 2009

If you own a C corporation or an S corp which was formerly a C, and you allowed the corporation to retain significant profits as retained earnings inside the corporation, you need to consider a tax change which could affect you in 2011.

Taking your payouts in 2009 and 2010, you’ll get a 15% tax rate on dividends.  In 2011 the dividends will be taxed at your marginal rate, which for wealthy taxpayers is nearly 40%.

This is because the 15% rate was temporary, as part of the JGTRRA of 2003 and will end after 2010 unless new legislation is enacted.

Call me if you need details on strategies to reduce that tax bite.

Mike Dayoub is a fee-only financial planner and tax preparer in north metro Atlanta.

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Will the Estate Tax exemption revert to zero?

Saturday, April 25th, 2009

In 2010 when the current exemption ($3.5M) expires, the law says the exemption will automatically fall to zero.   Don’t worry.

The House Ways & Means has introduced a bill to preserve it and the maximum estate tax rate at 45% (LINK)

The Senate’s proposed budget would raise the exemption to $5M and reduce the maximum rate to 35 percent. (LINK)

So I wouldn’t worry about suddenly losing the exemption.  The USA would need a radical turn, attempting to raise tax revenues and balance the budget.  Highly unlikely in today’s political and economic climate.

Mike Dayoub is a fee-only registered investment advisor and tax preparer in Milton, GA. Website.

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The tax advantage of stocks and ETF’s (vs. mutual funds)

Tuesday, March 31st, 2009

Adding to investor pain in 2008 were 1099-DIV statements from mutual funds where the investor had to pay tax on capital gains even though his stake in the fund was currently underwater. How did that happen? Because the fund managers were forced to sell holdings (often for gains on the underlying stocks) to redeem many investors who were cashing out in the “flight to safety“.

This was a pain inflicted on mutual fund investors last year that investors in individual stocks or ETF’s didn’t experience.

However, that advantage of stocks and ETF’s is almost non-existent for a while. More than 99% of all mutual funds right now are carrying negative exposures to capital gains.

So if you are in a taxable account (as opposed to a retirement account where tax on earnings is deferred) and you are deciding between a mutual fund vs. individual stocks, this might be a determinant.

Call me if you want to know which funds are carrying the largest negative. Those funds can grow the most before you’re likely to see a 1099-DIV for capital gains.

Mike Dayoub is a fee-only registered investment advisor and tax preparer in Milton, GA. Website.

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$29 for H&R Block’s “2nd look” at your taxes

Wednesday, February 25th, 2009

Want to get to know me?

One option: We can meet at my H&R Block office and for $29 I can punch your most recent income tax data into H&R Block’s software.  Average savings for H&R Block clients who get this “2nd Look® ” is more than $500.  It’s a good way for me to get a snapshot of your cash flows and we can take the conversation from there.

Or we can just meet and talk.  The first meeting is always free.

Mike Dayoub is a fee-only registered investment advisor and tax preparer in Milton, GA.  Website.


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2009 Economic Incentive Plan: what it means for average Americans

Tuesday, February 17th, 2009

There are much better write-ups of the ARRA American Recovery and Reinvestment Act, signed 2/17/2009. That’s why I deleted this blog post, which I posted 2/17 to  serve as a quick summary.

This is the best writeup I’ve seen.  It’s from Financial Planning Magazine.

Contact me if there are provisions of the ARRA which you need more advice on for your financial situation. Also please call me if your group wants a speaker who can present a summary of ARRA for individuals and families.

Mike Dayoub is a fee-only registered investment advisor and tax preparer in Milton, GA.  Website.

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Plan to convert to a Roth in 2010

Monday, February 16th, 2009

Good financial news!

Worried about income tax rates going up in the future? Pay the income tax now on the taxable portion of your traditional IRA, 401(k), 403(b), or 457(b) and convert the sums to a Roth IRA. Earnings in the Roth IRA accumulate tax-free for most savers and another big advantage of the Roth is there are no required minimum distributions (RMD’s) at age 70 ½.

Unfortunately in 2009 you can’t do the conversion if you have more than $100K in gross income. But in 2010 the IRS removes that restriction. That should help you sleep better instead of worrying future income tax rates are going to take a big bite out of your retirement.

The conversion isn’t for everyone, so talk with your planner about whether it’s right for you and how to prepare your accounts.

Mike Dayoub is a fee-only registered investment advisor and tax preparer in Milton, GA.  Website.


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Self-employed insurance expenses

Thursday, February 5th, 2009
  • Health Insurance

Self or family health insurance premiums are a reduction in income for the self employed on the 1040 if neither spouse was eligible for employee health insurance during the time the premiums were paid.  I can help you find the best policy for you.  Remember: fee only planners get the same policies, with no commissions.  We will save you money.

  • Long Term Care

Employer-provided long-term care premiums are deductible by the employer as employee benefits. For the business owner, they are treated as health insurance premiums, which means that they are also 100 percent deductible.  Fee only planners have access to policies from the same high quality carriers (Hancock, Genworth, etc.) without commissions, making your premiums much lower.

  • Disability Insurance

Not deductible.  This is an important coverage to have if you are self employed, and sadly many startups don’t recognize how valuable this coverage was when they were employees so they skip this expense.  I can find you lower premiums, often via group plans.

  • Life Insurance

Life insurance is not deductible on Schedule C for sole proprietors.   However, remember fee only planners have access to much lower rates for the same life insurance.

  • Business liability, business casualty & property insurance

I can help you identify your risks, determine if you need coverage and point you to a broker who will shop for the best policy for you.  These insurance expenses are deductible on the Schedule C.

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