A surprise tax payable because of the stimulus package?

November 17th, 2009 . Posted in Taxes, Uncategorized | Comments Off

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

Amnesty for offshore accounts

August 12th, 2009 . Posted in Taxes | Comments Off

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

Open your mail yourself

August 11th, 2009 . Posted in budget help, life planning | Comments Off

This is the best advice I can give the high net worth individual who uses a family advisor.   Don’t isolate yourself from your mail.  Open and sort the mail, and then let your assistant or advisor handle it.  View the bills.   You’ll have a much better chance of catching a problem.

I don’t market fear, but if you use a family advisor you should acquaint yourself with the advisor’s procedures for avoiding any possibility of fraud.  Those procedures should include (or explain why they don’t)

  • segregated duties (check signers should not be account reviewers, etc.)
  • complete financial reports.  readable and understandable and timely.
  • wire transfers only with your approval or a separate authority, not the person initiating the wire transfer
  • background checks for anyone in your family office
  • outsourcing to separate entities for bookkeeping, auditing, bill paying, etc.

Too many fingers spoils the pie, but a single financial manager handling all your bills and investments is a recipe for damaging acts.  I can help share some of that load and provide additional oversight and value.

Mike Dayoub is a financial planner in Milton/Alpharetta GA and is capable of working with a family office to provide guidance and oversight while keeping business transactions convenient for family members.

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

July 21st, 2009 . Posted in Taxes | Comments Off

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.

The “bottom” for metro Atlanta housing prices

July 20th, 2009 . Posted in investments | Comments Off

Worried house prices here around Atlanta have further to drop?  Here’s a few reasons to not worry so much.

1. Replacement cost:  If you had to rebuild your house on your current land, what would it cost you?  Fair Market Value tends to reflect that replacement cost.

2. The US creates 1 million new households a year.  The US built only a half a million new houses last year.   We demolish another 250,000.   So we’re running a 750,000 deficit of new houses.  The deficit will catch up soon.

3. Lake Lanier.  A federal court just ruled Atlanta doesn’t have preiminent right to Lanier for drinking water (or lawn water).  Bad news for builders who need permits.  Good news for existing homeowners who will see their values go up as the glut of empty homes dissipates.

Call me if you want pointers to these statistics.

Mike Dayoub is a fee-only investment advisor and retirement planner in Georgia.  Website here.

State health benefit plan increase surprise

July 15th, 2009 . Posted in insurance | Comments Off

Some Georgia retirees on the State Health Benefit Plan noticed a jump in premiums this month (July, 2009).

It’s probably because they’re not enrolled in Medicare Part B. For about 8 months the State of Georgia tried to warn retirees who weren’t enrolled in Part B that their Health Benefit Plan premiums would have a significant increase in July 2009.

The increase is because the state is trying to address a rising liability Georgia is carrying for retiree health benefits. I think the rationale is those retirees who don’t need Medicare Part B can pay more to help address the $16B liability Georgia is carrying.

If you’re a State of Georgia retiree who isn’t signed up for Medicare Part B, you can do it during the next Special Enrollment Period (SEP). That period may be available to you if you’re getting married or a new dependent. Otherwise, the SEP is during the Open Enrollment Period, which this year will be from October 10 to November 10, 2009.

Call me if you got burned by this change. You might save money and surprises if you have a good financial planner keeping a lookout for changes to your retirement benefits.

Mike Dayoub is a fee-only financial planner in the Milton/Alpharetta area of Georgia. Website.

P.S.  Here’s last year’s booklet for SHBP info.  The one for 2010 will get published around September.

Georgia’s estate tax?

June 22nd, 2009 . Posted in Estate Planning | Comments Off

Estate planning clients sometimes ask if Georgia has an additional estate tax – on top of the federal estate tax system. The answer depends on the year you die.

Background: The Georgia tax rules say Georgia estate tax is equal to whatever the federal system allows as a credit for state death tax. So if the federal system allowed a $10,000 credit for state death tax, Georgia would charge an estate tax of $10,000.

Our current federal tax system has zero credit for state death tax for the next two years. A new credit might be instituted in 2011, but nobody knows because the federal estate tax system is due for a large update in 2011.

What does this mean to you?
1 – there’s currently no Georgia estate tax form to fill out — not for the next 2 years
2 – rules might change, but base your estate plan on the Federal exemptions and don’t worry about the Georgia estate tax.

Mike Dayoub is a fee-only financial planner in North Metro Atlanta. Website.

P.S. Estate planning is a much larger topic. I answered this question because I don’t see much written about it for Georgia. I don’t practice law. I team with a variety of estate attorneys and value their input, so call me if you have more to say on this topic.

Do you wish you could invest in “private equity”?

June 4th, 2009 . Posted in investments | Comments Off

You may have read stories in 2007 about the fantastic returns investors were getting in “private equity” funds.   The logic was simple.  They had the advantage of

  • less trading
  • more patient investors
  • unencumbered by reporting requirements

Think you missed the boat because you couldn’t afford the $250K stake to buy into one of these funds?  Think again.  ETF’s such as PowerShares PSP gave average investors access to private equity funds.

How did PSP do?   Horribly.   Down more than 75% over the past 3 years.

And the component private equity funds PSP contains?  They’re all down an average of 75%.  Not a winner in the bunch.  The S&P 500 is only down 25% over the past year, by comparison.

Leucadia National (NYSE: LUK)
American Capital Strategies (Nasdaq: ACAS)
SVB Financia (Nasdaq: SIVB)
CapitalSource (NYSE: CSE)
KKR Financial (NYSE: KFN)
Allied Capital (NYSE: ALD)
etc.

These are publically traded funds which invest in private equity.  Do you think you can do better than them?  Good luck!

I’ll keep looking for opportunities in private equity, but it doesn’t look promising.

Mike Dayoub is a fee-only financial planner in North Metro Atlanta. Website.

private equity performance

Time for a checkup on your estate plan?

May 21st, 2009 . Posted in Estate Planning | Comments Off

The market downturn creates a couple of opportunities in your estate plan.

  • While your investments’ values are low, you might want to gift some of those assets to your heirs. There are other strategies to leverage gifts, such as trusts, family limited partnerships or limited liability companies.  Call me to discuss.
  • If your adjusted gross income (AGI) does not exceed $100,000, you can roll over from your IRA to a ROTH.   In 2010, there’s no AGI limit.  Pay taxes on those funds now, while asset values are low.   You can also convert your 401(k) to an IRA and then to a Roth.   Planning is needed so you know how much tax you’ll be paying.  Try not to use retirement funds to pay the tax.

There are 2 other Estate Plan items to check now that the markets are down:

What looked fair to your heirs a few years ago might not seem fair to you now, since different assets declined.

Your generation-skipping trusts and your other trusts might not be capturing the right maximums, now that asset values have changed.  You might need to move some assets that would have been taxed into those trusts that wouldn’t be taxed, to take full advantage of those trusts.

Mike Dayoub is a fee-only financial planner in Alpharetta GA. Website.

How’s your health? (some folks are in denial)

May 4th, 2009 . Posted in insurance | No Comments »

Over 70 percent of boomers rate their health, and spouse’s health, as good or excellent.

However, according to the National Center for Health Statistics, 50 percent of boomers have high blood pressure and two in five are obese. (source:  Energizer Holdings)

Clearly, there’s a bit of denial going on here.   It would be sad if that denial extends into their assessment of how likely they are to need long term nursing care.

Mike Dayoub is a fee-only financial planner in Milton, GA. Website.

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