Understand Your Retirement Plan

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Understand Your Retirement Plan

Nov 10, 2012 Posted by Sanjiv No Comments

Retirement is one of the most feared times of life especially when there are no plans laid down. Today, the government pension cannot be totally counted on for the best and prompt services. There are so many reasons why retirement plans are considered important. This is why if you are able to plan the best retirement plans, you have to do it well. Retirement plans come in different forms. All aimed at ensuring that you get exactly what you deserve. Although there are some that are not totally drafted with you in mind.,  For instance; you can get a retirement plan that will allow you take annuity payments on a regular basis for some time.

No matter how small is your retirement plan, you need to make sure you are getting exactly what you will need to keep you safe when you retire. The number of payments that will come with every plan will differ. This is why it is best to make sure you research more about the plans you are signing up for. Due to the fact that these plans can be affected by inflation and other economic turn downs, it is best to make sure you are on the right path when going ahead with it.

Before you sign up on a retirement policy with a retirement company, there are so many factors to consider. First of all, it will be best to know exactly what you are looking out for. There are retirement plans that will allow you to make monthly installments for a number of years with special packages whiles there are others that will take a lump sum and make sure payments are made till you retire.  You should use the internet for your search. This will help you to have a larger base to search from.

Many people prefer to use online annuity calculators which are great. Using online annuity calculators will give you so much to look up to. It will also give you many annuity companies and their rates. They will also help you to understand their special terms and policies. This will give you so much knowledge and also help you know which rates are best. There are so many insurance companies that can provide you with all you need. However, it will be best to read the policy document before you sign.

If the company you want to sign up to have a record of failure, it will be best to make sure you do not go ahead with the contract. Take your time to look through every annuity comparison detail you get. This will help you to ensure you make no mistake. Also, if you have a health condition, it will be best to make sure you select a plan that will benefit you more or transfer to your next of kin when you are not around. Having a retirement plan is always needed and considered very important if you want to have a great retirement life.

Who should pick C Corporation?

Oct 22, 2012 Posted by Sanjiv No Comments
This is a very common question asked by our readers.
Who should use a C Corporation as a business entity?

You should pick a C Corporation if you:

  • Have noncitizen or greencard share holders.
  • Might look for additional funding from venture capital firms.
  • Want a flexible way of splitting profit among business owners.
  • Want to reduce medicare and social security taxes by setting up salaries for employees and/or owners.
  • Want to provide fringe benefits to owners. E.g. life insurance, education, and transportation costs.
  • Want to provide health benefits (through your corporation) to your employees and owners.
  • Want to reduce your taxes by splitting your earnings between your shareholders and the corporation.
  • Want your business earning to stay with in your business so that it can grow.
  • Want to transfer your share among other business partners/share holders.
  • Want to provide stock options to employees as benefit.
  • Want to make it easier for someone else to purchase your business.
  • Want to provide a travel and entertainment benefit to your employees.
These are some of key reasons why you should pick a C Corporation as your business entity. However, you should consult with a professional before setting up your business structure.
Good consultant can advise you to ensure your business structures provides good asset protection and reduce your tax liabilities.
Make sure to understand the requirements of business structure.  For example, C Corporation requires business owner to hold annual meeting and keep the meeting minutes.  You can lose your protected corporation status if you fail to follow the requirements.

IRS Wins Foreign Account Case Over Former Mobil Senior Executive

Sep 3, 2012 Posted by Sanjiv No Comments

IRS (Internal Revenue Service) has achieved a great victory over the former Mobil senior executive Bryan Williams. He was alleged in a case of offshore tax evasion. He concealed foreign bank accounts of him holding millions from IRS.

In between 1993 and 2000 this former executive opened two Swiss offshore in order to hush up his financial activities. He was also accused for purposely failing to fill out documents like foreign bank and financial account forms aka FBAR.

In recent years IRS has become more stringent about the regulations. Different cases like   this have prompted them to take such an action.  The authority has been petitioning for more financial resource so that they can expand the tax evasion programs effectively. Their focus is now to catch and prosecute law breakers.

Initially the judgement was in favor of Williams. But in the year of 2003 Williams was convicted in a separate case. His case involved fraud and conspiracy. He pleaded guilty for this case. This year finally the fourth circuit court of appeals in Richmond,Virginia ruled in favor of IRS (Internal Revenue Service). According to the court documents he has committed a fraud.

Now IRS will impose heavy penalties on Williams for committing such crime. He will have to pay a huge amount  for each year of evasion.

This is  a great lesson for taxpayers. This is the high time everyone should be concerned about the consequences of such fraud. So it’s better to avoid the ways to take the help of abusive tax shelter. Going with legal tax shelter is quite beneficial way to reduce the taxable amount. Charitable donation is a perfect way of legal tax shelter. Apart from this you can go for investments. Investments in real estate or health insurance are also considered as a better way of tax shelter.

If you are holding an illegal foreign account, then you should stop such a financial activity. Any day and any time IRS authority can accuse for doing such frauds. And the rest you know.

 

How Tax Shelters Help To Reduce Tax Burden?

Aug 27, 2012 Posted by Sanjiv No Comments

Tax shelter is a great way of reducing tax. It can effectively reduce your tax burden to the IRS (Internal Revenue Service). But tax shelters can turn to be a problematic issue if the law is violated. So make sure that the tax shelters are legitimate.

Tax shelter is actually a financial arrangement that helps to reduce a taxpayer’s tax burden. Tax shelters accomplish such difficult jobs by decreasing and sometimes eliminating your taxable income. This is also a great tool to create tax-deferred or tax-exempt income.

You have to be very cautious while setting up the tax shelter. It should be legitimate. If it’s proven abusive then it can create a big problem. When the purpose of a tax shelter is avoiding tax, then that is considered as abusive tax shelter. There are many other purposes involved with legal tax shelters.

A legal tax shelter can effectively reduce the taxable income. The main purpose of setting up legal tax shelter is to report the IRS very little of your income. Tax shelters are extremely beneficial for high income professionals. Especially big companies are to take the help of tax shelters for avoiding tax payments.

The most common examples of tax shelters are charitable donations, pension plans, retirement accounts, municipal bonds and so on. Investments like life insurance and health insurance plans can also be considered as tax shelters. Investing in a real estate is also a perfect example of legal tax shelter. So it can be said that tax shelters work great as an incentive for investment.

Tax shelter is actually a great strategy. The more intelligent reason you can show to the IRS the easier will be to reduce the amount of payable tax. Larger firms have no way but to use this subtle way of cutting the taxable amount.

 

Without much stretching the laws you can really set up a beneficial tax shelter. Charitable donation is a legitimate way to avoid taxation. The authorities of IRS monitor tax shelters efficiently. So going with laws is the best way to reduce your taxable amount. To know the laws better you must visit

Understanding Self Employment Tax

Aug 27, 2012 Posted by Sanjiv No Comments

The word tax never fails to not to scare us right? No matter however much money we are paying to the government as tax it seems that when ever it’s time to pay back to the government there is some shiver that goes down the spine. But much of the fear is allayed when the necessary taxes are deducted from the salary itself and you don’t have to bother much about paying them yourself. But when the case is otherwise and you have to yourself tell the government about your earnings and then pay the relevant taxes, it becomes a bit scary then. So definitely it not only sounds scary but quite draining as well.

How Does One Go About Paying The Self Employment Taxes?

If you are self employed and you do not draw monthly cheques under a company then you have to individually make arrangements for getting your taxes paid. This may sound tough but as you systematize and organize the important documents, the task of you paying your taxes is not that difficult anymore.  What is important is knowing when to pay them

If you are self employed then such taxes may be paid throughout the year. If you are making a good living out of your self employed incomes or earnings, which is again registered as your primary income then probably you have pay the scary taxes. Also you can only skip the quarterly taxes at the risk of paying heavy fines during tax paying time.

As a self employed individual one has to also pay social security and medicare to the government out of their incomes. The best thing to allay your self paying tax fears is to stash away those essential bucks to be used only during tax time.

Not all is bad for self employed persons!

Yes in such cases you may have to pay only half of the entire tax burden. Also you are liable to face deductions if you are using your home office, other business expenses or purchasing your own health insurance schemes. The only thing that ought to be kept in mind here is keeping all the papers ready for audit time.

If all the above is little complicated for you then you better consult an attorney to secure legal advice.

Top 3 Deductions for Self Employed | Infographics

Aug 5, 2012 Posted by Sanjiv No Comments

Self employed individuals can also take advantage of many tax breaks.  Here are the three most popular tax breaks that can help you reduce your tax bill.  Do you have health insurance ?  You can deduct the cost of your health insurance and of your family.  Do you have an office ?  You can deduct your office expense. Yes, it also includes your home office expenses.  If you are in business for yourself than you must be spending money on supplies.  Most supplies are also tax deductible.  However, there are many tax deductions that can also get you in trouble.  You must watch out for those kinds of tax deductions.
self employed tax deductions

All You Wanted to Know About Medicare Tax

Jul 31, 2012 Posted by Sanjiv No Comments

Medicare tax is quite popular in theUS. Like land tax and service tax, Medicare tax is imposed on earning/ wage / salary of an employee or a self employed individual. As per 2013 budget the US government has announced an increase in Medicare tax rate; from 2.9% to 3.8%.

Medicare hospital insurance amount is divided amongst the employees and the employer; both are subjected to pay half the amount of the total taxable money. Those that are self employed have to pay the total amount as they themselves are employee and employer, rolled into one. However such individuals can file for half the amount paid as Medicare tax when filing for tax return.

Medicare tax rate will be increased to bring under its fold higher income individuals and investment income. This as a part of health care reform laws is called ‘unearned income Medicare contribution tax and it is calculated as follows:

Multiply 3.8% tax rate by the lower of either of net investment income or the gross income over a certain amount

While the net investment amount covers interests, annuities, rents, dividends, capital gains etc the gross adjusted income includes overseas income/ income from properties abroad etc.

Employers are required to deduct an additional 0.9% from their employee’s salary which is calculated on the threshold amount. This deductible amount is the difference between 3.8% unearned Medicare tax and the 2.9% Medicare contribution tax. Because employers may not have knowledge whether an employee is subjected to additional Medicare tax or not the tax amount is decided upon the individual’s income tax return. All extra tax amounts are to be cleared by the individual who is filing for tax return. On the other hand if employers do not calculate on this basis then they can be subjected to penalties and fines.

If you fall within the higher income group then you might want to calculate the amount that you have to pay as additional Medicare tax at the rate of 3.8%.

  • Tax-deferred plans such as IRAs and 401(k) accounts should be the place where you would need to shift income-producing investments .
  • Avoid taxable bonds in favour of tax-exempt bonds.
  • To ensure net capital gains to be as low as possible you need to pair capital gains with capital losses..
  • When the additional Medicare tax would not apply you would need to postpone selling investments with a capital gain by about a year.
  • Children or other family members who aren’t subject to the additional Medicare tax should be bestowed with income producing investments.
  • Increase payroll withholding or estimated taxes to cover the additional Medicare tax.

By all these methods you would be able to ensure that you plan your medicare axes well and gain greater savings.

July News Letter | Tax Tips

Jul 21, 2012 Posted by Sanjiv No Comments
 

July/2012
Tax Tips From Sanjiv Gupta CPA

I am back from India.  It was a fun trip but as always it was short. It was great pleasure to see how fast India is growing. I spent most of the time in New Delhi and NCR area but I am sure rest of the India is also growing as fast as it can.  

How about your business?  I am trying to catch up on appointments but you can now call my office to schedule an appointment to take care of an urgent business.

Understand NRI/NRO Accounts
Picking the bank account for Indians living in United States can be little tricky. Various US and Indian laws can make one kind of account much more beneficial than the other.  Learn how to send money to India and how to bring the money back from India. 
Bank Accounts for NRI Explained By Sanjiv Gupta CPA
Bank Accounts for NRI Explained By Sanjiv Gupta CPA

 

A To Z of Home Deductions
If you have a home based business you can save money by availing home office tax deductions. The IRS allows you to save money on insurance, mortgage, repairs and other utilities, if you have an office at home. Home office deductions are applicable for all kind of homes irrespective of apartments, flats and even mobile homes. So if you are wondering how to claim a home deduction this article will provide you with all the basic information.          

Tax Rate For Year 2013

 

President Obama wants to keep the 10% to 28% tax rates with no change.  He also wants to bump the top two rates to 36% and 39.65.  At the same time, Republicans want to keep all the Bush Tax rates as is..
Call 510-825-7563 to make an appointment or visit us online at www.sanjivcpa.com

Issue: 1
In This Issue
NRI/NRO Accounts
A to Z of Home Deductions
2013 Tax Brackets
Medical Deductions

Medical Deductions
 

A medical deduction plan helps to reduce tax on medical expenses.  This type of plan is beneficial for one who has to spend excessively for medical issues.  
 
Medical deduction plans allow a person to qualify for tax exemptions. However to file tax return on medical expenses it is essential for an individual to present all supporting medical documents.

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Obama's Health Care Plan and Tax Deductions

Jul 15, 2012 Posted by Sanjiv 1 Comment

As many of you may know that starting 2014 Obama’s healthcare plan will kick in that may allow low income families to enroll in qualified health care plan and claim the insurance premium as tax credit.  However, some of us are still wondering what if qualified health plan offered by the Obma’s health care plan is cheaper than the one offered by our employer.    Can we switch to different plan?  If we make the switch, can we still deduct premium?

Answers to these questions are equally important to the employers.   Employers would like to predict their exposure to the employer responsibility excise imposed should if they offer the healthcare that does not provide minimum value (What is the minimum value?), or is unaffordable.   After all, employers want to know if they should continue with their health plans or not?

“Have IRS not finalized the rules?” you may ask.  You can read T.D. 9590 published by the IRS and Treasury Department.  You will find many rules to determine eligibility for and calculation of the tax Code section 36B refundable health insurance premium tax credit added by the Patient Protection and Affordable Care Act, as amended.   These rules address many matter e.g treatment of required waiting periods, or relief from erroneous automatic enrollment in an employer-sponsored plan.  But at the same time they leave many issues for future guidance and public interpretation.

For example, Employers can find out when employer plan coverage is affordable for the employee by using a simply formula (i.e., the employee’s contribution is no more than 9.5% of household income) but do not address whether coverage is affordable for related individuals who can enroll in the employer plan.

Many groups are working closely with IRS and Obama’s administration to finalize the rules and calculation methods to determine how much premium should be deductable.  Tax payers are also being invited by the IRS to comment on these matters.

Would like to share your thoughts on this matter?

What Are The Available Medical Deduction Plans?

Jun 22, 2012 Posted by Dolly No Comments

A medical deduction plan helps to reduce tax on medical expenses.  This type of plan is beneficial for one who has to spend excessively for medical issues.   Medical deduction plans allow a person to qualify for tax exemptions. However to file tax return on medical expenses it is essential for an individual to present all supporting medical documents.

Tax Deductable Expenses

Tax deduction for medical expenses is available for a large number of issues. One can get deduction on diagnosis cost, cost of treatments and even cost of medical supplies.

 Medical deduction plans are available for the following issues generally.

  •  Fees payable to doctors and dentists
  • Expenses that one has to pay for medicines that are prescribed by a doctor.
  • For medical aids and equipments like pacemakers, wheel chairs, hearing aids and dental equipments.
  • Charges of weight loss program which is prescribed by a doctor.  However, the charges of low calorie foods can not be tax-deductable.
  • Travel expenses due to medical treatment.
  •  The cost of any type of surgery including eye surgery and cosmetic surgery.

However one point to remember is that medical expenses that improve general health such as vitamin deficiency are not tax-deductable.

Who can have the benefits of tax deduction?

  • A tax payer can deduct medical expenses for his/her own medical treatment, cost of equipments and surgery.
  • A tax payer can receive tax deduction for the treatment of spouse.
  • A tax payer can claim tax deduction for medical issues of a person who is dependant on him/her.

  Is there any exposure for non dependant?

IRS generally offers no tax deduction offers for the non dependants. However, in some special cases tax deduction rules can be changed.

  • IRS does not offer any coverage for a non dependant even if it is one’s own child. But if the child is a non-dependable according to the law of divorce or separation.
  •  A tax payer can not claim a person as dependant if he/she gets $3,700 and more.

 

How to apply for tax deduction?

 

A tax payer can claim deduction of medical and dental expenses if the services were made during the tax year.  An applicant can apply for tax deduction when the payment is complete. This is applicable for each type of payment, such as online payment, payment by phone or credit card.

Deduction plans for long term medical expenses

IRS offers tax deduction for long term medical expenses.  If a person suffers long time from a severe medical issue, he / she can claim tax deduction for diagnostic, therapeutic, treatment and personal care cost. In order to avail a long tern medical deduction, one must meet all criterions as specified by IRS.

  • Medical issues must be of chronic type:  a person can be diagnosed as chronic sufferer if he /she has been suffering for one year or more and is unable to perform daily activities without substantial co operation.  if the mentioned person requires extensive care to maintain personal care and
  • Diagnosis, treatment and all other necessary medical services should be executed under the supervision of a recognized doctor or medical practitioner.

 What should be included in long term medical deduction plans?

Tax deduction can also be granted for the following issues.

  •  Expenses of meals that a person takes at a hospital or nursing home. However, such meals must be part of medical care.
  •  Charges paid for medical conference including transportation and admission costs. The time of conference must involve medical sessions. A person is not capable to claim tax deduction for fooding and lodging charges that he/she has to pay during the medical conference.
  •  IRS offers tax deduction for medicines, injections and other medical supplies those are prescribed by a certified medical practitioner. For diabetes patient, the charge of insulin is deductable without prescription.
  •  A chronic patient some times requires additional nursing services to perform regular activities. In such case, cost to appoint a nurse or an attendant or a care-giver is deductable.
  •  Cost of operation, eye surgery can be tax deductable. On the other hand IRS does deduct amounts that are spent due to unnecessary surgical treatments such as some kind of cosmetic surgery, artificial implantation etc.

IRS offers tax deduction for certain issues. These are mentioned in the following points.

  • Stop smoking program
  • Psychoanalysis
  • Sterilization
  • Pregnancy test kits
  • Special education
  • Weight loss program

Issues that are not tax deductable

  • Childcare services for a healthy baby
  • Cosmetic Surgery except for a medical requirement.
  • Weight loss program that is only for general health and appearance improvement.
  • Household service
  • Electrolysis
  • Expenses for funeral
  • Hair Transplant
  • Illegal surgical treatments
  • Cost of insurance Premiums
  • Imported drugs and medicines
  • Nutritional Supplements
  • Fees for Veterinary treatment
  • Diaper Service