Aug 27

My new class with OALP

It looks like we will have a good group of young agricultural leaders for the next 20 months. Here is a picture of the class. Your southwest oklahoma estate planner is still one of the tallest, so check the back row for my familiar face.

Southwest Oklahoma Estate Planning activities


Aug 19

It is time to look at your end of year planning

I have been approached by quite a few of my regular income tax clients this past month (and some new ones) and most have the same question: What do we need to do to ensure lower taxes and have everything ready for preparation on time? I have the following suggestions for them and want to pass them on to everyone on the internets.

1.  Ensure you are keeping proper records. This applies not only to keeping receipts, but also to your financial records for any business you may have. With one client, I did a short review of his company books and found negative accounts in inventory. His book-keeping system was improperly crediting inventory when ordered, but there was no corresponding debit when delivered. Since we started looking early enough, we were able to address the problem rather than being rushed in tax season or having to file an extension.

2.  The general rule is that you want to accelerate expenses and defer income, but this may not hold for this year to next year. Generally, because of the time value of money ($1 today will buy more than $1 in one year) you want to report as little in income as possible, while staying within the law. However, we have two factors working against this strategy right now: tax rates are scheduled for a grand increase next year and rates of return are so low that a dollar saved won’t make too much difference anyway.

How this plays out is best illustrated by a couple of examples using the capital gains rate. This year, 2012, the top federal Long-Term Capital Gain (LTCG) rate is 15%. Next year the LTCG rate is scheduled to increase to 20% and, if the taxpayer’s income is “too high”, then could incur an additional 3.8% surtax. So if you have a gain that you know will be recognized soon, you could stand to save 8.8% in taxes by recognizing it before December 31, rather than later. At a guaranteed rate of return of only 0.4% it will take many years to make up the loss in taxes.

3. Now is the time to purchase equipment or machinery you need. I mentioned this in a previous article that the Section 179 expense deduction is going to seriously curtailed next year. This year you can make qualified purchases up to $125,000 and immediately deduct the cost. Next year, the limit is $25,000 and decreases dollar for dollar on any purchase over the $25,000. As an example, if you needed to purchase a $100,000 tractor and your effective tax rate was 30%, if bought this year, you would save $30,000 in taxes, but next year, you would only get regular depreciation which equals about only $4,200 in tax savings.

As with estate planning, tax planning is much better accomplished the sooner you start. If you have questions or if you need a tax preparer for next year, please do not hesitate to contact my office.

Aug 17

Next seminar date set for September 13, 2012

We have scheduled our next estate and tax planning seminar for southwestern Oklahoma on Thrusday, September 13, 2012. We will be offering two times for the seminar; 2:30 and 6:30 p.m. Both will be at the Southwest Technology Center in Altus. If you are available for one of those times and would like to learn more about estate and tax planning, then call my office at 580-318-8829 to reserve a spot.

This will be a pretty basic seminar focusing on wills, trusts, joint tenancy, and beneficiary designations. Come learn how to plan for leaving your legacy.

Aug 15

Tentative seminar planned for September 13

I have scheduled another basic estate planning seminar for Thursday, September 13, 2012. I hope to have two separate times available for this date: 2:30 and 7:00 pm.

If you are interested, then please let me know so I can reserve you a spot. I hope to have up to 40 people at each event.

Aug 15

Affordable Care Act surtax will have immediate effect on Trust or Estate income

Another tax from the Affordable Care Act (Obamacare) will go into effect on January 1, 2013 and it may have an impact on the middle class and those grieving a loss of a loved one. As part of the funding mechanism for benefits, Congress imposed a 3.8% Medicare surtax on passive income if an individual makes more than $200,000 or $250,000 for a couple, or what will be the highest marginal tax bracket for the taxpayer. The surtax is imposed on passive income, when previously, Medicare and Social Security were only imposed on earned wages.

How does this affect trusts? Well, since a trust or estate cannot income, prior to January 1, 2013, the entity was exempt from any of these “payroll taxes”. Under the law, though, the passive income (investments, interest, etc.) will be subject to the additional surtax when the trust or estate reaches the highest marginal rate at $12,000.

It is fairly easy to plan around paying income taxes through a trust or estate, but those without proper planning may find that the legacy left to them by their loved ones subject to up to nearly 50% in taxes when Oklahoma taxation is included. This is after estate taxes of up to 55% are taken out. If you want to plan for these taxes, then call my office to set up an appointment.