Friday, September 23, 2011

Amazon Sells (out)

Just across the wires today: Amazon has reached a deal with California lawmakers to drop Amazon’s efforts to seek a referendum to stop CA pols from assessing sales tax on internet transactions forwarded to from CA websites. In exchange for Amazon suspending its efforts, CA will not attempt to collect the tax for one year.

There is also a legal challenge looming for this law as well. CA politicians are not eager to have their taxes deemed unconstitutional by a court, and I suspect that Amazon was hoping to avoid the costs of litigating this issue. Both sides want to avoid a fight and that was probably the impetus for this deal. This is good news for CA consumers and those many small businesses that have website feeds to Amazon .com and other large internet sellers.

But, it would have been better news if they had driven a stake through the heart of the beast now, rather than leave it on the table for next year.

Thursday, September 8, 2011

Market downturn can mean tax savings

Some serious stuff this time: Their may be a silver lining in the recent slide in the stock market. If you took advantage of the relaxed IRA/Roth Conversion rules last year and converted your regular IRA to a Roth, listen up! You probably paid tax on that conversion, and you have an opportunity until October 17, 2011 to undo that transaction and retrieve the taxes paid for 2010.

Why would you want to do that? Well, if your Roth value has eroded due to market declines to a point below what it was when you initially converted, you can recharacterize back to a regular IRA, and recoup the taxes you paid on the conversion. If you wait at least 30 days and then reconvert back to a Roth again, you push the tax into 2011, and if the value has declined, you pay tax on the lesser amount. So you reduce your taxes and delay them one year.

It’s a bit of a hassle, but if you qualify you can get reduced taxes and a deferral. Best of both worlds.

Thursday, September 1, 2011

Advice for Newlyweds

Prior to getting married (a long time ago), I did some premarital tax projections and realized that our joint income tax burden as a married couple would be significantly higher than if we were to remain single. Although I was accused of stalling, after much cajoling I managed to convince my soon-to-be bride to postpone our planned Fall wedding to January, thus saving enough money that first year to pay for most of the reception.

I was quite proud of the accomplishment, arguably getting the government to pay for part of our wedding, but have always been accused of weaseling a few months to avoid having an anniversary during hunting season. (I’m shocked at the accusation!)

Well, now I feel vindicated. The IRS recognizes that some newlyweds might be distracted by other issues and not thinking enough about taxes and related matters, so they have come to the rescue by publishing “Tax Tips for Newlyweds”.

My first thought about any guide for newlyweds envisions graphic pictures from biology books and instructions on how to boil water, but this information is far more valuable. Like helpful tip #4 – Notify Your Employer! Without this government admonishment who knows how many innocent young married couples would forget to tell anyone at their job that they got married. Or Tip #2 – Notify IRS where you are living, so they can mail you stuff. And then there’s Tip #3 – Notify the post office where you are living so they can forward IRS stuff to you. One can only envision the flood of mail that will be heading the way of these newlyweds from IRS.

But my favorite one is helpful tip #7: “Choose the best filing status”. I think that’s excellent advice. Sometimes the best filing status is Single. I spoke with a client yesterday who paid a lot of money to return to Single status. And it paid for my reception in 1981.