Caputo Brosnan P.C.

Newsletter

February 2015

In This Issue

Choosing a Tax Preparer

Taxing Subject

Designating a Beneficiary

Advice of Will Rogers

TIPS FOR CHOOSING A

TAX PREPARER

With the turning of the calendar page to the new year comes the onerous task of gathering proof of income and expenses and having our income taxes prepared.

Here are a few points from the IRS to keep in mind when you have someone else prepare your return.

1. Check the person's qualifications. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics. New regulations effective in 2011 require all paid tax return preparers including attorneys, CPAs and enrolled agents to have a Preparer Tax Identification Number (PTIN).

2. Check the preparer's history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Professional Responsibility for enrolled agents.

3. Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.

4. Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

5. Provide all records and receipts needed to prepare your return. Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.

6. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

7. Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

8. Make sure the preparer signs the form and includes their PTIN. A paid tax preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.

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A TAXING SUBJECT

According to the latest information published by the IRS you need to earn over $464,682 to be a 1%-er.

Income	2012 AGI	% of All Income	% of Income Taxes Paid	Aggregate % of Taxes Paid
Top 1%	Over $464,682	21.9%	38.1%	38.1%
Top 5%	Over $175,817	14.9%	20.9%	59.0%
Top 10%	Over $125,195	11.1%	11.2%	70.2%
Top 25%	Over $73,354	21.4%	16.2%	86.4%
Top 50%	Over $36,055	19.6%	10.8%	97.2%
Bottom 50%	Under $36,055	11.1%	2.8%	100%

Where do you fall in?

The bottom 50% of taxpayers only paid 2.8% of all income taxes, and even that is high, because many of these taxpayers received the earned income tax credit ("EITC"). The Treasury accounts for the EITC as a transfer payment rather than a reduction of taxes paid.

As you view this data please keep in mind that it is based on tax returns actually filed in 2012 by persons who pay taxes. Mitt Romney advised that 47% of the population does not pay income taxes. Those people are not included in the above statistics. It would be interesting to ascertain what percent of the taxes paid are distributed to the 47% who did not pay any taxes.

BENEFICIARY DESIGNATIONS

Many financial assets may be distributed to your heirs upon your death by naming them as a pay-on-death beneficiary. These include IRAs, 401ks, 403bs, bank accounts, life insurance, annuities, mutual funds and other investments.

The use of beneficiary designations is attractive because it is simple, convenient, avoids probate and avoids the trouble and expense of a formal estate plan. It may also create an economic disaster upon your death. For example, if your entire estate passes by beneficiary designation, where are the funds necessary to pay your final expenses and wind-up your affairs?

What if a beneficiary predeceases you, then where does the money go? You want your legacy to benefit these beneficiaries, but what if they are in a position where the inheritance won't be used as you would desire? Will the money eventually go to people who should not have it? (e.g. a spouse's children from a previous marriage or a divorcing spouse).

Does the beneficiary have the skills to properly manage the inheritance?

Is the beneficiary legally unable to manage the inheritance because of youth, advanced age or infirmity and so the inheritance will be subject to someone else's control?

Will the beneficiary lose public benefits because of the inheritance?

Is the beneficiary in a risky profession and subject to possible lawsuits?

Does the beneficiary have a substance abuse problem?

Before embarking on a do-it-yourself estate plan using only beneficiary designations, careful thought must be made as to your actual intent. A well drafted estate plan, including a trust, can assure your intent is met.

Will Rogers died in a 1935 plane crash. He was one of the greatest social commentators this country has ever known.

Some of his sage advice:

Never slap a man who's chewing tobacco.
Never kick a cow chip on a hot day.
There are two theories to arguing with a woman. Neither works.
Never miss a good chance to shut up.
Always drink upstream from the herd.
If you find yourself in a hole, stop digging.
The quickest way to double your money is to fold it and put it back into your pocket.
There are three kinds of men:

The ones that learn by reading.

The few who learn by observation.

The rest of them have to pee on the electric fence

and find out for themselves.

Good judgment comes from experience, and a lot of that comes from bad judgment.
Letting the cat outta the bag is a whole lot easier'n puttin' it back.
After eating an entire bull, a mountain lion felt so good he started roaring. He kept it up until a hunter came along and shot him. The moral: When you're full of bull, keep your mouth shut.