Janell A. Israel & Associates

October 2007 Tax Newsletter

 

 

What's new in taxes:

Don't Fall For The Latest IRS E-Mail Scam

 

The Internal Revenue Service is warning taxpayers about yet another e-mail scam. In this latest scam, the taxpayer receives an e-mail that appears to come from the IRS. The e-mail contains a link to an online "Member Satisfaction Survey," and the taxpayer is told he or she has been selected to participate in this survey. In return for completing the survey, the taxpayer will receive an $80 credit to his account. On the survey, the taxpayer is asked for information that the scam artists will later use to steal the victim's bank account, incur charges on his or her credit card, etc.

The IRS reminds taxpayers that it does not send unsolicited e-mails. Taxpayers who receive e-mails purporting to be from the IRS should forward them to phishing@irs.gov, the electronic mailbox set up to help catch these identity thieves. And watch for variations on the IRS e-mail scam; more than 400 separate scams have been reported in the past year.

 

If You Can, Plan For Coming Payroll Tax Increases

Many Americans pay more payroll taxes than federal income tax. That's the FICA tax you see on your W-2 wage statement - a combination of 6.2% social security tax and 1.45% Medicare tax. The social security tax is assessed on up to $97,500 of earnings in 2007, and the Medicare tax has no earnings limit. Your employer matches the FICA tax you pay.

Self-employed taxpayers pay an equivalent self-employment tax of 12.4% on net earnings up to $97,500 and 2.9% Medicare tax on all earnings (with a deduction for 50% of the tax paid).

The Social Security Administration is projecting that for 2008, the wage base for social security taxes will increase to $102,300. So if you'll meet or pass the 2007 taxable wage base of $97,500, you might consider accelerating additional income into this year. That income would not be subject to social security tax. Employees generally have few opportunities to move income between years, but self-employed individuals may be able to do some planning.

The Social Security Administration has projected that the wage base will increase to $141,900 by 2016. As significant as the payroll tax bite can be, doing what you can to minimize this tax is advisable. For guidance in this area, give us a call.

 

What's New in Finances:

Health Insurance Costs Outpace Inflation

According to the annual survey of employers conducted by the nonpartisan Kaiser Family Foundation, the cost of health insurance rose 6.1% this year. That's more than double the annual rate of inflation (measured in July) of 2.4%. The increase in health insurance premiums since 1999 has outpaced both wages and inflation for the same time period.

According to the Kaiser survey, the average annual cost for a family's insurance is $12,106; the cost for an individual is $4,470.

 

Choosing Your Executor: A Critical Estate Planning Decision

An executor is the person or legal entity that you appoint in your will to settle your estate after your death. It is common practice to name your spouse or one of your children (often the first born) to be the executor of your estate. Such a choice may be entirely appropriate. However, there are circumstances where you should consider other possibilities.

Your executor will be required to gather your assets and pay debts, taxes, and expenses. The executor may be called upon to liquidate assets and will need to distribute money and assets under the direction of your will, with the appropriate legal and tax considerations.

If you do not appoint your spouse or some other family member to be your executor, what other choices have you? You could use a corporate executor, such as a bank or trust company, or you may want to choose an accountant, attorney, investment advisor, or a business associate.

Do not pass up a nonfamily executor simply because there is a fee involved. Often the conflict of interest or the contests that result by naming a family member can be far more costly to the estate than the fees charged by an outsider.

Selecting an executor for your estate is as important a decision as naming your heirs. Give some thought to the complexity of your estate and select an executor accordingly. For more details, give your attorney a call.

 

Take a Break

A Dandy Derivation

Do you know where the expression "POSH" came from?

It originated when the ticket agents in England marked the tickets of travelers going by ship to the Orient. Since there was no air conditioning in those days, it was always better to have a cabin on the shady side of the ship as it passed through the Mediterranean and Suez area. Since the sun is in the south, those with money paid extra to get cabins on the left, or port, traveling to Asia, and on the right, or starboard, when returning to Europe. Hence, their tickets were marked with initials for "Port Outbound Starboard Homebound" or POSH.

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The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information on anything in this newsletter, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.

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