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If you recently got an e-mail telling you that on January 1st all real estate transactions will be subject to a 3.8% federal sales tax, don’t believe it. That is simply not true.
The facts are as follows:
• First of all, the new tax is applicable only to the gain on sale, not the entire sales price.
• The tax applies only to single taxpayers with modified adjusted gross income in excess of $200,000 and married taxpayers with modified adjusted gross income over $250,000 if filing a joint return, or $125,000 if filing separately.
• The tax is actually only equal to 3.8% of the lesser of the taxpayers’ “net investment income” or the amount by which their modified adjusted income exceeds the threshold amount.
• Only taxpayers with modified adjusted gross income over $200,000 (or $250,000 if married filing jointly) who sell their principal residence AND realize more than $250,000 in GAIN ($500,000 if married filing jointly) will be subject to the 3.8% tax and only on the amount of gain they realize OVER the $250,000/$500,000 threshold (and on their other net investment income).
During the 2011 Nevada state legislative session the specter of a Texas-type margin tax was raised as a replacement to the Modified Business Tax we now “enjoy”. Fortunately, it never got traction. But guess what? Its back and now it is being proposed in ADDITION to the Modified Business Tax, not in lieu of.
How would this new Margin Tax work? It seems simple enough, but the devil is in the details.
As proposed, the tax would apply to firms with annual taxable revenues over $1,000,000. Such entities would have to pay a 2% tax rate calculated on a tax base of their choosing:
Having to choose amongst these various tax bases makes the process considerably more complicated, partly because the costs included in “cost of goods sold” can be subject to interpretation. Furthermore, such a tax could potentially penalize businesses that are actually incurring net losses due to other operating expenses, but still have a positive gross profit.
The Texas margin tax has been judged an abject failure. Let’s hope we here in Nevada do not step into the same trap that has ensnared Texans.
The Mortgage Forgiveness Debt Relief Act is set to expire on December 31, 2012 and has large implications for Nevadans. Nevada is perennially in the lead, or in the top five in the U.S., in mortgage foreclosures. When a house is foreclosed upon, the difference in debt owed less the value of the house sold at auction, is considered cancellation of debt income to the IRS. 
This is taxed at the taxpayer’s ordinary income rates with the cancellation of debt income putting the taxpayer in a higher income tax rate bracket. With the proliferation of foreclosures and short sales starting in 2007, Congress passed The Mortgage Forgiveness Act which allowed this cancellation of debt to be excludable from income if it is from your personal residence.
But with this law expiring at the end of this year, Nevadans better be careful. If you stop paying your mortgage now and don’t enter into a short sale, it is likely that the actual foreclosure will be put off into 2013 and that means the debts cancelled will be income. If you are $100,000 underwater this could create a tax liability of at least $25,000!
If you currently own one of the 67% of homes in Nevada that is underwater, according to the website Zillow, and are assessing your options be careful. Make sure that your home is sold at auction before December 31 or enter into a short sale to get the cancellation of debt into 2012. Another possible exclusion of cancellation of debt could also be of help to you beyond 2012. If you are insolvent immediately before the cancellation of debt, this will still be excluded from income.
Our nation’s founders believed in certain core values that have served as the foundation upon which this great country has survived and thrived – prudence, thrift, limited debt, savings and stewardship. However, in the last several decades, our country and many of its citizens have strayed off course. Our future is now at risk. If we do not address the huge structural debt we face and re-order our nation’s finances, our position as a world leader and our overall standard of living is in jeopardy.
Our policymakers can address our fiscal challenges in a pre-emptive prudent manner OR they can wait for a crisis to provide political cover. Clearly, the preferred choice would be to put our fiscal house in order now, but this will require reasonable compromise and a healthy dose of political courage.
When you combine all our known liabilities with our various commitments, contingencies and unfunded debt, as of September 3, 2010 the U.S. was in a $61 trillion hole! That amounts to over $200,000 per person and over $500,000 per household. Contrast this with an annual median household income in America of about $50,000.
From a comparative standpoint, the U.S. now ranks 28th out of 34 for major nations in fiscal responsibility and sustainability, according to the recent Standard University Sovereign Fiscal Responsibility Index, which is essentially a fiscal fitness index.
It is time for our policymakers to design and implement a plan that will allow the U.S. and its people to move into a better fiscal neighborhood for our collective future.
Information for the preceding was taken from a report published by keepingamericagreat.org
Having lived in Nevada for the majority of my adulthood, I have long been acquainted with tipping. It has gotten to the point where I feel guilty for not putting a dollar in the tip jar at Starbucks for a $2 coffee or at my local sandwich shop. While living in Las Vegas I heard stories of people making thousands of dollars a night as a cocktail waitress or doorman at a club and valet drivers earning six figures a year. 
Since these tips were usually in the form of cash, I presumed that a lot of income wasn’t being reported to the IRS. I knew that the casino industry had agreements in place with the IRS for years where a fixed amount of tips per hour was reported on their W2s. I’m sure more tip income was earned, but since cash tips are so hard to trace the IRS needed some piece of the pie without being overly burdened.
Recently, my presumption on tip earners not claiming all their tips has come true. According to a Las Vegas Review Journal article, a club co owner and some of his employees recently got busted for not claiming all their tips as income. This particular club owner didn’t pay $141,306 in taxes on $403,732 of tip income in just two years! Three hosts and a doorman plead also plead guilty, although the article doesn’t say what they earned. These employees didn’t have any sort of elaborate scheme; they just didn’t report hundreds of thousands of dollars to the IRS from their tips!
I don’t know this guy personally, but I’m sure he wasn’t living a modest lifestyle and driving around town in a Hyundai. The IRS can easily construct a taxpayer’s income. If someone is driving around in a Porsche, living in a mansion with gardeners and pool guys, and wearing fancy jewelry, the IRS can figure out how much all that costs and calculate how much income would be needed to facilitate this lifestyle. Not being truthful to the IRS is an easy way to land in jail. Just ask Al Capone who got busted for tax evasion!
As a member of the class of 2012 Leadership Reno/Sparks, I invite you to join us for a fund-raising event benefitting the Sparks Senior Center.
Come join us for a great opportunity to appreciate the offerings of two of Reno’s most popular riverfront businesses while supporting the community.
Each year, as part of the program, the Leadership Reno Sparks class adopts a project in support of community members in need. The 2012’s class project is to make physical improvements to the Sparks Senior Citizens Center. The class is providing the planning and physical labor for the remodel and is hosting a fundraiser to help cover the costs. Come enjoy the summer weather on the riverfront and enjoy the delicious offerings of Campo and the Ole Bridge Pub. The cost is $30, and you will enjoy appetizers, specialty drinks and cocktails, a silent auction, and raffle prizes.
Thursday, June 28th 5:00pm to 8:00pm
Campo & Ole Bridge Pub, 50 North Sierra Street
Click HERE to register
Leadership Reno Sparks is an annual program offered by the Reno-Sparks-Northern Nevada Chamber of Commerce. It is 
one of three programs offered by the Chamber to help foster and develop leaders in our community.
The mission of Leadership Reno Sparks is to “identity and develop current and future leaders though a comprehensive program designed to increase knowledge and awareness of the issues and challenges facing this community.” The program prides itself on the quality and diversity of its members who are committed to improving our community through education, awareness, and involvement.
So you think you have financial issues? Just listen to what Nina Olson, National Taxpayer Advocate, has to say about the IRS. In her annual report to Congress she suggested that the IRS’s increasing workload and declining resources are the most serious problems facing taxpayers. So how does she connect the dots to conclude that this is a “taxpayer” problem?
She reasons that the resulting inadequate taxpayer service, erosion of taxpayer rights and reduced taxpayer compliance are causing harm to the taxpayers. That’s how! I don’t know. Seems to me like an IRS problem rather than a taxpayer problem. But, then again, doesn’t the taxpayer always get stuck with the tab?
But wait. Maybe there is a solution that doesn’t stick the taxpayer with the bill. It turns out that increasing funding for the IRS might actually be a good investment. Current inadequate funding contributes to many of the problems facing today’s IRS. When the federal individual income tax was first enacted in 1913, it applied only to high-income taxpayers, which totaled about 358,000 people. That total today stands at 141.2 million with one tax return for about every two people in the United States. And believe me, the returns are a lot more complicated now than they were almost 100 years ago.
It seems that as the collection agency for the U.S. government, the IRS does a pretty good job. On a budget of $12.1 billion, the IRS collected $2.42 trillion in fiscal year 2011. That is to say that for every $1 that Congress appropriated for the IRS, it collected about $200. Now with the current “tax gap” at about 15%, every household is paying an annual “noncompliance surtax” of about $2,700 to enable the federal government to raise the same amount of money it would have collected if all taxpayers had reported their income and paid their taxes in full.
While I doubt that appropriating an extra $1 would produce the same collection rate when applied to the last 15% of noncompliance, I’ll bet it would provide an attractive return on the investment.
It’s spring time in the Truckee Meadows. The river is running high, the trees are green, and students of all ages are getting spring fever.
With graduation on the horizon, it’s hard not to think about what is coming next. Whether your student is finishing kindergarten, graduating high school, or currently in college, it’s always a wise idea to be thinking about a plan for higher education.
It’s never too late to start saving, but just like planning for retirement, the earlier the better. These days there are a lot of options available for consideration including Section 529 plans, education savings bonds, Coverdell education savings accounts, and education loans. As the cost of college continues to increase it is important to be prepared. According to the Project on Student Debt, two-thirds of college seniors in the class of 2010 graduated with loans, and the average debt carried was $25,250.
The cost of college continues to be on the rise. Make sure you look into all your options for investing in your child’s future as well as for deducting your current costs.
If your student is already in college or will be starting this year, make sure your CPA is making the most of education deductions and credits. For those that meet the requirements, student loan interest can be deductible on a qualified education loan. Taxpayers may also be able to claim a deduction for qualified tuition and fees. Education credits include the American Opportunity Tax Credit and the Lifetime Learning Credit . These deductions and credits should be coordinated to maximize the tax benefit. While taking this all into account, it is also important to review the dependency exemption and determine when it is the optimum time for your child to no longer be claimed as a dependent.
Gold is one of the hot new investments today. 
People invest in this asset by purchasing gold bars, gold company stocks or gold electronic trading funds. These electronic trading funds, commonly called ETFs, have proliferated as evidenced by the ETF with the symbol GLD. This is a fund that started in 2005 and now has over 64 billion dollars of investors money under management. This ETF, as all precious metal ETFs do, purchase the metal for the investor so the investor doesn’t have to worry about storing or purchasing it. These ETFs can allow the investor to have a position in metals like gold, silver, copper or platinum.
But there’s a catch when investing in these, and many people don’t realize this until after their positions are sold or maybe even have calculated wrong on their tax returns. Capital gains on these precious metal ETFs, and also physical holdings of gold, silver or any other precious metal, are taxed at a rate of 28%, significantly higher than most other capital assets, including most stocks which are taxed at a rate of 15%. So assuming that you have a $1,000 gain on the sale of GLD you will have a tax of $280. In contrast, if you have a $1,000 gain from the sale of Newmont Mining Corp., a company that primarily mines gold, your tax will be $150. This is a significant tax burden that can come unexpectedly from investing in precious metal ETFs like GLD. When deciding whether to invest in precious metals or precious metal ETFs this higher tax rate should come into consideration.
According to the NY Times, credit scores are getting a facelift.
A company called CoreLogic has introduced a new type of credit report which contains additional consumer data than what the traditional credit bureaus (TransUnion, Experian, Equifax) show.
Have you missed a rental payment that is now in collections or are you behind on HOA dues? Have you been evicted or served child support judgments? Ever taken out a payday loan? All of this is included in the new credit report. There is also the possibility to show that your house is worth less than what you owe.
Since most of this information is already available to the public, it was only a matter of time before someone decided to compile this data to help lenders determine credit worthiness. An estimated 100 million American consumers will have a CoreScore credit report. The actual score will only be available to mortgage and home equity lenders at this time. Next year, CoreLogic will begin to evaluate whether the report should include even more data, like your payment history on utility and cellphone bills.
The positive: the added information can help illustrate positive behaviors otherwise not noted.
The obvious negative: consumers may now have additional dings in their credit history that previously went undetected. Consider yourself warned.
