2011 Q3 | With Savings Bonds, Prepaying Tax May Be a Good Tactic

2011 Q3 | With Savings Bonds, Prepaying Tax May Be a Good Tactic

U.S. savings bonds can be good investments, especially if purchased for young children. They’re issued by the federal government, so bond holders don’t have to worry about a default. Yields are comparable to the yields on bank accounts. They’re fairly liquid: owners can cash in savings bonds one year after the purchase and can redeem these bonds with no loss of interest after five years. (If you redeem savings bonds within five years, you’ll lose the interest for the latest three months.) Taxes, too Owners of savings bonds also receive tax advantages. The interest is exempt from state and local income tax. Savings bonds are issued by the U.S. Treasury Department so they enjoy this tax treatment, along with all

2011 Q3 | Tax-Free Savings Bonds

2011 Q3 | Tax-Free Savings Bonds

The interest from savings bonds you cash in may be tax-free. That can be the case if you use the money for college tuition and fees. Several conditions apply. For example, you must have been at least age 24 when you bought th bonds. Either you or your spouse must own the savings bonds. The bond proceeds may be used for the owner’s education, the owner’s spouse’s education, or the education of a dependent for whom the owner claims an income tax exemption. Income limits exist for this tax benefit. For completely tax-free income, your modified adjusted gross income (MAGI) in 2011 must be no more than $106,650 on a joint tax return or $71,100 on other returns. The tax

2011 Q3 | Use Appreciated Assets for Charitable Donations

2011 Q3 | Use Appreciated Assets for Charitable Donations

Writing a check is the easiest way to make charitable contributions. However, donating appreciated assets can be more tax-efficient. That’s true if the donated assets have been held longer than one year and, thus, would qualify for long-term capital gains tax treatment on a sale. Example: Mark Parker wants to donate $5,000 to a local animal shelter. If he writes a check for $5,000, he’ll get a $5,000 tax deduction. Mark’s cost for this deduction is $5,000, after-tax. Instead, Mark goes through his portfolio and finds a stock he bought in 2009 for $3,000 and, thus, would qualify for long-term capital gains treatment. That stock now sells for $5,000. Mark decides to donate the stock to the animal shelter. With

2011 Q3 | State Taxes Can Crimp Your Cash Flow

2011 Q3 | State Taxes Can Crimp Your Cash Flow

If your company does business solely in one state, it probably owes tax to that state, as well as to the federal government. Many companies, however, operate across state lines, and therefore, may owe tax to more than one state. In the current economic slowdown, some states are endeavoring to address tax shortfalls by aggressively seeking more tax from companies based in other states. Types of tax State taxes come in several categories. The most common include • income taxes. If your company has net income from operations within a state, that state may tax those profits. • sales taxes. These taxes generally are imposed on the retail sale of goods (that is, when goods are sold to an end

2011 Q3 | Voluntary Disclosure for State Taxes

2011 Q3 | Voluntary Disclosure for State Taxes

Companies may discover that they had nexus in a given state and, thus, owe back taxes. Most states allow voluntary disclosure agreements (VDAs). These agreements call for the company to submit delinquent tax returns and pay the required taxes. Typically, a VDA will limit the lookback period to three or four years. No penalties will be assessed if the company pays taxes in full for those years.

2011 Q2 | Income Tax Rates Hold Steady

2011 Q2 | Income Tax Rates Hold Steady

Tax legislation passed at the end of 2010—the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of2010—maintains the person in effect since 2003. In 2011 and 2012, those rates range from 10% to 35%. In 2012, we might see yet another debate on future tax rates. Capital gains and dividends The 2011 and 2012 tax rates ranging from 10% to 35% are on ordinary income: earnings, interest on savings accounts, pensions, and so on. For long-term capital gains and qualified dividend income (which includes most dividends received by investors), the top tax rate remains at 15% for this year and the next. Therefore, investors are likely to continue to seek dividend-paying stocks and all types of investments that may