Did you ever wonder what the total federal and state taxes you pay are?

The Total Tax Insights calculator using this link to an AICPA tool can make it easier to learn what you should know about what you’re paying in taxes. The result while approximate may surprise you. It might make you reconsider where to live and what kind of car to drive or whether you should change jobs or shop differently. Information is knowledge and knowledge is key for everyone's financial planning. It can help you work toward better tax and financial planning and decision-making. Follow this link to get started.
http://www.totaltaxinsights.org/Calculator

Thanksgiving: A truly American Holiday by Carolyn Flaherty

Thanksgiving resonates as a truly American holiday. Although not officially a holiday until President Lincoln declared it so in 1863, the tradition of Thanksgiving dates all the way back to 1621 when the Mayflower Pilgrims held a three day harvest festival to celebrate that year’s bountiful crops. After a truly devastating winter when the settlers lost nearly half their population, they had great reason to celebrate their survival, their plentiful crops and the help they garnered from Native Americans.

The Pilgrim settlers came to America seeking freedom and a better way of life. Indeed, historically immigrants to America come seeking freedom and prosperity. Imagine leaving everything you know, your family and friends and setting out to unknown, undeveloped lands. To embark on such a journey requires a great deal of courage, strength, faith, and confidence:  an overall quality I refer to as “true grit.”

To American stereotypes that label us loud, large and abrasive: I say,” Yes, we are gritty.” We are a nation built by those who were told they couldn't but knew they could. We are a nation of survivors. When I contemplate early Americans, those who built this great nation: I am proud of the entrepreneurial spirit upon which America evolved from the belief of freedom and prosperity to the reality of both.

The economy may be difficult when compared to recent decades. However, when you compare our economy and average wealth to that of the world, we have much to be thankful for. Times may feel uncertain or even volatile. You may be under great personal or professional stress. Yet, even on the worst day in the United States of America, there is still freedom and the potential for future prosperity. Therefore, today I am thankful for potential and for the inspiring people who have fought for, built and defended that potential and this great nation.

We wish you a very Happy Thanksgiving from Pavento, Ratcliffe, Renzi & Company. As you take pause today to share a meal with family and friends, we hope you will also reflect on and celebrate the things you are thankful for.

SALES TAX NEXUS by Karla Hopkins

Over the past three years states have increased their sales tax collection efforts because of the need to raise additional tax revenue. One way they have done this is to expand the definition of what activities create sales tax nexus for out-of-state retailers. In some states, courts have ruled that in addition to a seller’s direct physical presence, an indirect presence may create sales tax nexus. One example of an indirect presence is through independent contractors in a state.

To illustrate indirect nexus: In New York nexus can exist when a customer in New York purchases a product through a retailer’s agreement with a New York resident for commission even if the ultimate retailer is out-of-state. In other words, potential customers that reach the out-of-state retailer’s website by clicking on a link on the in-state affiliate’s website could be subject to sales tax by the ultimate retailer even though that retailer has no physical presence in New York. Two more states, Rhode Island and North Carolina have also developed similar legislation. In addition, during 2011 fifteen other states have proposed laws that expand the nexus laws in some way.

Some states have passed legislation to include a nexus determination for a controlled group where one member of the group is located in their state even if that entity is not even the retailer selling the product into the state.

While in most states, the legislation that was passed to capture the sales tax on out-of-state retailers is being challenged in the court systems, it appears that the trend for states to expand sales tax nexus standards to include remote out-of-state retailers is continuing forward. The federal government has also become much more involved and Congress is currently considering three remote sales tax proposals.

So, what’s the saying, buyers beware? When entering a new state with your business be sure that you are well versed on the laws specific to that state; not only for income and payroll tax, but especially sales tax.

Estate Planning In Our Digital World by Karla Hopkins

Nowadays most people have files and information stored on computers and smart phones such as online accounts with banks, email providers, social networks and music accounts.

These types of accounts and the identity of the service provider are often changing and as a result, planning for the location and security of online assets should now be a part of everyone’s estate planning.

Today, many people pay bills online, receive paperless account statements, keep their checkbooks online, and file their income tax returns online. It’s even possible that these important records are kept only in a digital format with no paper trail of the assets or bills.

Further complicating this subject is that since the digital world is fairly new, policies concerning access to these accounts upon the death or incapacity of someone are inconsistent and in flux. Often you must act quickly to protect online accounts from being deleted or frozen if the account has not been recently accessed. Yet, it is not uncommon for service providers to refuse to give to others the passwords for incompetent or deceased individuals.

Therefore, the first challenge is identifying the digital assets and then getting the username and passwords for the accounts. If there is no record, it could take a long time and a lot of effort to identify the accounts and gain access to them.

As such, individuals should prepare a list of all online accounts and other digital assets. This can be done with a written list. However, keep in mind that the list must be updated each time a password is changed or an account is added. Electronic lists, either on a computer or online, of usernames, passwords and accounts might prove to be more convenient to update.

The list should be kept secure. If you choose to maintain a written list, it should be kept in a safe deposit box, home safe, or with your attorney. Online lists can be secured by a master password. Keep the master password and instructions for accessing the electronic list in a safe deposit box, home safe, or with your attorney.

To begin to plan for your digital assets, consider what would happen if your computer were lost or stolen. What important information would be lost? Could your loved one obtain access to online accounts if you were to die or become incapacitated? What digital assets would you want your family to be able to access? Who would you want to have such access? In addition to personal electronic data, many also have business electronic files. It is important for your employer to be able to obtain access to your business files if necessary.

Planning ahead is always best to ensure that no account or asset is overlooked.

CONTRIBUTING TO A CHILD’s IRA by Karla Hopkins

Establishing an IRA in a child’s name can be an effective planning technique for a child with earned income. The annual limit cannot exceed the lesser of $5,000 or the earned income.

The key to contributing to an IRA is that the child actually earned income. This can include income from a part-time job, summer jobs, babysitting, lawn mowing or paper routes. Where you may not have reported the income in the past, you may elect to so that the child is eligible for an IRA. When a child is employed by a family member, the IRS can be expected to scrutinize carefully whether the income was in fact earned, and a reasonable hourly rate must be used for the work actually performed.

Parents often get frustrated when even a small amount of their child’s income is subject to tax. This occurs because of several things like the disallowance of the personal exemption, reduced standard deduction, higher interest and dividend income from savings accounts.

Under the Kiddie Tax rules, dependent’s investment income is taxed at the parent’s higher tax rate. (if the investment income exceeds $1,900) One way to shelter investment income of a dependent is by contributing to a deductible IRA. Because a deductible IRA is a pretax earnings account, the benefit of compounding investment income is a significant retirement benefit for the dependent.

Establishing and funding a ROTH IRA, which is a nondeductible contribution, can also be a significant retirement and long term tax favored savings strategy for a dependent. Contributions to a ROTH IRA are not deductible but if certain conditions exist, distributions are tax free.

Even though the contributions to a ROTH IRA are not deductible, this may be considered a small price to pay (i.e. the tax on the dependent’s investment income) for the power of tax free compounded earnings inside the ROTH IRA combined with the ability to withdraw funds tax free upon retirement or after age 59 1/2.

Also, if the ROTH IRA has been established for at least five years, the contribution amounts can be withdrawn tax free any time after the five year window which could be an advantageous college funding plan. The contribution does not necessarily have to come from the child’s earnings. As parents, you could gift the additional money for the IRA so that the child continues to keep his spending money. The long term savings available from this type of arrangement is highly recommended.