Showing posts from June, 2006

HERO ACT - Increased IRA Deductions for Armed Forces

HERO ACT - Increased IRA Deductions for Armed Forces

Appropriately enough, President Bush signed the Heroes Earned Retirement Opportunities Act of 2006 — the HERO Act, for short — into law on Memorial Day of this year. This new federal law expands retirement planning benefits for members of our armed forces currently serving in combat zones.
Briefly stated, an individual is permitted to contribute to a traditional IRA or Roth IRA only if he or she has compensation (such as salary from a job) during the year. For the 2006 tax year, the limit on contributions is the lesser of $4,000 or the annual compensation. A taxpayer who is age 50 or older can make an extra $1,000 "catch-up" contribution.
The contributions to the traditional IRA may be fully or partially deductible depending on the taxpayer’s income and whether he or she actively participates in an employer-sponsored retirement plan. Roth IRA contributions are never tax deductible.
Under prior tax law, combat pa…

IRS Announces Hybrid Cars that Qualify for a Tax Credit

IRS Announces Hybrid Cars that Qualify for a Tax Credit

Last year's Energy Policy Act replaced the $2,000 clean-fuel burning deduction with a tax credit that is potentially worth much more. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.

The credit is only available to the original purchaser of a new, qualifying vehicle. (If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.) The amount of the credit varies based on the fuel efficiency of the vehicle.

These models have been certified by the IRS for the credit in the following amounts:

2007 Ford Escape Front WD Hybrid — $2,600
2007 Ford Escape 4 WD Hybrid — $1,950
2007 Mercury Mariner 4 WD Hybrid — $1,950
2007 Toyota Camry Hybrid — $2,600
2005 Toyota Prius — $3,150
2006 Toyota Prius — $3,150
2006 Toyota Highlander 4WD Hybrid — $2,600
2006 Toyota Highlander 2WD Hybrid — $2,600
2007 Lexus GS 450h — $1,550
2006 Lexus RX400h 2WD — $2,200

Governent Makes Offers in Compromise Impossible

The Tax Increase Protection and Reconciliation Act changes the rules for Offers in Compromise (OIC), eliminating the breathing room a taxpayer has while waiting for the IRS to accept or reject an OIC. That is not good news.

Starting with OICs filed on or after July 16, 2006, taxpayers must make a non-refundable payment or the OIC will not be processed. The non-refundable payment amount depends on the type of OIC made. Lump-sum offers must include a 20% “down payment.” Thus an OIC to pay $10,000 cash to settle a tax liability must include a $2,000 payment with the OIC to be considered. If the IRS rejects the OIC, it keeps the cash.

If the OIC is based on periodic payments, the OIC must include the first proposed payment and the taxpayer must keep making payments under the proposed terms of the OIC until the IRS accepts or rejects the OIC. Again, if the IRS rejects the offer, it keeps the cash.

Bankruptcy Relief Down 75%

Bankruptcy filings are drying up at a level not seen in at least two decades and there’s no telling for sure when — or if — that phenomenon will stop.

An analysis of the latest filing figures reveals bankruptcy actions are plummeting more than 70 percent.

Powering that nose dive is the law Congress enacted to make it much harder for people to abuse the system by declaring bankruptcy to avoid paying their debts.

That remains to be seen. For now, though, the early numbers appear to demonstrate how a new and tough federal law can quickly crimp a financial bailout procedure that had become a way of life .

The numbers compiled by New Jersey Lawyer from numerous reports of the Administrative Office of the U.S. Courts show that during the second quarter of the federal fiscal year — January, February and March — the bottom fell out of personal and business bankruptcy filings in New Jersey and to a slightly less extent in the bankruptcy courts dotting the nation.

In New Jersey, fili…