Tips Guides Resources

In heritance tax has undergone some changes of late that make it a much simpler process to leave your money and property to your children without them paying the penalty of inheritance tax quite so soon.

Will writing is sometimes a complicated business and people do not always realise the implications of what they leave to the people they leave it to. Anything over 300,000 pounds for an individual would incur inheritance tax and combining a couple’s nil rate allowance was a little complex.

The couple would need to own separate shares in a property as tenants in common and set up a discretionary will trust when writing a will so that anyone inheriting their estate would not have to pay inheritance tax until they breached 600,000. pounds.

Although these so-called new changes are giving people what they already have, it does make the whole process easier. This change affects around 35,000 people a year in the UK which may not seem a lot overall but that is a lot of money that tax man makes!

By 2010 it is promised that the nil rate tax band for inheritance tax will increase to 350,000 pounds per person, or 700,000 pounds per couple. This is something that needs to be taken into consideration when will writing so that arrangements can be made for your children to receive as much as possible without paying penalties.

Opposition parties suggested the upper limit should be closer to one million pounds but The Chancellor put a stop to this and promised to spend the extra revenue on health and education. He has also promised that inflation and current house values will be taken into consideration when setting tax limits and as we all know this is a turbulent area of the country’s finance at the moment.

Civil partnership couples will also receive the same tax benefits as married couples but not those that simply live together; proper arrangements need to be made when will writing.

There have been several occasions reported in the press, and many that have gone unreported, where will writing has not taken into account the difficulties of inheritance tax. This recently happened to an elderly woman who had lived with her sister all her life in one house. When one of the sisters died without proper consideration to will writing, the other was forced to sell her home in order to meet the charges of inheritance tax.

This seems rather a cruel way to end your days and if inheritance tax is not taken into consideration when will writing it can lead to the inheritor becoming deeply in debt. Never leave these matters to chance. Never assume because you have written down your wishes that that is the way things will go after your death.

When will writing, always ensure you get a professional to check over it and see if there is anything you can do to relieve the tax burden on those you wish to help after your death.

Over two million homes in the UK are now worth more than the 300,000 pounds inheritance tax bracket and the incidence of problems are occurring are becoming more widespread. By 2020 it is estimated that over four million homes will be subject to current inheritance tax laws. A tidy little some for the chancellor to inherit if will writing is not undertaken correctly.

Financial expert Catherine Harvey looks at the way will writing should take tax laws into account.

We have all heard the claims of being able to settle tax debts for “pennies on the dollar”. It sounds great, but does it really work? It may seem too good to be true, and the truth is that it is not for everyone. But for those who qualify, it can be a real lifesaver.

An Offer in Compromise, or OIC, is an arrangement with the IRS that allows an individual or business to negotiate a settlement amount that is less than the total amount owed. It is important to realize that the IRS considers this a method of last resort; fewer than 1% of all balance due accounts are resolved this way. The IRS greatly prefers installment payments that will result in the eventual collection of the entire balance that is due. However, the OIC option is out there, and if you meet one of the following conditions, it could work for you.

There are three conditions that a taxpayer can fall under to apply for OIC:

1. Doubt as to liability–you are claiming that the IRS made a mistake, and you do not owe the money they are saying that you do.

2. Doubt as to collectibility–you as the debtor are telling the IRS that you do not have the money or assets available to pay the debt, and you never will. The IRS will calculate your available assets through a formula to determine your settlement amount, such as:
Settlement Amount = 60 months of disposable income + the equity in all of your assets.

3. Effective tax administration–you are claiming “special circumstances” because collection of the debt would create an undue hardship and would be unfair. This option is most often used for elderly or disabled taxpayers.

Recent tax legislation requires that those applying for an OIC submit a $150 application fee, along with a 20% payment of the proposed settlement offer. These fees are non-refundable; even if your offer is rejected, the IRS will keep this money. There are exceptions to the fee requirement. If you qualify for a low-income waiver, or if claiming doubt of liability, you will not have to pay the fees. The IRS has two years to make a decision on your offer.

If your OIC does get accepted by the IRS, it is essential that you remain in compliance with the filing and payment of all taxes for a period of five years or until the amount offered is paid in full, whichever is longer. Failure to do so will cause you to be in default on your OIC agreement.

A large past due tax debt can be an intimidating thing; after all, it’s not just some annoying collection agency pestering you, it’s the federal government. However, it is important when faced with such a challenge to take a deep breath and examine your options carefully and realistically. If you fit into one of the categories described above, an Offer in Compromise with the IRS could be just the thing to get that burden off of your shoulders.

For more information about offers in compromise or other problems with the IRS please visit IRS Problems Resolved.

A new Corporate Income Tax Law (”CIT Law”) was passed by China’s legislature, the National People’s Congress. The new law was launched on March 16, 2007 and it takes out many of the tax incentives that had specifically been provided to foreign invested manufacturing companies.

However, it decreased the current corporate income tax rate from 33% to 25%. The new law which is set to take effect on January 1, 2008, makes a precautionary attitude towards foreign investment while the law takes a much friendly approach towards domestic-invested companies and foreign invested companies.

It combines the two different tax regimes for domestic-invested companies (”DEs”) and foreign invested companies (”FIEs”) that have been on prominence for over a decade into a unified system and basically alters prevailing tax incentive guidelines. These changes include the end of general tax holidays for foreign invested manufacturing and export-oriented undertakings. These incentives specifically allowed a 2-year income tax exemption starting with the primary year of profitability followed by a 50% deduction of income taxes for an extra 3-year period.

The new CIT Law is the authority on prevailing FIE tax holidays. In the case of FIEs tax, holidays have not commenced yet as they have not enjoyed their first year of profitability. Their tax holidays shall be considered to begin from 2008 and continue for 5 years.

This could end up in a partial or total loss of the incentive relying on when profitability is actually realized. It seems that the new CIT Law has closed the tax refund possible for foreign investors that reinvested the dividends they got from their FIEs in China. This was not granted to domestic investors under the old tax law. The new CIT Law puts forward four tax reform proposals that China hopes to realize and they are a less puzzling tax system, a wider tax base, a decreased tax rate and a focused tax administration.

The new law consists of two exceptions to the updated flat rate for domestic and foreign invested companies. One for qualified small scale and light profit companies which will be put to a rate of 20% and another for supported high-tech companies which are to be levied a rate of 15%.

The new incentive policies aspire to improve technology innovation and transfer, core infrastructure construction, agriculture development, environmental preservation and natural resources management. The new CIT Law states the new incentive policies which provide little information as to the exact implication of the terms used or how they will be put into practice.

Besides the tax incentive changes, the new law instills the concepts of “Tax Resident Enterprise” (TRE) and “Special Tax Adjustment” (STA) and implements other anti-tax-evasion rules which are predicted to have a telling effect on foreign invested companies in China. The TRE stipulations widen the horizons of authority of China’s State Administration of Taxation (”SAT”) to permit it to tax the off-shore income of foreign enterprises. These enterprise’s effective management functions for off-shore operations are located in China.

Numerous questions pop up relating to how the new CIT law will take effect. These questions are extremely relevant for foreign investors, whether they have set up a business in China or are contemplating in that direction. The State Council, China’s top administrative body, which will proclaim the detailed implementation rules, is undecided on when the rules will be available.

Considering the impact of the changes in the new CIT Law foreign investors having live investments in China will need to investigate their consequences and update their tax profile to suit the new rules. For those who are planning to invest in the China market, a deep study of the new CIT Law relating to both incentives and taxation is required.

The Zetland Financial Group provides the offshore investor with fiduciary Services, investment management and corporate advisory services, offering personal service and professional advice with total confidentiality.

Hong Kong’s top financial officials have put forward some amendments aimed at bringing back wealth to people, including tax cuts and other compromises. The package of measures and compromises are offered to help the disadvantaged, improve Hong Kong’s economical stability and guarantee lasting development.

The government has predicted a surplus in the Consolidated Account of 115.6 billion Hong Kong dollars ($14.8 billion) and a surplus of 63.7 billion HKD (about $8.19 billion) in the Operating Account for 2007-08.

To retrieve wealth to the people, the government has recommended a one-off tax reduction of 75 percent of salaries tax and tax under personal assessment for the 2007-08 fiscal year up to a highest of 25,000 HKD ($3,213). Almost one million taxpayers would not have to spend more than 5,000 Hong Kong dollars in tax once the reduction is a reality. The decision would end in an expense of 12.4 billion Hong Kong dollars ($1.59 billion) for the government in 2008-09 and will be a blessing for 1.4 million taxpayers.

The proposal also includes increasing the basic allowance and single parent allowance from 100,000 HK dollars to 108,000, and boosting the married person’s allowance from 200,000 HK dollars to 216,000. Once the proposals are implemented, all the major allowances and tax rates will go back to their 2002-03 levels.

The salaries tax and personal assessment tax standard rate will be deduced by one percentage point to 15 percent, from the next fiscal year, and there will be a reduction of profits tax to 16.5 percent. Improving the tax bands from 35,000 HKD to 40,000 HKD is also a potential reality.

Small and medium businesses are also set to benefit from a one-off tax reduction with a proposed 75 percent concession of profits tax for 2007-08 up to a maximum of 25,000 HK dollars. Business registration fees will also be boosted for 2008-09. For the environmental front, a reduction of 30 percent, 50 percent or 100 percent in the first registration tax of commercial vehicles pertaining to Euro V emission standards, and a 100 percent profit tax reduction for capital expenditure on environmentally-friendly machinery and equipment in the first year of purchase is also among the potential changes.

To enhance Hong Kong as a trade and distribution center for quality wine in Asia, duties on wine, beer and all other alcoholic beverages barring spirits will be freed. The HK government has been pushed to decrease corporate profits tax further in accordance with the global trend and increase the stamp duty fee ceiling for properties. The corporate profits tax and standard rate of salaries tax have been reduced by 1 percent to 16.5 percent and 15 percent respectively. There was an increase in the stamp duty ceiling to properties priced at more than HK$3 million from HK$2 million according to the property price index to support young and middle-income families withstand property inflation.

There was also an advice to allowing regional headquarters full profits tax exemption for management and consultancy income attained by the Hong Kong entity from associated overseas entities. As only Hong Kong-based income is taxable according to the local system, legislation need to improve reliability and consistency in the tax system, and address issues like whether profits or salaries have a Hong Kong or an overseas source.

Reliability is of prime importance for investors. There was also a suggestion to the government to impose “polluter pays taxes” including electronic road pricing, fuel duties, air and water pollutant taxes, and other resource consumption taxes. This came after the understanding that pollution is the biggest threat to economic growth in HK.

The Zetland Financial Group provides the offshore investor with fiduciary Services, investment management and corporate advisory services, offering personal service and professional advice with total confidentiality.

April 15th can be the most stressful day of the year for many Americans. The date when federal taxes are due can strike fear into the hearts of the most serious taxpayers. Writing that yearly check to Uncle Sam can be quite distressing, especially if we find we owe more than we thought we would.

What can be especially troubling is that the stress can stay with us, year in and year out. However, for many people, the stress begins long before the filing deadline. It may occur as early as December when the tax forms first arrive in the mail. On the other hand, it may happen when our W-2 form comes across our desk at work. It may happen when we hear about tax season on television. Even getting our yearly interest statement from our bank might be enough to put us over the edge.

We may know some people who seem completely relaxed when tax time comes around. It seems that they have everything in order, and they have little with to be concerned. For such people, tax day seems to be a virtually stress-free experience. We will find them whistling through the hallways at work’ while we are hunched over our calculator, wondering whether we can pay our tax bill.

We need to realize that we can handle the stress of tax season without going ballistic. However, this means that we must be pro-active when it comes to handling our taxes. A little bit of planning can go a long way to reducing our taxes and our stress level.

To begin with, it could help us immeasurably if we seek the services of a financial planner. He or she can help us to take control of our finances, which can reduce our stress level considerably. In addition, the financial planner can help us to employ certain strategies, which will enable us to reduce our tax bill.

Next, we have to seriously consider whether it will do us any good to do our taxes ourselves. While figuring out our own tax bill can give us a feeling of control, it can also increase our stress level tremendously. Therefore, we might seriously consider hiring a tax accountant to handle the stress of our taxes. While such a move will not eliminate our stress, it can seriously reduce it.

Keeping folders of all the documents we need for filing our taxes can also lessen our stress. If we keep the folders current throughout the year, we will not be in a mad rush at tax time to find the papers we need to file our return. We might consider color-coding the folders for easy reference. Also, keep the folders in a central location.

While a filing cabinet might be the best solution, we might also consider a hope chest, an end table, or a desk drawer. In addition, be sure to keep all our records for at least three years in case a question arises about our return later on.

Another strategy for reducing our stress is putting an end to procrastination. While it might be tempting to wait until the last minute to file our taxes, it only increases our stress level. If we file our taxes long before the due date, we can rest easy when April 15th comes around. We might be amazed at how much easier it is to deal with tax season when we have done some advanced planning. If we find ourselves facing a large tax bill, chances are we will feel stress, no matter what time we file. Therefore, we might consider opening a savings account specifically earmarked for taxes. This way, we can save for tax day throughout the year.

Another option is to increase our withholding on our weekly paycheck so that we do not have such a huge bill to pay at the end of the tax year. There is no reason to become overly stressed over taxes. They are a natural part of American life, the means by which the government is able to function. If we take a few pro-active steps, we can significantly reduce tax-related stress. It may be hard at first to break old habits. However, once we do, we might be amazed at how relaxed we feel when April 15th comes around.

Molly Winters-Hughes is a marketing consultant for TaxEngine.com. TaxEngine.com is an online tax preparation website. For more information about TaxEngine, visit www.TaxEngine.com.

Therefore, it is the dreaded tax filing season again, and you are faced with many questions. How should I prepare my return? Should I itemize my deductions? In addition, (if you are lucky enough to get a refund) how should I receive my refund?

In addition, although you do not really have a choice when it comes to paying your taxes, you do have options for receiving your refund. Some are:

1. Paper Check: If you prefer the old-school method of a paper check, select this option. You will wait longer, but have the satisfaction of taking that money all the way to the bank. If you electronically file, you will receive your check within three weeks. If you mail in your return, it will take six to eight weeks.

2. Direct Deposit: As long you have a bank account, this is a convenient option. You will get your money faster than waiting around for a check in the mail. Usually it takes 8-15 days to receive your refund if you electronically file. With a mailed-in return, expect it to take 5-7 weeks.

3. Cash Card: Not many people are aware of this option, but if you do not have a bank account, this may be the most convenient solution for you. Several tax preparation establishments offer the cash card as one of their refund options.

The terms of these cards will vary. Usually they are part of a refund product, like a refund anticipation loan. If you choose this product, your refund (minus applicable fees) will be loaded onto a card. This is known as a prepaid card, and works much like a debit card. You should also be able to reload the card with money. Depending on the refund product you choose, your money can be available as soon as the next day.

To the millions of Americans without a bank account, banking services (check cashing, money transfers, etc.) are either unavailable or very expensive. According to an article published May 4th, 2006 by Economist.com, more than twelve million households are ‘unbanked’ - without any sort of bank account. Without a bank account, services such as check cashing can come with expensive fees. In addition, saving and managing your money is difficult, because there is no way to electronically track spending patterns.

If you are one of these Americans without a bank account, you may want to consider getting a cash card from your tax preparer. Finding a retailer to provide this service will not be hard, though. Several of the leading tax preparation companies offer a card, as do many smaller companies. You will want to weigh the benefits versus the costs, and decide if this service is right for you.

In addition, what are these benefits? You do not need a bank account, or even a good credit history. You can only spend the amount available on the card, so it helps you manage your money. Your tax refund will be directly loaded onto your card, and you can have your paycheck directly deposited into your card account, thereby avoiding check-cashing fees. You will have access to a network of ATMs. With a good card, you will be protected from fraud (most cards are FDIC insured). You will also get the convenience of a card that has accepted pretty much everywhere–most cards are provided through MasterCard or Visa, so they are accepted wherever these cards are accepted.
As for the costs of these cards, you will want to do your research to find the best one for you. Some cards charge transaction fees, while some charge just a monthly maintenance fee. You will also want to find out if they charge to reload your card or for direct deposit into your card account.

Also check out the options for checking the account balance–some will charge you to inquire about your balance, while some will not. If you look around, you will be able to find the card with the lowest amount of fees for your situation. For example, if you are planning to use your card frequently, you will want to avoid a card that has per-transaction fees. On the other hand, if you use the card only for emergencies, the per-transaction fee might be better than paying a higher monthly fee.

While these cards are not for everyone, for many Americans they offer access to services they are not able to get otherwise. In addition, they provide fast and convenient access to your tax refund. If this sounds like a good option for you, look around to find a card you will feel comfortable using.

Molly Winters-Hughes is a marketing consultant helping normal people make educated decisions about their finances. The ANEW prepaid Mastercard offers an opportunity to build or restore your credit rating. Find out more at http://www.theanewcard.com